Evaluating the Total Cost of Network Ownership

  • Written By: Lynn Koller
  • Published: July 26 2000

Brian Killian and Lynn Koller are associated with Brintech, www.brintech.com


A bank devotes extensive resources to its computer network-both in human wherewithal and hard cash. The upfront costs can be high, and veiled costs compound the burden. Ultimately, an invisible price tag hangs from a computer network. Total cost of ownership (TCO) is a model that helps systems managers understand and handle the budgeted and unbudgeted costs of an IT component throughout its lifecycle.

The lifecycle of a network occurs in five stages:

  • Design. The IT department evaluates needs, industry standards, and current technology.

  • Acquire. This phase involves acquisition, configuration, and distribution services, as well as asset management.

  • Integrate. The system is installed, and the project continually managed. Training and support plans are established.

  • Support. Help desk services, maintenance support, and disaster recovery plans are arranged.

  • Upgrade. At some point (often too soon), hardware and software becomes outdated, and needs upgrades.

The upfront expenses of a network comprise only 19% of the total cost. The remaining 81% can sneak up on bank management, often unaware of some subtle TCO factors.

Direct, Budgeted Costs

Budgeted costs are usually two-fold. They primarily consist of expenditures directly related to computing, like hardware and software. The second component of direct costs is labor, including Help Desk and technical personnel.

Bank management should budget for costs of all IS professionals directly managing and supporting the network, in addition to outsourced management and maintenance fees. On the support end, costs can be broken into Operations labor, Operations fees, and Help Desk. Operations labor includes management and administrative assistance needed for support. Casual learning and formal training of technical staff are factors, in addition to end-user training performed by the IS staff. There are also cost factors associated with travel and purchasing time.

Networks create and require extensive communications capabilities. These include remote access server fees, WAN costs allocated to the client/server systems, communication lines and device fees, and Internet service provider charges. All of these fees are included in budgeted costs.

Indirect, Unbudgeted Costs

The more elusive figures fall under the unbudgeted category. These include non-productive end-user time, troubleshooting, other IT tasks, and system downtime. Support and training make the system work for users, and the price of those services must be factored into the TCO. Management must calculate peer and self-support from the IS department. There are also costs related to casual learning, CBT, manuals, and online help. End user training can cause downtime and lost productivity.

Unbudgeted expenses often add enormously to the TCO. And, without understanding precisely what the costs arise from, bank management cannot control them. Fortunately, there is a way for Management to keep expenses in check. Knowledge establishes control. Awareness of the root causes for network expenditures gives Management and IT personnel the power to evaluate unacceptable conditions and change them.

10 Ways to Control the TCO

1. Standardize hardware and software purchases. Fewer technology platforms mean lower costs. Defining standards takes only upfront time, with periodic evaluations. As components wear out and become outdated, replace them uniformly across the organization. Upholding policies becomes the test. In the end, the strongest policy will fail without actions to enforce it. Defined standards will help the bank establish training requirements and reduce the costs of hardware upgrades.

2. Inventory all hardware and software. The network administrator needs to know the bank's computing environment for efficient decision-making. The information should be readily available to key people, and easily accessible in each department. The bank can improve its resource management practices by keeping a current catalog of hardware and software.

3. Reduce opportunities for trouble. Implementing explicit policies and profiles helps prevent users from delving into areas better left unexplored, and protects the integrity of the system. High security levels can:

  • Prevent users from accidentally deleting critical files

  • Keep users out of the Control Panel and the registry

  • Keep virus protection software updated

  • Keep users from installing unapproved software

  • Monitor system activities

4. Implement an efficient Help Desk support system. Users will always need some technical support. Insufficient support is a leading complaint among computer users in banks and elsewhere. An efficient Help Desk will reduce the TCO and frustration at the same time. Some ways to facilitate efficiency are to:

  • Implement a single phone number for all end users.

  • Have lower-level technicians or a call coordinator answer the Help Desk calls.

  • Install Help Desk software. (The benefits of a well-run Help Desk will spread throughout the operation.)

  • Track all calls and solutions using specialized software.

  • Take action on trouble PCs or end users. o Set minimum SLA levels for technicians.

5. Implement system management technologies. Banks can use technology to help manage technology. Implementing specialized products can help manage a network structure, including remote troubleshooting, application software distribution, and hardware and software inventories (asset management and software version control). Protocol analyzers can be employed to find chatty NICs and busy LAN segments. These watchdog products can isolate problems and inefficiencies early-long before the situation becomes detectable to the bank. This can save the bank enormous costs over the long term.

6. Minimize upgrades. Hardware and software upgrades are expensive. The bank can more cheaply purchase the power it needs upfront. Surprisingly, upgrading hardware and software often costs more than the initial purchase. Another tactic for controlling costs is to maintain software version control, and run only one version of software at a time.

7. Maintain a dependable infrastructure. A strong infrastructure is the foundation for a successful network. A weak structure causes problems that can affect large groups of people-not only individual users. The system should maintain ample bandwidth to key resources for high availability. Software is available to continually update network administrators of strains on the system.

8. Achieve total management support. TCO affects the entire operation, making bank management's support of network decisions critical. Departmental managers need ownership of a piece of TCO. The bank benefits by everyone feeling invested in the system, and taking responsibility for making it work. Since users are an integral part of a network, their buy-in is crucial. Users' enthusiasm about the benefits of network improvements can actually lower the TCO, through less downtime, faster learning, and more peer support.

9. Spread knowledge. The efficiency of the system increases proportionately with the training level of the staff. Users need education to learn how to make the most of the hardware and software that forms the network. Users should be encouraged to understand the network environment, directory structures, printing options, etc. The bank can maintain books, CBTs, and videos for reference and training.

10. Treat TCO as an ongoing issue. Reducing the TCO is not the goal in itself, but rather a catalyst for environmental improvements. As technology develops, the bank must adjust TCO methods to maximize cost reduction. Management can delegate part of the job of continually addressing TCO issues to someone in the bank with the knowledge and resources to curtail problems before they cost the bank money.

What Tools Can Help?

There are many tools that network managers can use to control and manage the TCO. Some specific products are:

  • Microsoft Systems Management Server

  • Novell Managewise or Z.E.N. Works

  • NT Terminal Server/Citrix Metaframe

  • Protocol analyzers like Microsoft Network Monitor, Novell Lanalyzer, and Network Associates Sniffer Pro (same product new name)

  • Properly updated virus protection software
  • Evaluating A Bank's Current TCO

    Networks around the country run the gamut from virtually worthless to very cost-efficient systems. IT components are continually being purchased and replaced. There is no single panacea for developing a successful network. A bank must evaluate its current standing before it can improve its TCO. Measuring TCO is a critical step in understanding the business value of IT projects. Bank management can ask some questions to help determine the current TCO status.

    • Will purchasing new technology affect the TCO?

    • Which best practices will lower the TCO?

    • Are there hidden costs involved?

    • Are staffing levels appropriate?

    • Is the bank making the right investments?

    Improving the TCO

    Each bank will take a unique approach to improving its TCO. Management can start by setting TCO target goals, and then determining the activities that will produce the greatest results. A TCO project thrives best under the leadership of someone with a technological background who is unafraid of change and innovation. The bank's technology steering committee can become involved, and assist in developing a strong project plan. The networking environment is sure to change during such a project, and everyone in the bank should be prepared for some level of evolution.

    Comparing TCO to Industry Standards

    Network managers should compare their situation to the best practice environment, average costs, and industry standards. Assigned technical personnel can work to evaluate whether new trends and products justify their costs in managing the TCO. Finally, managers should compare:

    • Actual TCO to a typical TCO

    • Current to previous actual TCO

    • Actual TCO to target TCO

    These comparisons will paint a clearer picture of a bank's standing, and way to position itself at the pinnacle of cost-efficiency.

    Assessing Success

    In the case of TCO, success is more like a long road than a destination. The project plan helps charter the territory, and the project people need to repeatedly review the map to insure that the bank stays on track. Technology provides the fuel to propel the bank on a successful journey.

    Network managers should measure the TCO about every six months or as necessary. Management should compare these periodic TCO calculations to the bank's target goals and historical data. The bank will clearly strive for continual improvement, and the fast pace of technological developments means that ongoing improvement is often possible.

    And Finally . . .

    The total cost of network ownership eludes a boilerplate formula. Along with other developments anchored in bits and bytes, computer networks offer something almost ethereal to financial institutions. They provide a structure for work processes and communication that can change in tandem with the growing requirements of the organization. Of course the network should be cost-effective. Knowledge will provide the control necessary to reduce hidden costs and maximize the bank's investment in its network.

    The Authors

    Brian Killian, Brintech Director of Network Services, has designed, implemented, and managed systems projects in national corporations. These projects included network designs, network troubleshooting, groupware and e-mail migrations, and help desk designs.

    He has also managed large-scale multivendor integration projects, involving data migration from Netware to Windows NT, while maintaining UNIX and SNA connectivity. Brian is experienced in facilitating the migration of large firms' outdated software to Windows 95 and Windows NT Workstation. Using platforms including Windows NT, Novell Netware, SUN Solaris, IBM AS/400 and IBM mainframes, he provided onsite Level 3 support for national firms in multi-platform environments. Brian has also conducted international training tours for NEC's Server division. In these seminars, he trained systems engineers in high-end server hardware, configuration, and troubleshooting.

    Brian Killian is a Microsoft Certified Systems Engineer, Certified Netware Engineer, Microsoft Certified Trainer, Cisco Certified Network Associate, and a Citrix Certified Administrator.

    Lynn Koller is a writer for Brintech, a technology management firm based in New Smyrna Beach, Florida. Brintech serves clients across the country, helping them find ways to profit from their technology investments. Lynn reports on general technology issues like Internet trends, e-commerce, and network design for business publications. Before joining Brintech, she worked in the legal field, and designed and taught computer classes at the college level. Through Stetson University and a community college, she instructed DOT and other government employees about the use of the Internet and various office applications.

    Lynn has a B.A. degree from the University of Central Florida in Orlando, Florida. She is just inches away from her Master of Arts degree in writing.

    For more information on Brintech go to their website: www.brintech.com or call 904-427-6772.

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