Look at Total Cost of Ownership | IT PROCESSES

When looking to make IT investments, make sure proposals include recommended budget increases to cover all the costs—initial as well as ongoing—and projected budget decreases associated with the promised cost reductions. Often, companies focus on the initial costs to purchase and implement a solution rather than the total cost of ownership. Have the CFO make these budget adjustments automatically upon completion of each project. 


Suggestions on how to collaborate effectively with finance and the CFO. Similarly, when comparing to the base case of doing nothing, make sure you include all the costs, such as the opportunity cost of lost savings due to inefficiencies. It is a challenge to determine the base case correctly because the future without doing the project (i.e., the base case) is often different from the current situation (i.e., your existing budget). Ensure that the base case reflects the full effect of not doing the project in question, including new costs. Examples of total cost categories to review are:
  • External implementation costs:
    • Software
    • Database
    • Server
    • Network
    • Software modification
    • Consulting for implementation
    • Interfaces, conversions, customization
    • Training and change management
    • Project management
    • Travel and expenses
    • Sales tax
    • Investment tax credits (to defray the investment costs)
  • Internal implementation costs:
    • IT setup and operations labor
    • Business analysis and configuration labor
    • Subject matter expert labor
    • IT interfaces, conversions, customization labor
    • Training and change management labor
    • Project management labor
    • Travel and expenses for internal labor
  • On-going costs:
    • Application maintenance
    • Database maintenance
    • Operating system maintenance
    • Server maintenance
    • Network maintenance
    • Sales tax (varies by state)
    • IT operations and support
    • Depreciation
    • Business labor
    • Interest expense (if investment was financed)
    • Software license expansion for growth
    • Software upgrade

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