The New Generation of Total Cost Ownership
In a connected world we live in now, smart buying is a necessary skill. Every purchase you make leads to forming a buying habit – being smart, practical or lavish in making purchasing decisions. As consumers, our buying potential always has limits depending on many variables which make spending, in general, a very latent issue for a lot of people.
The perennial question of knowing what you’re truly investing in always comes up. Are you really getting value for your money?
How would you answer that when you’ve just come from an electronic store making your first extravagant purchase?
The idea of making a purchasing mistake is unfathomable. However, we don’t always know ONE mistake we keep doing – OVERPAYING. Owning something you may have overvalued isn’t always known to the buyer because we simply don’t ask important questions before buying. We end up taking the product home hoping for the best.
In the case of consumer electronics, a lot of buyers often go for the price “on the shelf” without asking questions except for, maybe, a discount. The life cycle of the product is never discussed. That’s because most buyers don’t know they have to care. And in most cases, it’s too late. You paid cheap for a product that did not meet expectations or may have paid additional costs for during its lifetime (think of the repairs on your second-hand car).
It now makes you sit back and analyze just what gadget you own now which you may have potentially overpaid for. But you’d be right to do that.
Like most consumers, the main difference between the Total Cost Of Ownership (TCO) versus the Purchase Price isn’t always known to you.
Why should we know what TCO is, you ask? It’s simple, if you really think about it.
Out of habit, we buy what costs less even if the quality of what we’re buying isn’t always known. We almost always presume that what costs more isn’t always a practical purchase. There are always cheap alternatives out there.
The Total cost of ownership of things with value such as your smartphones, tablets, computers or TVs, for example, isn’t always reflected on the purchase price for a reason – it’s too much work to have to keep analyzing TCO for every single purchase you make.
It’s a mistake to always go for purchase price right away, as a general rule. Otherwise, you’d always make the costly mistake of not getting value for money. Think of TCO in terms of the life cycle of the product. Is this money you’re investing now going to be the last you’ll ever have to shell out during the product’s lifetime?
You wouldn’t want to buy a cheap car now without ever thinking that you’d pay for repairs down the line, would you? The same logic applies.
Total Cost of Ownership is the cost you pay after carefully considering the after-purchase costs of an asset – after you have to set it up, maintain, deploy or upgrade in the future. Owning an asset also comes with the inherent responsibility of having to pay for its maintenance over time which can be substantial, if you’re not careful.
True Value of Ownership
It can be hard to put a pin down on this concept if you’ve never thought about the aggregate costs of something you own. And if at this point, the message of TCO still isn’t clear, let’s put this analysis somewhere close to home.
Almost every business owns a mobile computer now, so let’s start with that. The normal buying pattern for most enterprises in terms of buying mobile computers is to go for the lowest purchase price. Sure, the unit would have 1 or 2 high-end specifications but the buyer almost always goes for the cheapest. So you end up taking home a brand new, albeit, low-priced (but not low-cost) computer. And fair enough, you enjoy it for a year without problems.
But as time would pass and you’d have used your laptop, taken it outside or subjected it to potential hazards like drops, scrapes or even breaks, the unit would eventually need to be hardware upgraded. Some applications and software would have had to be upgraded (paid) as well. Most of the time, the unit would have already needed parts replaced (faulty keyboard, anyone?) and perhaps you’ve paid for a service to retrieve lost data.
All of these are what is implied by real value of ownership of a cheap mobile computer bought at purchase price. Buyers often never take into consideration the long-term costs for maintaining the unit itself overtime. Whereas, had you bought a computer – a now ruggedized one built to withstand both normal and extreme conditions from a company/service that offered you a bigger initial investment plus a small monthly fee for the upkeep of it – chances are that you’d have paid these fees one time with the unit still as good as new 5 years down the line.
In the example above, total cost of ownership could very well means the true value of ownership. The same logic applies to all things purchased where you only think of the short-term costs, often the lower purchase price and never the true cost of ownership.
Think of the return of your investment as a strategy. Would you rather pay cheap or would you put your valuable resources in a secure basket? Total cost of ownership applies when you invest in something big, analyze the future costs involved and only materialize such investment when you’re sure of the value this investment comes back in.
The rationale here is super simple if you don’t want to think of it too much – looking beyond purchase price and think of the real value of owning stuff.
It would only make sense for businesses to highly invest on things that can be prevented and guarantee zero losses at the end of the day. It’s just a smart thing to do. All things considered, by investing in a ruggedized device, whether for personal or enterprise use, you’ve made sure that what you see isn’t necessarily ALL you get.
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You Get What You Pay For
The logic behind TCO is very sound as more businesses look into investing in assets that would help them transition into mobile ruggedized technology. They would think of it as an important business strategy as more and more of their workforce rely on using devices that would boost their productivity and profits.
This is generally what is meant by a new generation of total cost of ownership. Enterprises are now more adept in knowing where to put their investments in and enabling fast ROI as a result.
Simply put, organizations who are ready to invest in enterprise technology (mostly ruggedized in nature) know they will get what they pay for such as:
- Less Limitations – The costs incurred always include a lot of value added services from providers. That means the limitation that comes with consumer-grade devices no longer apply. The total cost for each unit bought would have already considered everything from upkeep, downtime costs, deployment costs, software upgrades, security and finally, unit replacements too. Most providers even throw in a handful of other bespoke services too like customizing their platforms to the nature of the business itself. In this context, the real value of ownership now also means having little to no limitations in terms of services.
- Security – Usually knowing their investment is safe would be enough for most organizations but that’s not the security meant here. This means, quite literally, enterprise units (laptop or smartphones) being physically secured against all types of hazards. All units are built tough on their exterior as all ruggedized units should be. That’s because an insecure unit results in work disruptions, delays and even lost data.
- Peace of Mind – True value of ownership, equated to total cost of ownership, takes in the long-term viewpoint here. It is 40% more cost effective to buy a ruggedized device than going for the commercial ones out there. Not only that, your TCO investment now will have more returns in terms of profits which is always an advantage to know.