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 Blog Item Added on March 31, 2006

Base your business case analysis and total cost of ownership models on cost (numerator) on achieving your internal customer’s output/mission (denominator). That approach is hard to refute and gets to the heart of the institutional matter. Another way to encourage people to think Total Cost: don’t talk about a $50-million building that will cost $4-million a year to operate. Instead talk about the $170-millon total cost alternative (30years). 

Total cost models used in evaluating capital investment projects should include the added burden of services and consumables consumed (derivative demand). You can also use total cost of ownership to attack broad equipment vendor boilerplate numbers that could cause you to over-build.

It is a perplexing observation that total cost of ownership thinking and discussion rises to the highest management levels when considering the issue of retrofit vs. replacement of an existing building, but NOT very often when deciding on new construction for growth.




 
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