When an SMB purchases PCs there are many factors to take into consideration. Often, the best way to choose the right PC, whether commercial or consumer, is to consider to use a “Total Cost of Ownership” (TCO) calculation. Many companies rely on TCO to help make technology purchase choices, but it isn’t always the sole driving factor. Read on to find out how SMBs that opt out of using a TCO make their purchasing decision, gain a more in-depth look at how a TCO calculation works, and discover several recommendations for SMBs.
Consider TCO When Purchasing PCs for your SMB can affect how much you are spending versus saving in the long run.
Outside of TCOs, how do SMBs make PC purchase decisions?
Not all SMBs utilise TCO. Instead of just looking at cost, they generally look at four areas of comparison: Sturdiness of the PC, a lower upfront cost for the PC, minimal PC maintenance needs, and low failure rate. However, depending on the type of PC owner that the SMB is, they prioritise these factors in different ways. Commercial PC owners tend to place a low failure rate at the top of the hierarchy, followed by a low maintenance cost and high sturdiness. They tend not to be as concerned with the initial cost of the machine. The end goal of commercial PC owners is to have machines that won’t break down and cause disruptions in productivity.
Consumer PC owners tend to be less concerned with sturdiness and lower failure rates. Instead, they consider lower upfront costs and maintenance costs to be the basis on which to make their purchase decisions. The main reason for this is that consumer PC owners do not expect to use the PC for more than four years. Therefore sturdiness and failure rates do not matter as much. SMBs that own a mix of consumer and commercial PCs take a more approximate approach by balancing lower upfront and maintenance costs, as well as reduced failure rates.
TCO is always involved
Even though some SMBs may not intentionally or directly employ the use of TCO to help them make their PC purchases, they will always indirectly use TCO. The four aspects that non-TCO SMB users use to evaluate PCs (i.e. sturdiness and lower upfront cost, maintenance costs, and failure rates) are related to direct TCO factors.
- A low upfront cost can be tied to the cost of PC purchase.
- Low maintenance cost can be associated with the TCO parameters of the cost of warranty extension, cost of hardware repair, and cost of software maintenance.
- Sturdiness is the factor that influences the cost of productivity loss—if the PC is sturdy, it will break down less, which leads to fewer productivity losses.
- A low failure rate is also tied to productivity loss, as well as the cost of hardware repair and carry in service charges.
So while SMBs may not actively seek out TCO when comparing PCs, they end up with a similar result.
A breakdown of the TCO calculation
The core of TCO calculation is very straightforward. SMBs simply need to add direct costs and indirect costs. Here is a breakdown of the calculation:
1. Cost of PC purchase + 2. Cost of OS/software licensing + 3. Cost of warranty extension + 4. Cost of hardware repairs + 5. Cost of software maintenance and recovery
1. Cost of carrying service + 2. Cost of productivity loss
When all of these costs are added together, an SMB will have the TCO. The challenging part of this calculation, though, is identifying the indirect cost of productivity loss and the direct costs of software maintenance and recovery and hardware repairs. Nailing the productivity loss numbers down will take some estimation and possibly looking at customer reviews to see how much downtime can be associated with the PC. When this downtime is identified, an SMB can multiply this by employee hourly rates. A similar strategy can be used with hardware and software maintenance and repair costs (i.e. researching customer reviews), as well as trying to get accurate numbers from the manufacturer.
Additional information about TCOs
Direct cost compared to the indirect cost
In most cases, the indirect costs will make up the bulk of the overall TCO. It is not uncommon for the direct cost to be half or even a third as expensive. The cost of productivity loss makes up the bulk of both the indirect costs and the overall TCO.
Small organisations compared to medium organisations
On average, small organisations end up having a higher TCO than medium organisations. This is especially prevalent when it comes to the indirect costs, which tend to be significantly higher. The cost of productivity loss creates the most dramatic cost difference between small and medium organisations’ TCOs. The only areas that medium organisations end up paying more for, is the cost of licensing OS/software, the cost of warranty extension, and the cost of hardware repairs. However, these costs are only minimally higher for medium organisations.
Consumer PCs compared to commercial PCs
Consumer PCs typically have a higher TCO than commercial PCs. This is mainly due to the much higher indirect cost that is associated with consumer PCs. However, commercial PCs do have a higher direct cost, mainly due to a higher cost of purchase, higher cost of OS/software licensing, and higher cost of software maintenance and recovery.
Recommendations for SMBs
Choosing between commercial and consumer PCs can be difficult. There are benefits and disadvantages to both. As an SMB, make sure you spend time outlining your goals and objectives for the PCs in your tech purchase. Including the purpose of the PC, its operation lifecycle, and the potential for any future maintenance and repairs. Additionally, SMBs should research the availability of spare parts.
When approaching this decision, SMB leadership should know that consumer PCs often have a lower upfront cost. However, they should still inquire about commercial PCs and thoroughly analyse the TCO to save the business money over the long-term.