You get what you pay for: TCO of Security Systems
The difference between price and cost
Whenever we are in the market for something new, one of the first things we want to know is the price. We check the tag on the shirt in the department store, the sticker on the new car at the auto dealer, browse on-line to find the best price on the latest gadget we crave. But does price tell the whole story, especially with more sophisticated products we may need? Are we really getting the best deal by buying the lowest price offering?
In the IT world in general, study after study demonstrates the answer is – definitely not. Lowest purchase price doesn’t not mean best value long term or overall ROI. While we may not think in these terms when buying a shirt or a gadget, when considering a significant business investment, calculating the total cost of ownership (TCO) becomes much more important than just evaluating vendors and solutions on the initial purchase price.
Indeed, studies have shown that for various enterprise investments, purchasers underestimate the on-going costs of operations by anywhere between 30% to more than 100%, failing to take into account important aspects such as product quality, operational features that save time and money over the long term, indirect and intangible costs, and the cost of repairs, maintenance and downtime.
But what about the TCO issue related to an IP security solution – are they similar to IT investments in general?
Security TCO: A sample case study
We recently completed a study to evaluate TCO in a typical enterprise level security system implementation. While using a hypothetical model, the study is based on real world scenarios and attempted to paint a realistic picture of how costs are divided between different parts of the system as well as the different phases over a sample ten-year lifecycle of the system.
Our TCO study was based on a hypothetical city surveillance project which requires a robust high-quality surveillance system with 1,500 cameras. It includes a professional video management and storage solution. Of course, we know every project is different and different industries have specific needs and evaluation criteria to determine overall costs. But certain factors are consistent across most enterprise situations and we drew from our experience with hundreds of large installations worldwide to help guide the research.
Potential costs of the security lifecycle
Some costs are obvious when buying a surveillance system – hardware, software, installation and integration – but we actually came up with a total of 40 cost factors that impact TCO over the long run.
Not surprisingly, acquisition costs (typically Year One costs) account for the majority of the total – 67% in our example. Also notable, the costs for the project were divided equally between product related costs and ‘other’ costs – such as labor – not related to the specific price of the products purchased.
As important, on-going operating costs – often overlooked by purchasers who focus just on upfront costs – account for 31% of the long term costs. Decommissioning costs, while a small fraction of the total, still can be significant when considered across a multi-million total investment.
With this study, we are not claiming that this TCO model is applicable for all projects. The TCO will of course vary considerably depending on project size, industry application, system requirements such as number of cameras and other unforeseen attributes. But better understanding how to evaluate TCO can help you make better decisions by accounting for the full range of hidden and direct costs from delivery to disposal.