A few weeks ago I wrote an article on the real cost of fighter jets. However, before you can figure out the cost of a solution, you need to figure out what your solution options are.  And the way to figure out your options is to define your needs.

As I write these blogs, I am always struck by how much they apply generally life as well as in making business decisions – this process works if you are looking for a new computer or phone, buying a house or shopping for a new outfit to wear to the party Saturday night.

So first, what are your needs? There are, of course, entire books on how to do this for computer systems, so I am just going to offer a couple of thoughts:

1. Focus on outcomes, not on process.  Remember what you are tying to accomplish - a fulfilled order or a completed product or a comfortable outfit that goes with my blue Louboutin pumps.
2. Think creatively when identifying needs. Don’t worry so much about the current processes you follow today. Current processes are derived from system and business constraints and old habits.  Take the opportunity to rethink how you do things and look for new approaches, practices and outcomes that may be enabled by new technology.
3. Set priorities for your needs.  Here is where you must be realistic. Know which features you will give up on if you have to pick, and which ones are must-haves.
4. Don’t get caught up in sales patter and jazzy presentations.  Keep an open mind, but keep focus on what you are trying to achieve and what you need to get there. Don’t let flashy demos distract you from what you need and are looking for.

 The second piece is to identify possible solutions that meet your needs.

1. Scan the marketplace – go to trade shows, search the internet, talk to your business partners, leverage your personal alliances to find out what’s out there.  Consider your existing relationships with vendors that you might want to extend. 
2. Look for vendors who want your business – so that you are just as important to them as they are to you.
3. Consider (even for only a few minutes) all possible options. If you are looking at a software solution, consider in-house builds as well as commercial products, if only to reinforce the logic of your selection process.
4. Follow the Pareto principle – 80% of the value comes from 20% of the input. Look for a solution that meets 80% of your needs (including the critical ones) and the remaining 20% can be figured out later.

Christy DeMont

Hearing about the variety of opinions about the cost of fighter jets for the Canadian Armed Forces, it got me thinking about the idea of using Total Cost of Ownership as a method for calculating the costs of a solution to an organization and comparing options.  (I’m not going to address the topic of defining your needs and identifying solutions that meet those needs – which seems to be at issue here as well.  Perhaps another blog on this soon…)

Before the idea of Total Cost of Ownership (TCO) became popular, businesses putting in new computer solutions didn’t understand and account for the full cost of the solution – it used to be (and still is) easy to think of the cost of a piece of technology as the amount you pay a software vendor for acquiring the product, implementing it and paying annual maintenance. These costs are clear and unambiguous, particularly when you are writing the cheques for them.

What traditionally didn’t get accounted for was a myriad of less obvious costs – the cost of your internal IT team to learn, implement and manage the new system, the costs to train and support staff who use the product, and of course additional infrastructure costs such as backup and archive, computer room footprint, power, AC and UPS (Uninterruptible Power Supply) draw. Some of these costs are fairly obscure to determine (and in fact for things like infrastructure really have to have some sort of cost allocation used).

But here’s the thing: if you don’t consider them, one day you realize that your computer room is full to capacity, or your network is working at maximum capacity or you need more storage at your hosted computer facility, and you have to make a case for why you suddenly need to spend more money.  What’s worse, it’s often on items that nobody really cares about (“No new added functionality? Why should we pay for a new UPS?”) and that fall into categories that, as a CIO, your boss expects you to be on top of – so not only do you need to ask for money, you look like you aren’t doing your job.

So – back to the F-35 jets.  What costs should be included? First, you want to include any cost that is incremental over what you have today.  You have the cost of the planes, of course.  And direct ongoing costs – maintenance, training for pilots and ground crew. You have to consider some operating costs – for example, if these planes use fuel at a faster rate that the old ones, you have to add in the extra fuel.  If you need to rebuild hangars or runways to accommodate them, you have to account for that. However, if the total number of pilots doesn’t change (i.e., they are just going to stop flying old planes and start flying the new ones), you don’t have to account for them. 

My opinion is that you have to be thoughtful but use common sense. What’s really important here is to be able to compare options on equal footing (so accounting for all the costs for each option to provide a fully implemented solution), and then once you make the decision of the solution to be implemented, make sure you know the resources you need to implement and run the solution – money, people’s time or use of organizational facilities. Oh yeah – and, as always, make sure your colleagues understand your decisions and your analysis so they aren’t surprised down the line.  Forgetting to do that is the surest way to have support for your project disappear if suddenly the price goes from $9 billion to $16 billion.

Christy DeMont