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Why TCO is the Only True Way to Measure Network Costs

October 6, 2011 - 1 Comment

Cost always plays a big part in purchase decisions. It’s certainly a factor as I consider buying  a new car. As you’re well aware, purchasing a new car isn’t just about the initial cost. In my case, I’m considering reliability, speed (not that I need to go that fast carpooling my kids to school), mileage, and looks to a certain extent. (I just can’t bring myself to drive a minivan.) But what does buying a car have to do with your customers, or IT spending for that matter?

To put it simply, customers often cite initial cost as a big factor in their network decision-making, too. But if they are looking only at CapEx when purchasing new equipment, it’s the same thing as only looking at the initial cost of a car: They’re not seeing the entire picture.

Total cost of ownership, or TCO, is a better metric to assess network cost, because it considers the full impact on IT spend, including CapEx, services, labor, bandwidth, and energy consumption. And TCO is not just a measure of the initial expense, but of how much equipment will cost over its lifetime.

In June 2011, Cisco commissioned a third-party business consulting firm to analyze the true TCO of the network, comparing the quantitative costs of acquisition, support, labor, bandwidth, energy, and product longevity. The firm also assessed qualitative business benefits like network uptime, user productivity, and security.

The quantitative results alone show that a network built on Cisco’s architectural approach can yield up to a 13% better TCO, building a powerful business case for you to take to your customers about why the choice of networking gear matters.

Here are some facts drawn from the findings, which support Cisco’s firm belief that a strategic next-generation Cisco network architecture delivers superior value and lower TCO:

  • The Cisco Borderless Network Architecture can deliver up to 13% better TCO than a “good enough” network, offering compelling value for the strategic Cisco investment
  • The single biggest benefit of Cisco’s architectural approach is labor savings—labor constitutes 50% of TCO, and Cisco delivers 5-10% labor savings driven by unified wired and wireless and embedded security
  • A quality network delivers business benefits beyond TCO, including improved network uptime, higher user productivity, and a lower threat of security breaches
  • A Cisco network provides many additional business benefits that increase ROI, such as higher business growth rates, increased customer reach, or new business processes that streamline operations and increase employee productivity

Many customers have seen the transformational business benefits of using a next-generation network—for instance, ExamWorks, a medical and legal review company, reported saving $333,000 annually by avoiding purchases of new PCs, and deploying virtualized desktops on Cisco UCS servers. The company further reported that the cost of supporting 1,000 virtual desktops using UCS is 67% less than conventional server architectures. That’s just one example of many that demonstrate how next-generation networks are helping companies to save costs.

We know that many of the CIOs and IT decision makers you sell to are looking for solutions that increase agility and improve employee productivity without driving up costs. But it is increasingly hard for IT to say “yes” to users and stakeholders without sacrificing security or ease of operations.

While any vendor can provide a cheap solution, only a vendor that invests consistently in innovation can deliver the lifetime TCO and superior ROI that your customers will demand from their networks.

Want to learn more about how next-generation networks deliver superior TCO? This whitepaper details the results from the research.

You can also attend Cisco’s upcoming webcast, The Economics of Networking, on October 10 at 9:30 a.m. PDT, which will examine how innovations in the network help reduce the TCO and enable organizations to deliver transformational business benefits.

And to learn more about how Cisco can deliver a next-generation network with superior TCO for your organization, visit the Cisco Borderless Networks ROI Benefits Calculator to see what benefits you could be harnessing today.

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  1. Good stuff