Today’s technology craze makes computer-purchasing decisions difficult and confusing. Before stepping into a showroom, buyers must consider budget constraints. Nevertheless, a tight budget shouldn’t steer you toward trouble disguised as a cheap computer.
Every business owner should become familiar with total cost of ownership (TCO)—the financial estimation for calculating direct and indirect costs related to purchase of any capital investment. With your computer system, the TCO calculation needs to account the following costs:
- Computer and software
- Printers, networking and backup hardware, other peripherals
- Software upgrades
- Hardware maintenance and supplies
- Technical service and support
With TCO, you can plan yearly costs without blindsiding your budget. When buying a computer system, TCO typically adds up to three or four times the actual purchase price of the computer and initial needed software, so purchasing a $600 computer with $400 of software and a $500 printer has a total TCO of $4,500 to $6,000. This equates to $900 to $1,200 per year, if the computer last five years.
Printer Costs Compared
Every computer-system purchase changes your TCO. The goal is to lower your actual yearly TCO by evaluating your needs and making smart purchases. Sometimes this means spending more upfront to save money down the road. One example is to spend more on a quality printer, such as the HP LaserJet 2420DN Networked Laser Printer for $699. The higher front-end cost may first prompt you to close your wallet, but stay with me to understand how TCO works.
The HP toner cartridge costs $195 and yields 12,000 pages at 5 percent coverage. This works out to a cost per page of 1.6 cents for high-quality professional printing, meaning you could print 1,000 billing notices a month for a yearly ink cost of $195, not including paper cost. The TCO per year over five years is $335, including the price of the printer.
Now compare the HP with a lower-end inkjet Canon printer costing as little as $49. The average cost for this printer’s ink is around $28, but it yields 500 pages of text at 5 percent coverage. This works out to a cost per page of 5.6 cents for nonprofessional quality. If you print 1,000 customer letters a month, you’ll pay $672 in ink costs a year, with an annual TCO of $682 over five years, including the printer price.
The TCO reveals how trying to save money on a printer will cost you $347 more a year, for a five-year loss of $1,735—just in printing invoices. The lesson: When selecting the right printer, figure how many pages you print each month, remembering to include all letters, invoices, receipts and office memos. If you exceed 200 pages, a higher-end printer will save you money as well as provide professional quality. Where else can you save $1,735 over five years? As you can see, TCO leads to smart buying.
The same holds true for all your computer purchases. You may be told that you can buy a great computer for just a few hundred dollars, but is this a smart TCO investment? As with just about anything, you get what you pay for. When it comes to computers, the first advice is to stick with a reputable vendor. TCO will be lower with a big name brand computer, plus you’ll get customer support that you might not find elsewhere.
Major-brand vendors make computers that small manufacturers can’t build themselves. Dell, for example, ships thousands of computers every year. Mass production allows the company to offer computers that are guaranteed to work or someone will be at your office within 24 hours to fix the issue for free, depending on your warranty.
If you don’t like Dell or other manufacturer’s support, you can call the Geek Squad. The company is available 24/7/365, and support calls are not routed to another country. The Geek Squad will send an agent to fix whatever issues you may have. This assurance—provided by the Geek Squad or other IT-support company—helps lower your annual TCO by keeping your computer, and business, up and running.
Another tip: Establish a relationship with an IT professional before you have a problem. If not, you may be subject to high per-hour charges to fix unexpected issues.
The main lessons here are twofold:
- The initial price of capital purchases become just a part of the life cycle of purchase costs.
- TCO estimations help you make smart capital investments.
You can do TCO estimates with your car, your kid’s educational costs or your self-storage business. The final statement reflects purchase and future costs, making TCO a great strategy for anyone concerned with finances.
Tredd Barton owns Tredd’s Software Solutions, which has been developing self-storage software for the past nine years. His company recently released version 6.2.9 of its selfstorage software and hired a new sales and marketing manager for its expanding business. For more information, call 724.484.7801; e-mail email@example.com; visit www.tredd.com.