06/30/2024
TCO - Budget & Monitor for Optimized Value
Total Cost of ownership is a summation of all direct and indirect costs related to Capital and Operational Expenditures associated to the enterprise, capability, process, program, product, service or asset under consideration. In the Lean and Agile financial accounting practices it is the Value Stream budget.
Apply specialized knowledge to discrete elements for different subjects
In generalization it is a 360 degree view of costs with the investor stakeholder in the center. The CapEx and OpEx are 50k feet high categories. As you traverse down the pyramid of expenditure and return rationale the underpinnings of cost dimensions start shifting. Such basis differentiations also impact the dimensions of cost benefits and return on investment mindsets. For this reason, the C Suite and the senior leadership start coagulating towards the Business Value instead of set and defined KPIs and OKRs on the Dashboards.
Measurement of Success depends on the reasons for calculating TCO. The Why in TCO must layout What and How to calculate. The Why defines your accounting function approach and costing elements.
Cost Model and Business Models are of paramount importance in the approach to calculate TCO. The accounting principles of the enterprise has an impact. The decision lies with the investor or spending stakeholder working with the finance stakeholders on how to bean count. A software the the IT Stakeholder wants to include as an operational expenditure you may uncover has been capitalized by IT Accounting.
Macro Level Cost or Business Models Do Not apply cleanly and impact TCO compute.
Factor in the Technical Debt, Product Debt, Business Debt for the TCO Continuum while Optimizing TCOs during monitoring and control. Most such debts, specifically Technical and Product debts cannot be forecasted. These can become significant factors in misaligning your TCO driven by additional capabilities you deploy to service these debts. Many a times you have to carry such debts on your Roadmap as long term elements.
Forecasting TCO vs Monitoring and Controlling TCO is key to your success. TCOs for product, programs, organizational initiatives, services, among others, garner special attention to discreet elements in different TCO scopes. TCO for technology assimilations are different that Enterprise Architecture initiatives, which are different that a Platform Modernization initiative. A cross functional team with adjacent capability areas like accounting and finance, line of business stakeholders, etc. will empower your contextualization and recharacterization of statistical elements.
During the implementation of you initiative Roadmaps you will learn by experience the available budgets of your aspirational benefits and work on their readjustments. Keep an open mindset for the reporting metrics, success criteria, aspirational outcomes, methods and processes, all.
A Value Stream driven computation is a Best Practice Approach to Outcomes Based TCO.
An expansionist view to implementing your TCO endeavors - learn, mature & optimize
Start calculating TCO for a segment and then expand. The approach of incrementally expanding provides you the wisdom from the matured learning of the experience. It gives you many adjacent benefits of increasing your circle of influence based on trust and demonstrated success and rectification of mistakes and errors. This start getting respect in your corner.
The commitment to the continuum of delivering business value is what you want to attract lesser friction for larger coverage of your program. This empowers stakeholders and the program to achieve enterprise shape delivering enterprise level value. Large in scope, significant in quantum and ultimately with awards, recognition of desired executive stakeholders.
For your needs of TCO consulting you can always reach out to us for assistance at VXXIV Corp. and Adorset
The Janus Institute Unified Methods Myi-Ching : Capability Development
