TCO (TOTAL COST OF OWNERSHIP) CLIENT ALTERNATIVES TO PURCHASING

Transcription

1 TCO (TOTAL COST OF OWNERSHIP) CLIENT ALTERNATIVES TO PURCHASING

2 William J. Stuckert President CDO2 TCO (Total Cost of Ownership)

3 Agenda TCO Total Cost of Ownership Industry Information Finance Alternatives Buy Lease Capacity Poll Case Study SunCoke Energy

4 TOC Total Cost of Ownership

5 Your Homes TCO Average US home purchased:$138,000 Average down payment: $18,000 Average US home mortgage: 5% for 30 years Monthly payment: $ Mo. Insurance/taxes: $ Total: $1,150 x 360 Payments:$414,000 Upkeep/Paint/Grass/Etc.:$175@mo.x360=$63,000 Total TCO=$477,000

6 Your Cars TCO Average US car purchased:$19,300 Average down payment: $2000 Average financed: 6% for five years Monthly payment: $ Mo. Insurance/fuel: $ Total: $ x 60 Payments = $37,080 Total TCO=$37,080 AAA report says; car ownership is rising at 1.9% per year

7 Your Children's TCO $3,900 $860 Child cost in the year 2014 $970 $1,300 $1,660 $3,130 $790 Food Transportation Clothing Childcare/Educ. Healthcare Housing Misc. If you Live in the Midwest: Average Salary: $61K- $100K Child is 0-2years old Send to private college you pay for This year your child will cost you; $12,700 Total TCO=$360,946

8 Mobility TCO Gartner Says: Level 1 Bullet Hardware Cost Dependent

9 Mobility TCO per user- per year Voice and Data: $830 Labor: $700 Service Desk- Level I II. System Architects III. Dispatch Support Mobile Device Management Software: $200 Device Hardware & Software: $200 or more General Admin and Training: $55 Total TCO per user per year = $1,900

10 Where are the Hidden Cost s? Ranked highest to lowest Importance Poison pill software to eradicate data on lost or stolen devices Encryption Technology VPN s Mobile Device Management Services and Software (AirWatch) Internet or Intranet based application portals Appliances for device management and security Enterprise-class mobile devices Software inventory and usage services Internal Web 2.0 capabilities Private or public clouds Client virtualization Mobile Enterprise Application Platforms

11 A Tablet TCO Distribution from Intel

12 Management is Needed Mobile Inventory/Asset Management: Ability to have the awareness of which devices are connecting into corporate systems; Mobile Application Management: The ability to add, remove or update custom or third party applications in a centralized fashion; Mobile Security: The deployment of solutions for anti-virus, anti-malware, authentication, encryption, etc. to ensure information loss prevention; Wireless Expense Management: Pro-active management of wireless carrier expenses, as well as the inter-departmental chargebacks for both individual and corporate liable devices; Mobile Operations Management: The ability to monitor the status and health of the various systems (BlackBerry Enterprise Server, servers, databases, application servers, etc.) that will be used in the mobile solution to proactively manage (and prevent) incidents and/or system downtime; Mobile Help Desk: Systems for opening, managing and resolving incidents and trouble tickets specifically related to mobile deployments.

13 How can you better manage TCO? Creative solutions mo. fee for services Lease/finance Built in tech refresh Cost basis to include all; Hardware Software Services Maintenance Tech Support (Call Center) Technology turns

14 Alternative Acquisition Strategies

15 Why would you finance technology? Mitigate interest rate risk locked down. Transfer obsolescence to the third party lease company. Only pay for equipment during the period they use it. Prepare for a refresh. Preserve their cash for core operations. Free up lines of credit and cash for asset purchases

16 Mitigate Obsolescence Risk Expected Usage Drives Financing Decision Is the solution Upgradable vs. Scalable? What s expected replacement cycle? Mechanical vs. Economic Obsolescence Economic obsolescence increases TCO Keep asset passed its useful life Total Cost of Ownership is Key Cost of hardware is not the only factor Understanding of technology road map

17 User Demands Drive Managed Services Business model evolving into Services Bundle Hardware being commoditized Services & Management taking a bigger role Ability to push obsolescence risk back to the vendor Managed Services Financing Eliminates CAPEX Converts fixed cost to variable charge Can be off balance sheet

18 Acquisition Strategies Pay cash Lease and own at the end for $1 (i.e. capital lease) Lease and return at the end (i.e. operating lease) Finance current and future growth assets, under one capacity pool

19 Pay Cash Pros Control Ownership Fund with Cheap Debt Generates Depreciation Expense Cons Usually handcuffed to refresh due to NBV problems Uses up balance sheet capacity needed for core operations In 2014, bonus depreciation was eliminated making ownership more expensive

20 Lease to Own for $1 (Capital Lease) Same treatment as paying cash i.e. It is on balance sheet and assets depreciated by enduser Does not position for next refresh Generally represents an ownership mentality, which has a tendency to drive up TCO Obsolescence risk stays with the enduser

21 Lease then Replace (Operating Lease) Pros Refresh discipline is forced at end of lease TCO is optimized by refresh Risk of obsolescence transfers to Lessor (finance company) Alternative finance source Cons Specified return dates on each system may be hard to manage Requires detailed asset management tools If users change their strategy, this lease is harder to modify

22 SunCoke Capacity Pool

23 Technology Capacity Pool Technology financing Focus on total cost of ownership End to end process Flexibility for technology migration

24 Asset Lifecycle Drivers Reduced Costs and Increased Operational Efficiencies Improved Service Provisioning Vendor Consolidation and Management Clear ROI on IT Investments Compliance and Risk Mitigation Regulatory and Compliance Mandates Software License Tracking Financial Risk Management Global Security Threats Increased Service Levels to the Business Integration of the Business and IT Improved Service Continuity Enable Growth Through Innovation Mergers and Acquisitions Competitive Advantage Focus on Core Business Technologies

25 Solution Approach Establish a Holistic, Long Term IT Asset Lifecycle Management and Support Strategy Assure Investments Are Leveraged Within Long Term Business Directives Define Success Establish Measurable Program From the Beginning Benefits: Defined Asset Management Road Map Integrated Asset and Issue Tracking through Asset Managment Portal Detailed System and Performance Data Optimized Process Automation and Integration Maximize Return on Investments Over Time Avoid Re-work and Premature Asset Decommissioning Maximize Service Value to The Business

26 SunCoke Energy Capacity Pool $5,000,0000 Purchase leaseback of existing equipment 5 year commitment - client estimates $500-$1M per year spend on technology Only pay on dollars spent - rates locked in monthly per user pricing As many tech turns as required built in obsolescence management Covers software, services, warranties, consumables etc Configuration and deployment SunCoke shares in backend remarketing -35%

27 Recap TCO is expensive Maintaining security critical to your enterprise Creative solutions allow for updated product acquisition Managed services - combing all TCO cost drivers, delivers better return on investment Financing key driver to negating obsolescence risk

28 Agenda Questions?