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Never mind the TCO, it's the TCC that counts in IT procurement

Antony Savvas

Companies should adopt a total cost of change (TCC) buying formula instead of the traditional total cost of ownership (TCO) calculation when buying business software such as ERP and CRM.

According to ERP supplier Agresso, organisations continue to base their purchasing decisions largely on up-front costs. As a result they typically end up with a solution that fits perfectly at the time of purchase, but is very costly and frustrating to modify after implementation. The company has now published a TCC checklist.

"The frustration companies feel with their rigid business applications is fuelling the popularity of TCC as a purchasing criterion," said Brian Sommer, an analyst at TechVentive.

"Instead of measuring up-front costs, TCC looks at the costs involved with modifying an existing software installation. As it turns out, TCC is a far superior measure of an ERP solution's true cost of ownership than TCO," he said.

 

Agresso's TCC checklist

1. Reorganisation and restructuring

  • Our organisation will likely change in structure in the future to accommodate market demands/drivers. What effort is required to change the existing management structure?
  • How much effort does it take to implement a reorganisation whereby one department splits into two?
  • What effort is required to review organisational changes within the finance system?
  • What effort is required to allow project managers to track debtors, creditors, commitments, budgets and margins by individual projects when a decision to outsource has been made?
  • What effort is required to track a project when the organisational structure changes?

2. Organisational evolution

  • How much effort does it take to provide people evolving in their job?
  • What effort is required to support the business when rolling out new products or services?
  • What effort is required to add a new metric by which to slice and dice results or performance?
  • What effort is required to start analysing pay costs to a lower level of detail than just overtime?
  • How quickly is it possible to change from a multi-site implementation to a shared services implementation without disrupting the business?

3. Mergers and acquisitions

  • What effort is required to migrate the merged/acquired organisation to the corporate business system?
  • What effort is required to introduce a common reporting structure across multiple legal entities and regions?
  • What effort is required to move to operating a single credit control department for the entire group?

4. Government reform and compliance

  • If a new regulation is introduced, what effort is required to comply?
  • What effort is required to ensure new and old reporting standards compare?
  • What effort is required to report financial data alongside non-financial data?

 

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