What is TCO?

In any kind of software deployment, the issue of TCO (total cost of ownership) is an important one. The concept of TCO was first introduced by Gartner originally in 1987 and is used to describe how the cost of software functions over the lifecycle of its implementation. Software tends to continually evolve, and this means that the cost of software is not one fixed figure, but builds over time, by a range of actions, for example, customization or upgrade. More than often, the total lifetime cost exceeds that of the original project development. Depending on how tightly TCO is defined, the cost of ownership sometimes also includes the cost of hardware and other equipment in an installation.

Factors affecting TCO

The TCO of software varies according to the way it is implemented and the ease with which it can be maintained over time. Maintenance will almost certainly include some kind of customization and upgrade activity – and these will be performed to add new features or functions, for example, to add planning capability, as well as to extend the domain of the software – for example, in OSS to include a new service or technology.

So implementations where future changes can be handled through configuration, rather than additional software development, are likely to be cheaper. Systems based on standard products, which benefit from the scale of number of deployments – effectively sharing the cost of testing, debugging and correcting errors together with the wider scope of standard features, also reduce TCO.

TCO also includes indirect costs, such as additional staff or other resources required. For example, an inefficient provisioning process might require manual activation, incurring the cost of one or more staff to process files, check data and run scripts. A replacement system might be fully automated, saving this cost entirely.

The switch to COTS OSS software

In many network operators, software has traditionally been custom-developed as the capabilities required were not available through COTS (commercial off the shelf) software. The balance between in-house and COTS software is changing however, as increasingly service providers find that they can source required functionality from a COTS software package. For service providers therefore, the issue of TCO needs new consideration, as TCO of COTS software has different parameters to that of in-house developed software.

For example, when we talk about ‘upgrade’ of in-house developed software, this is usually referring to a customization project – and this can be time-consuming and expensive, depending on how old the existing system is, and how much change is required. But for COTS software, upgrade refers to the installation of the latest version of the existing software package. While upgrade is sometimes coupled with other customization projects, assuming the package has been implemented in a standard way, upgrade itself should be relatively straightforward.

These commercial benefits arise when following our vision of an Active Inventory