The Loaded Cost

When Orion delivers a solution to our customers, we try to focus on the overall value a solution provides vs. the total cost of ownership today.  This can often be a complicated calculation due to the fact total cost of ownership includes both hard and soft cost elements.  Hard costs are those for which a bill is delivered and can easily be tracked.  On the other hand, soft costs can include many assumptions and have very different weights dependent on the unique environment of any given organization.  For many of the solutions being recommended today, a true cost of ownership requires the combination of these two values.

Hard Costs

When looking at potential options, hard costs include both operating and capital costs.  Again, these costs often receive a bill which can easily be tracked and compared vs. the expected costs.  These costs can include operating expenses such as telecom circuits, maintenance contracts, etc. and capital costs like equipment, telecom installation, and vendor implementation costs.  However, even hard costs have some degree of fluctuation that needs to be estimated.

  • Usage costs – Although many telecom services have unlimited usage elements, some still included rated components. Is your business seasonal with usage charges varying by time of the year or are usage costs trending upward or downward due to the overall state of your business?
  • Bursting costs – There are some organizations benefiting from flexible bandwidth cost elements where capacity and associated costs can change as needed. It is critical to understand these bursting costs to avoid potential surprises.
  • Surcharges/Taxes – As most know, beyond the standard telecom costs, there are also additional taxes and surcharges many governed by local, state and federal entities. These charges have been known to change within a contract term.

Soft Costs

These charges can also be very relevant, but much more difficult to assign to a given project both from implementation and support perspectives.  From a vendor presentation standpoint, these soft costs can often be amplified to prove a shorter ROI.  However, only your organization can assign these costs.  Some examples of these soft costs related to telecom services include:

  • People Salary and Time – Since you are paying salaries, what is the cost for your people to implement and support a solution? How much time will your staff spend troubleshooting issues in a reactive mode?  What kind of training time is required to provide on-going support to your services and applications?
  • Delays – If a project does not meet an expected timeline, what costs might be incurred? For example, if you are moving a site and a service is delayed by a month, what is the impact to your organization?
  • Utilities – What percentage of your utility bills can you assign to a new project? Will there be additional electricity consumed?  These may not be charges falling directly to your budget but must be considered in the overall financial viability.
  • Down Time – What short and long-term costs do you assume if a critical application or service is down for an hour, a day or a week? Could you lose customers long term if you cannot support their short-term requirements?  Are users sitting idle while applications are unreachable?

The Big Picture

Again, the attachment of hard and soft costs are very specific to your organization.  Your decision process and ROI calculations may be very heavily weighted to hard costs.  However, many of the values of telecom solutions these days often lean to harder to identify cost savings.  For example, many organizations are looking to hosted services.  These are projects in which organizations look to eliminate expenses both OPEX and CAPEX from in-house solutions to a mostly OPEX hosted solution.  From a hard cost standpoint, this can be a relativity easy calculation.  But, many of the values of such a transformation come from softer costs such as network reliability, uptime, reduced internal support and utility costs, and flexibility.  You may just consider these additional benefits of your more simple calculation OR you may assign specific monetary values to each element within your decision process.

At Orion Communications, we prefer to focus on the hard cost evaluation of our solutions.  These are areas in which we can most easily be accountable.  If we can deliver more for less, it is often an easy decision.  The fact that our solutions are also more reliable, flexible and easier to manage are just assumed benefits of our options.