Enough to go 'Round?

Thinking smart about total cost of ownership.

The TCO Model

Forced to restructure your technology initiatives due to unanticipated costs? Nine times out of ten, that's an indicator that you didn't adequately forecast total cost of ownership, or TCO.

TCO refers to the life cycle of costs for technology, including both direct and indirect expenses. TCO includes costs incurred by capital (hardware, software, and facilities); administration and operation (planning, upgrade, replacement, and technical support); and end-user operation (staff development and user downtime).

Appropriate TCO planning reduces network downtime, improves integration of technology resources into curriculum and instruction, and allows teaching staff to focus on instruction rather than technical support. By identifying, planning, and managing TCO, schools and districts can maximize their technology investments and get the best for students.

Key Challenges

Thinking smart about school- and district-level technology TCO means considering a range of factors, including many that at first may not seem directly tied to budget considerations. Experienced school technology officers say the following are some of the key challenges they face.

Offering compelling evidence that technology works. Due to technology's incredible complexity and accelerating rate of change, it is unusually difficult to measure its full value, even under ideal circumstances. Yet educational policy makers are demanding that technology investments have clear and direct links to schools' efforts to improve student achievement. Leaders must offer policy makers compelling evidence that their information technology investments are closely planned, managed, and evaluated.

Building in a strong management system. All too often, poor management causes even schools and districts with well-conceived technology plans—ones that include funding for all aspects of TCO—to fail. Public and commercial pressures for innovation push organizations to continue to add and learn the latest technology. But schools are unique; their management structures are not designed to keep pace with such rapid changes. For starters, they don't have a direct financial incentive to push a timely and more efficient management of technology. They also lack the flexibility to facilitate the timely transfer of internal funding for the optimal level of investment.

Some of the most common roadblocks to good school and district management are inadequate training of instructional, administrative, and technical staff; insufficient technical expertise; little asset inventory or management; proliferation of operating systems and desktop images; and the use of one-time funding sources to invest in new technology.

Keeping your vision. Stay focused on the core of your vision. Don't attempt to do everything. And when you do choose a focus, be certain you implement it extraordinarily well. Say no to requests for new technologies if you do not have the capacity to fund TCO. Anything more is a waste of resources.

Leveraging Resources

In this section, you will find descriptions of applications designed to help school leaders determine the true cost of investing in technology. Their primary function is to produce analyses that show both direct and indirect costs associated with investments in hardware, software, professional development, and a variety of associated and support resources.

Five Practical Tools

1. Total Cost of Ownership Tool from the Consortium for School Networking (CoSN)

As part of its Taking TCO to the Classroom initiative, the Consortium for School Networking partnered with research firm Gartner to develop the Web-based TCO Tool. Registration is required, but the tool is available free to any school in the United States. The TCO Tool measures direct and indirect costs of technology investments, such as hardware, software, and direct labor for tech support, and the indirect costs accrued for user training and self-support. The tool also helps schools and districts make better budgetary decisions, organize tech planning, establish a baseline for future analysis, and maximize benefits technology investments. In the three years since its launch, more than 1,600 school districts have used CoSN's TCO Tool.

Users of the TCO Tool must enter more than 100 data points concerning their existing network and future plans. The tool then calculates the data and displays metrics and charts that compare the user's district to case study districts around the country. Detailed case studies on each of the comparison districts were prepared by Gartner and CoSN and are available on the CoSN Web site. The TCO Tool is particularly useful as a means to benchmark a district's current costs of managing its technology and how those costs may change in the future. If a user wants to make more complex comparisons, the tool allows for the analysis of multiple scenarios.

The TCO Tool can help technology leaders make the case that their technology spending is reasonable and efficient. Given the tight fiscal and regulatory environment, this kind of analysis is likely to have a positive impact on policymakers. Furthermore, because the TCO Tool is based on the Gartner's unbiased and proven methodology, the metrics produced should gain additional credibility with education policymakers.

2. The K12 TCO Calculator from Edvantia

Another useful TCO planning tool is provided by Edvantia (formerly AEL). Its free K12 TCO Calculator was developed to enable technology planners to calculate approximate costs for implementing a multiyear technology plan and see the long-range impact of their decisions on the total school or district budget. It also allows users to perform theoretical scenarios to investigate the implications of choosing various options in their plan.

Users of the K12 TCO Calculator input current and projected inventories, professional development needs, building characteristics and proposed modifications, and goals defined in the multiyear technology plan. After the required data is entered, the calculator creates charts and tables that display the projected costs of major expenses (computers, peripherals, telecommunications, professional development, building modifications, and electrical power consumption), as well as a comprehensive cost summary and projections for all costs based on typical equipment life spans and replacement cycles. Costs are broken down for each year of the plan and include adjustments for E-Rate savings and inflation. Users can adjust their projected investment based upon enrollment figures and potential replacement costs. Calculator data tables can be downloaded as Excel files for further analysis and scenario building.

As with the CoSN tool, the K12 TCO Calculator requires a significant investment of user time. The quality of the output from the tools is fully dependent on the quality of the data input and therefore on the time and attention to detail committed by the user. Both tools will pay dividends if the user is willing to invest the appropriate amount of time and research.

3. Smart Budgets for a Digital Age from the BellSouth Foundation

The BellSouth Foundation was created more than 20 years ago to improve the quality of education in the communities where BellSouth operates. The foundation provides funding to promote active learning and to stimulate fundamental change in educational institutions. In addition, BSF has developed a suite of tools to help technology leaders understand the fiscal impact of their decisions and to provide advice to help districts make better technology-related budgeting decisions.

Smart Budgets for a Digital Age is a free Web-based application that helps technology leaders determine the human resources required to implement their technology plans and provides a way to estimate the cost of staffing.

The site does not provide information on hardware, software, or other non-personnel related costs.

Users of the Smart Budgets tool box complete a series of forms about the size and composition of their district, as well as existing and planned technology efforts. The tool can be employed by a single user to create a general estimate of personnel costs. Users can also generate a more detailed report, though it requires school administrators, school technology/media specialists, and teachers to complete online surveys.

Smart Budgets for a Digital Age is a simple tool that offers some useful information about the personnel costs of supporting technology programs. It is easy to use and requires little time to complete the surveys. However, the lack of analysis about hardware, software, training, and other indirect costs means that this is not comprehensive enough to provide a complete TCO picture.

4. ECS Web Site Education from the Education Commission of the States

The Education Commission of the States is an organization devoted to providing information, analysis, and technical support to policymakers who operate at the local, state, or national level. The ECS Web site is packed with resources covering all major issues in education. Although the resources are aimed primarily at state-level policymakers, there is significant value for school and district technology leaders, too. The technology finance section includes annotated reviews of selected readings and research on the challenges of funding educational technology. It also includes a state policy database that lists the status of all state-level bills that impact the funding of educational technology. Finally, ECS offers a comprehensive set of annotated links to external resources on technology budgeting and TCO.

5. "True Cost of Ownership" by Jamie McKenzie

Jamie McKenzie, the tell-it-like-it-is guru of educational technology, presents a unique perspective on TCO in his article, "True Cost of Ownership." McKenzie believes that the typical approach to TCO "does not adequately address other critically important costs that could have major implications for district and school success in broader terms." He then defines a list of TCO elements that, if overlooked, may cause a technology innovation to fail. McKenzie describes this list as a supplement to the good work already done by CoSN.

McKenzie's list includes soft items that are often neglected, including learning resources like subscription services that are not included with the computer; research and development costs; network management and development costs; and costs for spirit and support building. He argues that counting these costs is essential to developing a full TCO perspective. Including these often-hidden expenses can help a school or district avoid flaws that will prevent the initiative from meeting all of its goals in the most efficient manner.

Todd McIntire is vice president at Edison Schools.