The introduction of the term to the English lexicon is widely attributed to British psychologist Hywel Murrellat the meeting at the UK's Admiraltywhich led to the foundation of The Ergonomics Society. He used it to encompass the studies in which he had been engaged during and after World War II.
It's an accounting methodology that today is proving to be crucial in making sound IT decisions. Many IT professionals conveniently factor in only the costs of purchasing hardware and software when doing TCO analysis.
This isn't surprising; when pressed for time, they only take into account what's easy to find out. In the relatively easy-to-manage world of mainframes and big centralized computing systems, hardware and software accounted for much of the cost factors.
What should go into the computation of the TCO of any system? We can group these costs into direct and indirect costs. Direct costs pertain to the acquisition expenses or the cost of buying the system, and cover all of the following activities: Researching possible products to buy, which is essentially a labor cost but may also include materials cost, such as purchase of third-party research reports or consultant fees.
Designing the system and all the necessary components to ensure that they work well together. Naturally, this cost component will be higher if a move to a totally different system platform is being considered.
Sourcing the products, which means getting the best possible deal from all possible vendors through solicited bids or market research. It's often sufficient to get a quotation from three vendors with the cheapest one not necessarily being the best choice.
With the Internet, it's even easy to get price quotations from sources outside the country, to get a good spectrum of pricing options. Purchasing the product swhich includes the selling price of the hardware, software, and other materials as negotiated with the chosen suppliers.
Include all applicable taxes that might be incurred. Don't forget to consider the costs of the systems at the end-user side; some system choices might entail a change or upgrade at that end. Delivering the system, which includes any shipping or transportation charges that might be incurred to get the product into its final installation location.
If the installation of the system will result in downtime for an existing system, relevant outage costs must be included.
Any lost end-user productivity hours during this activity should also be factored in. Developing or customizing the application s to be used.
Training users on the new system. Deploying the system, including transitioning existing business processes and complete integration with other existing computing resources and applications.
Include here the costs to promote the use of the new system among end users. Indirect costs address the issues of maintaining availability of the system to end users and keeping the system running, which includes the following: Operations management, including every aspect of maintaining normal operations, such as activation and shutdown, job control, output management, and backup and recovery.
Systems management, such as problem management, change management, performance management, and other areas. Maintenance of hardware and software components, including preventive maintenance, corrective maintenance, and general housekeeping.
Ongoing license fees, especially for software and applications. Upgrade costs over time that may be required.
User support, including ongoing training, help desk facilities, and problem-resolution costs. Remember to include any costs to get assistance from third-parties, such as maintenance agreements and other service subscriptions.
Environmental factors affecting the system's external requirements for proper operation, such as air conditioning, power supply, housing, and floor space. Other factors that don't fall into any of the above categories, depending on the type of system deployed and the prevailing circumstances.
All these cost factors seem fairly obvious, but quantifying each cost is difficult or impractical in today's world, because few organizations have an accounting practice that's mature enough to identify and break down all these types of expenses in sufficient detail. What support costs did you incur last month?
How much time did each user spend in solving computer-related problems? How much work was lost due to downtime on desktop PCs? Additionally, companies rarely have accurate inventory and asset information regarding their computing systems, especially in large, multi-location computing environments where PC, server, and local network purchasing decisions are often handled at the department level.
So, what's the value of knowing a system's TCO? Obviously, our objective is not to calculate exact figures. Rather, you need to understand what these costs could reasonably be in your organization.(iv) EXECUTIVE PROGRAMME SYLLABUS FOR MODULE 1 - PAPER 2: COST AND MANAGEMENT ACCOUNTING ( Marks) Level of Knowledge: Working Knowledge Objective: To acquire knowledge and understanding of the concepts, techniques and practices of cost and management accounting and to develop skills for decision making.
Application of Accounting Concepts Matching Principle & Accrual Concept Accrued / Prepaid Expense & Accrued or Advance Revenue To ensure an accurate matching of expenses and revenue under the accrual basis, it is necessary to include all revenue earned but .
The total cost of ownership (TCO) of a computing system is defined as the total cost for acquiring, activating, and keeping that system running. It's an accounting methodology that today is proving to be crucial in making sound IT decisions.
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Accounting practice refers to the normal, practical application of accounting or auditing policies that occurs within a business. On a deeper level, to remain competitive while adhering to certain standards of business conduct, accounting practices will implement accounting systems. Mar 20, · very useful practical applications of all the accounting standards must bookmark this questionnaire on accounting standards as 1 disclosure of accounting polici.