Technology's Real Costs
Protect your investment with Total Cost of Ownership
By Sara Fitzgerald
When a school district decides to buy new school buses, it's
usually understood that some other line items in the budget must
increase, too. The district will have to purchase more gasoline,
allocate more money for parts and maintenance, and hire more drivers.
Insurance premiums might go up, and over time, the bus eventually
will have to be replaced with a newer model.
But when it comes to purchasing computers and installing new
technology, too many school leaders believe their job is done
once their schools are wired and a brand-new multimedia PC sits
on every fifth desktop.
In fact, the job is only beginning.
For many school districts, the technology portion of the budget
is regarded as a frill or an add-on. Faced with the substantial
expense of wiring their schools and installing computers, districts
nevertheless manage to cobble up the money from a variety of sources,
including bond issues, state and federal government initiatives
and grants, E-Rate discounts, and corporate equipment donations.
But these districts are ill prepared for the long-term costs involved
with operating that equipment effectively.
If school officials don't provide adequate funding for training,
computers will sit idle because teachers don't know how to use
them. If they don't budget enough money for computer support,
the reliability of the district's network could be compromised.
And if school officials don't make plans to replace the computers
they are now installing, they will end up, five or six years from
now, with buildings full of rapidly aging, if not obsolescent,
equipment.
If that happens, a backlash against educational technology could
easily develop when taxpayers discover that the investment they
made less than a decade before has been so poorly managed that
it needs to be made all over again.
Computing the costs
A business concept called Total Cost of Ownership (TCO) can
help school leaders understand what's really involved in implementing
technology. TCO represents all of the costs involved with installing,
operating, and maintaining a network of computers over a period
of time.
The idea got under way in the mid-1980s, when U.S. businesses
began abandoning mainframe computers in favor of company-wide
networks. Information technology consultants began calculating
the associated costs of such things as managing widely dispersed
hardware and training people who were not familiar with computers
and providing support to them. Companies then used these numbers
to make strategic business decisions, to calculate the return
they achieved on an investment, and to try to control their computing
costs.
TCO can vary among companies, and different consultants use
different formulas to calculate it. In most cases, though, TCO
combines the "hard costs" of operating a network -- including,
for instance, the costs of training employees, maintaining a help
desk and support staff, and repairing computers -- with some calculation
of "soft costs," namely the loss in productivity when users have
to stop and fix their own computers or the network is down because
of poor maintenance.
School districts, of course, are different from businesses and
make their budgeting decisions based on very different factors.
Nevertheless, even if a school district is not in a position to
analyze its Total Cost of Ownership in a formal way, school leaders
still need to understand all of the costs involved with operating
computers if they are going to use them to their full advantage
-- and cost-effectively.
After a school district makes an investment in hardware, the
major components of Total Cost of Ownership are professional development,
software, support, and the cost of replacing computers and peripherals
after a few years of use. Retrofitting older buildings for technology
installations is another cost that is often overlooked or under-budgeted.
And the cost of connectivity, which is not necessarily included
when businesses calculate their TCO, is important for schools.
Some ballpark figures
The TCO of certain network configurations in the business world
can run as high as $11,000 per year per computer. That figure
might make you rue the day you ever saw a computer in a classroom,
but take heart: The TCO for schools has generally been calculated
to be much lower than the TCO in the corporate world.
In 1997, International Data Corp. surveyed 400 school officials
and calculated that the TCO for a school with 75 computers was
$2,251 per year per computer, while a comparably sized business
would have a TCO of $4,517 per computer. The difference, according
to IDC, resulted from four factors:
1. Schools purchase less-expensive PCs at larger discounts than
businesses do.
2. Educational software packages are priced lower than business
software applications.
3. Schools typically use their computers for at least five years,
compared to only three years for businesses.
4. Schools use roughly half the number of people that businesses
do to support the same number of PCs.
In the business world, for example, when a computer breaks down
or a network crashes, employees might become totally unproductive
until the problems are fixed. In contrast, when a school computer
crashes or the network goes down, students simply double up around
the remaining machines or teachers go back to teaching "the old
fashioned way."
The Denver Public Schools, in late 1997, developed a TCO projection
as part of a five-year tech plan and a comparison of the costs
of leasing computers versus purchasing them. District officials
calculated that over five years, the support and staff development
costs for a $2,000 PC totaled $1,943.73 a year, including $500
in parts and upgrades. As a point of reference, the district had,
at the time, achieved a ratio of one computer for every six students
and one multimedia computer with an Ethernet-based Internet connection
for every 18 students.
Hidden costs
These estimates can give you some idea of the total cost of
technology implementation in a school district. But in thinking
about TCO, you must also be cognizant of costs that don't appear
on the books but are nevertheless real.
You might appear to save money, for instance, by cutting back
on the number of computer support staff you hire, but unless you
evaluate how this affects the productivity of teachers and other
staff members who are forced to trouble-shoot their own computer
problems, you will not have a complete picture of costs. To cite
one example, a consultant reviewing the computer support needs
of the Fairfax County (Va.) Public Schools calculated that the
district, which has 225 schools, was actually spending the equivalent
of 330 full-time equivalent teaching positions, or $16.5 million
a year, in the amount of teacher time devoted to computer support.
(This calculation assumed that each teacher spent an hour a week
trying to fix a problem that could have been avoided with better
support or standardized equipment, and that 5 percent of teachers
are "technical wizards" who have to spend an additional 1.5 hours
a week helping peers who call on them for assistance.)
As school networks grow, age, and evolve, school leaders undoubtedly
will gain more experience with budgeting to support technology
adequately. The main lesson for now is that after networks are
installed, technology costs continue, and much of those costs
shift to line items that cannot be supported by bonds or the capital
budget, such as staff development and personnel. And that means
your district must build its networks intelligently -- and be
careful not to bite off more than you can chew.
Sara Fitzgerald
is project director of the Consortium
for School Networking's Taking
TCO to the Classroom initiative. She also is vice president,
communications, of Funds For Learning, an Arlington, Va.-based
education technology consulting firm.
TAKING TCO TO THE CLASSROOM
The Consortium for School Networking
(CoSN) has launched an initiative called Taking
TCO to the Classroom to help school leaders understand the
concept of Total Cost of Ownership. CoSN is a nonprofit coalition
of school districts, state and regional education groups and networks,
corporations, and education organizations, that promotes the use
of telecommunications in K-12 classrooms to improve learning.
The TCO project, which is supported by Intel Corp. and IBM Corp.,
is developing tools and resources to help school leaders understand
all of the costs involved if computers are to be used effectively.
Among these is a publication called "Taking
TCO to the Classroom: A School Administrator's Guide to Planning
for the Total Cost of New Technology." Additional resources
are available from Intel
and IBM. --
S.F.
A QUICK CHECKLIST FOR TECHNOLOGY BUDGETING
After your district has purchased computers and installed a
networking infrastructure, you should be prepared for these major
expenses and technology decisions:
* Professional development. Has your district budgeted
an adequate amount for staff training, including the cost of trainers,
materials, and substitutes if training is conducted during school
hours? Training costs should represent a large component of a
district's technology budget -- the U.S. Department of Education
recommends 30 percent. If staff members are not properly trained,
teachers will not understand how to integrate technology into
the curriculum, support staff will not keep up to speed on hardware
and software improvements, and the district will fail to achieve
the maximum return on its technology investment.
* Software. Has your district budgeted adequately for
network management software, computer-based curriculum materials,
applications and productivity software, and the software needed
to adapt technology to users' special needs? A wide variety of
software applications will give school districts greater flexibility,
but it also will increase the costs for support and staff development.
* Support. Has your district budgeted adequately for
staff to maintain the network and other hardware and to help people
solve their software and hardware problems? How your district
deploys its network and the variety of software and operating
systems you choose to support will determine how large a support
staff you will need.
* Replacement Costs. Has your school district budgeted
adequately to cover the costs of replacing computers and other
peripherals? The life cycle of even the most advanced multimedia
computer is still only about five years.
* Connectivity. Has your district budgeted adequately
to cover the costs involved with connecting schools to each other
and to the Internet? Lower-bandwidth connections will generally
cost less but will involve a tradeoff in the complexity of the
information that can be shared and the amount of time it will
take to download files or access information.
* Retrofitting. When your district is ready to build
a network, have you budgeted adequately to upgrade electrical
capacity, improve heating, cooling, and ventilation systems, beef
up security systems, and remove asbestos and lead found in older
buildings? These costs can be reduced if plans are made for future
networking requirements when school buildings are constructed
or renovated. In certain cases, wireless solutions might also
be possible and might save money.
Source: "Taking
TCO to the Classroom: A School Administrator's Guide to Planning
for the Total Cost of New Technology."
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