A financial tool that helps managers evaluate purchasing decisions by comparing direct and indirect costs of alternatives, Total Cost of Ownership (TCO) can identify which alternative represents a better value over the life of the project.
This powerful analytic tool enables buyers to look beyond initial costs to longer-term considerations, and thus estimate the overall cost of a project or installation. The alternative with the lower total cost of ownership represents the better value. Presenting TCO calculations can be an extremely effective and persuasive way to direct any project scope, and the ideal calculations incorporate knowledge of available solutions as well as a primary knowledge of the client.
Relationship-based integrators can use TCO to their advantage when presenting video surveillance storage solutions to their clients. Using a TCO tool to explore the costs and benefits of implementing a cloud-enabled video surveillance solution compared to a local storage-based installation can help the decision-makers at your client’s organization make the right choice. By reducing the initial investment using a scalable and flexible architecture with low monthly operating expenses, you can demonstrate to clients how the cloud-based storage approach delivers notable cost savings for the life of the project.
Several TCO calculators are available online at various sites. You will need to evaluate them to see which one fits your specific needs, but once you choose one, you will find it an invaluable resource to help promote cloud-based storage solutions to video installation clients.
Setting the Situation
For optimum cost savings without losing performance, capacity or security, a Hosted Video Surveillance Solution with cloud storage technology delivers. Traditionally, businesses have satisfied their security needs with elaborate and expensive systems of DVRs to store their video data, but this model is now breaking down. Today’s cloud-based storage solutions cost a fraction of a standard DVR deployment and significantly reduce the need for up-front capital investments.
In the following piece, I will reference two hypothetical installations — “AutoWorld” and “HealthLife” — to demonstrate the effect an accurate TCO calculation can have in presenting the benefits of using a cloud-based storage solution.
“AutoWorld” is a small regional retail chain with 10 stores, comprising 1-4 camera installations per store. “HealthLife” is a medical services group that runs three campus centers. In addition to the three-story parking facilities, each site’s eight-story hospital building has multiple entryways, corridors, check-in desks for every department and an onsite pharmacy, requiring approximately 40 cameras per site. Healthlife’s “local storage solution” is an analog CCTV system with a local DVR. The company’s “cloud-based storage solution” uses a cloud storage service provider together with a network storage device and integrated video management software.
Calculating the TCO
To calculate the TCO for each of these clients, the integrator should get answers to six key questions. Using AutoWorld and HealthLife as our examples, the power of TCO in a sales pitch becomes clear.
Question 1: How many locations and how many cameras at each?
A key determinant in understanding the cost of ownership is scoping the project. Is it a single location, like a gas station convenience store, or is it an enterprise-wide, central station-monitored operation? Obviously these poles represent a huge scale difference, but understanding the economics behind the camera build out enables you to present a more compelling cost savings benefit to your client.
Start by tallying camera counts by location and cameras per location. Calculate how many locations will have 1 to 4 cameras, 5 to 8 cameras, etc., progressively scaling up to 33 to 48 cameras or more. Create a table with a 10-year axis (the predictable life of this type of project) to compare to the cost of owning and maintaining a locally based system, assuming the usual parameters and considerations (main10ance, upgrades, failure rates, etc.) vs. the cost of maintaining a cloud-based hosted video storage solution.