What Does TCO Really Mean?

As with other types of software, when IT (or any software selection team) is in the process of procuring a messaging and collaboration solution, cost enters the discussion early. But, not understanding the nuances of total cost of ownership (TCO) can add up over time, both in CapEx and OpEx.

In fact, a recent whitepaper from Osterman Research found that the majority of decision makers weren’t confident in the estimates on messaging costs. The figure below provides the breakdown.

Confidence in Estimates of Messaging Costs

Confidence in Estimates of Messaging

Source: Osterman Research. “The TCO of Enterprise Email”

User Cost

The most common expression of cost, in the software world, is the per-user license or subscription fee; however, these only account for a single aspect of software TCO and are sensitive to volume. Both the total user count and the deployment model affect the price curve. On-premises solutions have higher starting prices points but steeper curves, while cloud-based solutions having a lower starting price with a flatter curve. This leads to high user-count price advantages for on premises and low user-count price advantages for the cloud.

Labor vs. Infrastructure

According to the same Osterman Research whitepaper, labor will have more impact on TCO for on-premises solutions than infrastructure.

“Unlike the cost of server hardware and software, the amount of IT labor required to manage an on-premises solution can have a significant impact on the overall TCO of an email system.”

While the location of the labor will determine full labor costs, labor is still more influential than server-related components.

“As a result, significant expenditures for robust and reliable hardware, clustering, disaster recovery, and business continuity systems will have little impact on the total, multi-year TCO of  whitepemail.” 

SaaS vs. On Premises

Osterman best summed up how to view this.

“Regarding the choice of on-premises, cloud-based or hybrid email solutions, there is no “right” answer that can be applied across all organizations. The issue must be determined based on TCO considerations, as well as how and which mail-enabled applications are used in an organization, the geographic distribution of employees, corporate initiatives for migrating to the cloud and other factors.”

TCO means more than just a per-user dollar amount and can be a complex calculation. The Zimbra commissioned Osterman Research whitepaper is available free to help decision makers understand the various aspects of TCO.

Download Whitepaper


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