Total Cost of Ownership

Total Cost of Ownership (TCO) sounds like a highly abstract concept. But really, it’s not. It’s also something that churches—sadly—tend to miss out on. TCO is simply a calculation of what a particular product or service is going to cost you during its life. TCO has become popular in automotive circles, with some manufacturers boasting about the fact that while their car might cost a little more to buy, it will cost less to own.

At least in theory.


Missing TCO Calculations
TCO can be missed in several ways. Sometimes, a church will buy a particular piece of gear—sometimes a very expensive piece—that will dig into their cash reserves pretty significantly. Projectors are a great example of this. A really bright 15k projector can cost well over $20,000 - 50,000. That’s a lot of money. However, it will also cost somewhere between $2,000 - 6,000 to re-lamp it. And at that brightness level, re-lamping is going to happen every 500-800 hours of use, which is right around a year (at least for many churches).

So not only did you spend, let’s call it $30K, on a projector, you can figure on another $20K in lamps over the next 5-7 years of life. And we haven’t even talked about filter replacements, electricity costs or service. Costs on this imaginary projector (that’s not that imaginary) will easily exceed $60K over the life of the unit. Did anyone think about that or did the initial purchase price double as a complete surprise?

Moreover, given the rapidly declining costs of LED walls, it might actually make more sense to spend $50-70K upfront to buy an LED wall. The brightness will be higher, the blacks will be blacker and with a 10-15 year operating life, it may actually cost half to one third the cost of really bright projectors. As you can see, it's not a simple matter of comparing like products, but TCO can also be used to compare different solutions to a problem.

Other times, a church will buy the cheapest piece of gear they can find, thinking they are saving money. However, what they find out is that the consumables cost of that gear is far more expensive than a slightly more expensive piece of gear. Inkjet printers are a classic example here. I’ve seen churches replace older, heavy-duty color laser printers with newer “cheaper” ones because the toner cartridges are 1/2 the cost of the old ones. What no one noticed was that the new cartridges print about 1/8 as many pages, which quadruples the per-page costs and irritates the users who find the printers always out of toner.

Do Your Homework
Sometimes, it’s hard to choose between two seemingly comparable pieces of equipment. What you need to look at, besides initial cost, is total operating costs. I’ve compared projectors based on bulb and filter life plus electricity and found brand A to be almost 50% less expensive over a 5 year period than brand B. And these are two projectors with output and picture quality close enough to be called “the same.”

Rechargeable batteries are another great example. Yes, it might cost you a few hundred dollars to get into the game once you purchase chargers and the initial stock of batteries. But from that point on, your annual battery costs could drop to under $100 to handle replacements. At my last church, we went from spending over $1500/year to about $200; and the only reason I spent that much is that we had 5 rooms using rechargeable cells, and the batteries in the student rooms go missing regularly.

It’s Real Stewardship
If you want to win friends and influence people—especially your senior leadership—continually present them with plans that demonstrate you know how to make purchases that represent an excellent value over time. Showing them that you’ve done TCO calculations, and have chosen equipment with that in mind will show them you’re serious about leading your department well.

Of course, TCO doesn’t tell the whole story; it’s just one data point. But it’s an important one. You still have to consider usability, whether the product fits your needs and if the volunteers can use it. Still, TCO can often be the tipping point between brand A and brand B.

Choosing the one with the lower overall lifetime cost will pay off in more ways that one. Trust me.

Originally posted on ChurchTechArts

Mike Sessler