1.4 Cost Analysis
When developing a business plan for a new company, product, or project, planners typically make cost analysis in order to assess whether revenues/benefits will cover costs. This is done in both business and government. Costs are often underestimated resulting in cost overrun during implementation. Main causes of cost underestimation and overrun are optimism bias and strategic misrepresentation
1.4.1 Cost Estimate
The Total Cost of Acquisition（TCA）is a managerial accounting concept that includes all the costs associated with buying goods, services, or assets.
Generally, it is the net price plus other costs needed to purchase the item and get it to the point of use. These other costs can include: the item's purchasing costs (closing, research, accounting, commissions, legal fees), transportation, preparation and installation costs毕业论文http://www.youerw.com/
The Total Cost of Ownership (TCO) is a financial estimate whose purpose is to help consumers and enterprise managers determine direct and indirect costs of a product or system. It is a management accounting concept
TCO, when incorporated in any financial benefit analysis, provides a cost basis for determining the economic value of an investment. Examples include: return on investment, internal rate of return, economic value added, return on information technology, and rapid economic justification.
A TCO analysis includes total cost of acquisition and operating costs. A TCO analysis is used to gauge the viability of any capital investment. An enterprise may use it as a product/process comparison tool. It is also used by credit markets and financing agencies. TCO directly relates to an enterprise's asset and/or related systems total costs across all projects and processes, thus giving a picture of the profitability over time.
TCO in computer and software industries:
TCO analysis was popularized by the Gartner Group in 1987. The roots of this concept date at least back to the first quarter of the twentieth century. Microsoft then embraced the concept and commissioned various white papers and case studies in the late 90s to show that Windows had a lower TCO than Linux. The studies have not been found to be either objective or conclusive. Many different methodologies and software tools have been developed to analyze TCO. TCO tries to quantify the financial impact of deploying an information technology product over its life cycle. These technologies include software and hardware, and training.
Technology deployment can include the following as part of TCO:
Computer hardware and programs: network hardware and software, server hardware and software, workstation hardware and software, installation and integration of hardware and software, purchasing research, warranties and licenses, license tracking—compliance, migration expenses, risks: susceptibility to vulnerabilities, availability of upgrades, patches and future licensing policies, etc.
Operation expenses: infrastructure (floor space), electricity (for related equipment, cooling, backup power), testing costs, downtime, outage and failure expenses, diminished performance (i.e. users having to wait, diminished money-making ability), security (including breaches, loss of reputation, recovery and prevention), backup and recovery process, technology training, Audit (internal and external), insurance, information technology personnel, corporate management time
Long term expenses: replacement, future upgrade or scalability expenses, decommissioning.