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Putting TCO Studies In Their Place - page 2

Analyzing the Analyst

  • December 5, 2002
  • By Brian Proffitt

Kusnetzky sat down for an interview Wednesday morning to go over the report and what it really means for each of the warring parties. Before he went over the report, he laid down some background on TCO reports in general.

Over the years, as IDC has gathered data for hundreds of reports, Kusnetzky explained that most companies tend to fall into one of two categories, based on the answer to this question: "Is the company's data going to be turned into a product?"

If the answer is yes, then much of what the company does as an IT organization will be dictated by that data-as-product. Oft-times the company cannot rely on pre-packed applications, and will instead have to focus on developing their own custom apps to handle the data.

All of the IT processes, and much of the company's business processes, will be centered around the data. Once home-grown apps are built, only then (if applicable) will the company choose to purchase third-party applications. Finally, they will choose the platform. This last decision, like all of the others before it, will be made more on the needs of the data, and not but just cost.

For these types of firms, TCO studies are only marginally relevant, while return on investment (ROI) studies are very important.

In contrast, the other type of firm treats data as an ancillary component of the business process--a necessary evil that is ultimately treated like another expense. Such firms will always seek to drive the costs of maintaining data down as far as possible, and will choose the applications and platforms that handle the data based on that mindset alone.

For those kinds of companies, Kusnetzky explained, TCO reports are always going to be much more relevant.

Kusnetzky feels that whenever the public sees such reports, they should be framed in this sort of perspective. TCO analyses do not apply to all organizations, Kusnetzky emphasized.

This particular report is even more specialized than that.

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