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Use TCO to Gain a Competitive Edge

Paul_Santilli

Most of the OEM partners I work with face stiff competition. Many feel compelled to offer steep discounts to win new business. Before you take a big margin hit it is probably worth your while to fully consider the economics of your solution from the perspective of your potential customers.

Many customers perform a Total Cost of Ownership (TCO) analysis for significant investments. A TCO typically factors in upfront equipment and software licensing expenses as well as continuing operational expenditures including:

  • Labor costs––IT administration, help desk, and support expenses
  • Maintenance costs––hardware and software support contracts
  • Equipment operating costs––power, HVAC and rack space expenses

 

A simplified TCO analysis might look something like this:

 

Expense Category

Initial

Year 1

Year 2

Year 3

CAPEX

 

 

 

 

    Hardware

$140,000

   

    Software

$260,000

   

OPEX

 

 

 

 

    Hardware Maintenance

 

$25,200

$25,200

$25,200

    Software Maintenance

 

$46,800

$46,800

$46,800

    IT Labor (Admin & Support)

 

$50,000

$50,000

$50,000

    Power, Cooling, Rack Space

 

$25,000

$25,000

$25,000

TOTAL

$400,000

$147,000

$147,000

$147,000

 

As you can see, over a three year period ongoing operational expenses can easily outweigh initial hardware and software costs. By standardizing on HP server, storage and networking platforms you can reduce your customers’ operating costs and improve your competitive position.

 

HP’s integrated servers, storage and networking platforms eliminate cost and complexity

 

Here are just few examples of how HP can help you reduce customer operating expenses:

  • Lower IT labor costs. HP OneView unifies server, storage and network management eliminating operations expense and complexity––your customers can manage all elements of your solution from a single-pane-of-glass.
  • Lower maintenance fees.   Many HP products come with extended product warranties, and many HP networking products come with limited lifetime warranties that include software updates––you can pass these savings directly to the customer.
  • Lower equipment operating expenses. HP Converged Infrastructure solutions consolidate equipment and reduce sprawl––your customers enjoy power, cooling and rack space savings.

 

Use TCO in the sales process to gain a competitive edge

Why not use TCO to gain a leg up on the competition? Develop a simple Excel TCO calculator that shows off the full economic advantages of your solution. Help your proponents build a compelling business case for senior management.

Use the TCO argument to change the conversation and underscore your full value proposition. Win new business without dropping prices and sacrificing margins!

HP can help you develop a TCO model for your solution. We’ll show you how an integrated product family with unified management can help reduce OPEX and improve your competitive position.

 

Learn more

Check out the new HP OEM Portal website for Partners  

Learn more about how HP can help OEM Partners improve performance and lower costs with trusted, reliable HP technology. The new OEM Portal offers more details on working with the HP OEM program, focus industry solutions, technologies, and more that will help you optimize your OEM applications and value. Watch a short video tour.

 

Visit the HP OEM Program page on hp.com 

The HP OEM hp.com page showcases the quality, experience, and pedigree of the HP OEM program and why our customers are choosing HP. Visit the new site today!

  • OEM Update
About the Author

Paul_Santilli

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