Estimating Total Cost of Ownership (TCO)

Estimating Total Cost of Ownership (TCO)

A VLE is a sizeable investment and from the outset you will no doubt have been thinking about the costs involved and probably have a budget in mind. We have included this section well into the Toolkit because it is only when you have firm proposals from suppliers and have thought about how a particular VLE will work in your institution that you can really estimate the total cost of ownership (TCO).

When talking about TCO we are referring to what it will cost you to implement and support the product over a defined lifespan. Generally you would look at a period of around three to five years.

Estimating TCO is not easy. The same VLE could have a very different TCO in different institutions depending on the extent of the change required to implement it and how each organisation manages and supports it.

You will also need to bear in mind the cost of 'doing nothing' as compared to the cost of change. Doing 'nothing' will generally appear to be the cheaper option on paper but you need to ensure you are factoring in all of the associated costs. You also need to think of the benefits that can be achieved from each of the possible options and what these are worth to your institution.

The cost of change

The decision to move to a different VLE is likely to require a well thought out and structured change project. The costs associated with this need to be considered in tandem with the cost of the actual product and hosting.

Factors to bear in mind include:

• licence costs including any projected growth in user numbers during the period under consideration;
• hosting costs including projected growth in users and storage requirements;
• any new hardware requirements; cost of any additional staff required for the implementation project or to replace
• staff seconded to the implementation team; cost of consultancy support for the implementation;
• costs associated with any period of parallel running of old and new systems including licence
• and staff costs; legal costs associated with procurement and contract negotiations;
• costs associated with data migration such as the supplier charging for bulk import or use of migration tools;
• costs associated with bespoke integrations particularly with in-house systems;
• additional features in the new product that will eliminate the need for other tools/systems and associated
• integration costs; gaps in the new product that will require solutions involving other tools and/or integrations;
• ongoing support costs in central and/or devolved teams;
• expected timescale before a major upgrade is essential;
• staff development costs and whether the required development consists mainly of familiarisation with the new system or more wide-ranging support in
• designing learning and teaching to take full advantage of the affordances of the technology;
• potential savings in staff time if the new product makes it easier to carry out routine tasks; potential
• benefits in terms of student retention and achievement due to a better learning experience;
• project costs associated with change management and communications;
• project costs associated with evaluation and benefits realisation;
• the need for additional project phases to fully realise all potential benefits e.g. make better use of available learning analytics.      

The cost of staying with the same VLE

The decision not to change may be a feasible outcome of your VLE review and market testing. Bear in mind however that even 'doing nothing' involves some cost. It is worth comparing the TCO of staying with your existing VLE against others you may be considering.

Factors to bear in mind include:

• ongoing licence costs including any projected growth in user numbers during the period under consideration;
• hosting costs including projected growth in users and storage requirements;
• ongoing support costs in central and/or devolved teams;
• cost of maintaining existing integrations with other systems;
• costs associated with customisation - you may be paying to stand still if you need to redo customisation each time there is a product upgrade;
• ongoing staff development either as a result of staff turnover or because you are not using the product to best advantage;
• expected timescale before a major upgrade is essential;
• whether conducting a procurement exercise will allow you to negotiate a better deal with the existing supplier;
• potential costs in staff time wasted if the existing product does not support efficient and user-friendly workflows;
• lost opportunity cost and potential impact on student retention and achievement if the product is not really fulfilling all of your needs and enabling you to deliver against the objectives of your learning and teaching strategy.

To mitigate against some of the more negative elements in this list you need to look equally at the opportunities afforded by staying with the same VLE and making it better fit your requirements by upgrading, changing the hosting model or making better use of it. There is more on this topic in the sections on Hosting and technology and Delivering the benefits.