Hall Technologies and TCO

25 January, 2021 03:39 AM
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Conventional wisdom and even common sense says you get what you pay for. If you buy a “cheap” product you get a “cheap” product, right? Sorry, it is not that simple anymore. The line of distinction between cheap/bad versus expensive/good has been blurring over the last decade. We are confronted and perhaps confused as consumers with generics in most categories at a lower price that claim to be as good as the name brand. To be sure this may well be true in some cases such as pharmaceuticals. This is where the law dictates that the generic be “as equal” to the original. No problem. But in many other product categories this can get confusing and at the extremes even harmful. This is where the generic product appears to be as good as the name brand, but it falls short in one or more areas. In the AV and IT industries we are bombarded with products that look alike but are not. Depending on where the generic or no-name product falls short, it may have a significant negative impact on your project. Regrettably, it is not always easy to see the shortcomings so let’s take a look at the impact of buying the “right” product at the outset versus buying (what so often becomes) a temporary solution.

Ultimately any purchase is about the total cost of ownership (TCO). This is the purchase price of an asset (i.e. product) plus the costs of operation. Assessing the total cost of ownership represents taking a bigger picture look at what the product is and what its value is over time.

When choosing among alternatives in a purchasing decision, buyers should look not just at an item’s short-term price (aka purchase price) but also at its long-term price, which is its total cost of ownership. The item with the lower total cost of ownership is a better fiscal decision and a better value in the long run.

The total cost of ownership should be considered front and center by companies and individuals when they are looking to buy products and make investments in capital projects such as AV systems. Although these costs are often itemized separately on a company’s financial statements, a comprehensive analysis of the overall cost of ownership should be a common practice for business dealings.

Companies can/should use the total cost of ownership over the long term as a framework for analyzing business decisions. Looking at the total cost of ownership is a way of taking a more holistic approach that assesses the purchase from a broad perspective. This analysis includes the initial purchase price as well as all direct and indirect expenses along the way.

While the direct expenses can be easily reported, companies most often seek to analyze all potential ancillary expenses that can be of significant influence in deciding whether to complete a purchase. Keep in mind that an examination of potential ancillary expenses is in order to complete the picture of due diligence.

Under the heading of ancillary expenses in the world of AV systems is the concept of impact and implication. Impact is the effect on a company if the system fails. Since the system is made up of individual products, the tried-and-true weakest link adage comes into play. The system is only as strong as the weakest link. The most obvious impact if a system fails is financial. In most cases, the part that fails is not the most obvious one. It is usually one of the support components that fail i.e. cables/connectors, source devices, and signal processing and distribution.  Some would say that is not a big problem or expense. After all the expense is the cost of the item and the labor to replace it. Not a big deal right? Well, the big deal is downtime. You must look at the cost (loss) in productivity of having the system go down and for how long. Think about the chaos of having your network go down. Think about having an entire AV system go down. The impact could be significant.

In the famous Dirty Harry movie Inspector Harry Calahan asks the “perp”, “do ya feel lucky? Do ya?”. He is speaking about risk and repercussions. If we look at risk there are 3 approaches:

  1. Avoidance
    1. When you avoid the risk it means you change your plan to completely eliminate the probability of the risk occurring or the effect of the risk if it does occur.
  2. Transference
    • Risk transference occurs when the negative impact is shifted to a third party, such as through a maintenance contract with an AV system integration provider. The risk may still occur however the financial impact will be somewhat displaced.
  3. Mitigation
    • Risk mitigation occurs when you proactively change the plan to minimize the impact or probability of the risk occurring. Risk mitigation does not eliminate the risk and as such there will be some residual risk remaining.

As we look at TCO, impact, and risk, it does come down to the weakest link. The fundamental question is how to ensure that the components in a system are the least likely to fail. This begins with an assessment of the system overall and the mean time between failure (MTBF) of each product. The MTBF is rarely published for obvious reasons so what is the best approach to product selection? Referring back to the concept of generic no-name products with no track record, best practices dictate that to reduce risk and ensure the lowest TCO you go with names and companies that you can trust.

You look for companies with a track record. You look for companies that are in control of design, engineering, R&D, and manufacturing and not a “pass-through” from an OEM supplier coming out of who knows where. You look at warranties and how they are administered. If a product fails how long does it take to get a replacement.

The goal of companies like Hall Technologies is “Set it and forget it” as the famous pitchman Ron Popiel used to proclaim on the first TV infomercials. Hall Technologies begins with the design, engineering, performance, and robustness of the product and then back it up with a meaningful support team and warranty. They reduce risk, lessen negative impact, and ensure low TCO. Generic no name? Not a good idea unless you accept the risk of “feeling lucky”.

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