Total Cost of Ownership (TCO) is a way of looking at the value of the lifecycle of a capital purchase. It looks at the costs associated with the purchase/acquisition of a product or service, the operating costs associated with that product or service, and the personnel costs over the lifetime of the product or service. A deep TCO analysis will also include accounting contributions in terms of incremental savings and/or revenue flows over time, using Net Present Value (NPV).
As you can imagine, it’s a complex process. Within it, you have to make some assumptions about long-term costs and implications that may or may not be correct. But TCO analysis can be used to compare and contrast a series of variables that are associated with your purchase, so it can be used to assess any ongoing costs.
TCO came into heavy use in the 1980s, due to the expenses associated with supporting hardware and software/IT purchases. Support for IT could cost 5 to 8 times the original purchase price. As businesses looked for ways to consider the potential impact of their investment in IT, the practices of leasing, licensing, and Software as a Service (SaaS) came into the spotlight as ways to better manage support costs.
If you want to take a deeper dive into TCO analysis for your business skills, here’s a 90 minute online course from Lynda.
So how does TCO apply to training?
Well, the advantages of using licensed content, as in a SaaS model, apply to creating and supplying course content and delivery methods for both live (face-to-face) and on-demand online training. SaaS, where you pay only for the services or products that you need, means minimal investment in IT infrastructure:
- No need to purchase a course authoring tool
- No need to purchase a learning management system
- Zero learning curve for course creation
- Minimal learning curve for integration of online learning platform
- Zero upgrade costs for course authoring tools
- Zero costs for course content upgrades
- Zero maintenance costs for a learning management system
- Nothing to download or install - all cloud-based
Here’s a hypothetical comparison.
First, a model of what it would cost to purchase and build everything in-house, based on our Construction Technology course. It is about 6 hours of online content, with 14 modules covering everything from building science to air sealing and insulation to mechanical systems.
So you’d need to create 6 hours of online content that has some interactive elements with a voice over and a final assessment (we use an acceptable industry ratio of 200 hrs effort: 1 hr finished product). The time frame is 10 years.
Initial Capital outlay:
1,200 hours of content development and course authoring at $165/hr for total effort (subject matter expert, instructional design, graphics, course authoring, voice overs, etc.): $200,000
Software and Hardware: $5,000
1st Year Costs:
- Set up fees $7,500
- Training costs: $4,000
- Customization/integration: $3,000
- Learning management system annual fee: $8,000
- Major upgrade/install: $2,500
- Annual training: $750
- Support & maintenance of LMS & course authoring tool: $1,500
Compare that to the cost of using a content provider like Blue House Energy (these are real costs, by the way):
Subscription for 200 seats annually, for access to 14 modules of high-quality, interactive e-learning: $25,000
1st Year Costs:
- Set up of LMS: $2,500
- Optional customization of LMS: $2,500
- Training costs: $1,000
- Learning management system annual fee: $2,500
- Annual training: $500
- Optional premier support (basic support included in subscription fee): $1,500
This is what the two scenarios look like over a 10 year period:
This is an illustration only, and does not take into account such complexities as business growth or net present value calculations for cost of capital.
So, if you’re looking for quality online training in construction technology and building science, Blue House Energy’s got it:
- Modular format makes it possible to mix & match content
- Foundational training
- Broad range of topics covered by national and regional level programs
Our business is based on the SaaS model. We offer quality online e-learning, built to adult education standards, designed to keep learners engaged, written by industry-recognized subject matter experts.
Our goal is to bring you cheap and cheerful online learning in building science to help build industry capacity.
Our question is this: why reinvent the wheel?