We all know that cost management becomes crucial for defense organizations because of the budget restrictions and oil price hikes. Moreover, defense is required to deliver increasing efficiency and to demonstrate value-for-money in its information systems. In view of this, a holistic Total Cost of Ownership (TCO) approach becomes a “must” in complex defense-related programs.
TOTAL COST OF OWNERSHIP : DEFINITION
“Total cost of ownership is a financial estimate used to help procurers and end-users to assess and clarify the direct and indirect costs normally related to ownership and operation of a particular product and/or service”
HIDDEN ASPECT OF OWNERSHIP
As with any other business, direct costs are easily identifiable and quantifiable in defense but indirect/hidden costs are more difficult to determine. The hidden costs of ownership are often undervalued because of an erroneous understanding of the TCO.
DIRECT AND INDIRECT COST ELEMENTS
ILIAS Solutions doesn’t only fly with ACE but also collaborates with their experts on a day to day basis to make better solutions. We draw upon their know-how and expertise for the improvement and extension of our Military Flight Scheduling and Aircrew Training Management solutions to make sure that we can provide value to our Air Force customers.
WHAT IS IN IT FOR DEFENSE ?
Due to complex programs, defense stakeholders struggle to implement the changes required for a TCO approach and, at the same time, they become more and more cost-conscious. By leveraging recorded experience and data, TCO analysis is the perfect tool to minimize costs over the life-cycle of any service related to defense.
For defense ministries worldwide, TCO tools can lead the selection of value for money programs and focus on cost-effectiveness. “The analysis can also be useful to define the expected capabilities of existing resources and to find a way to make the most of it.” Finally, a TCO tool can be highly helpful as knowledge and information management instrument to retain cost-related data and experience as well as to avoid its loss due to high personnel turnover.
The TCO analysis is a strategic advantage and an investment decision-making tool that can help defense stakeholders to define and control logistics costs and operational effectiveness from the simple to the more complex programs.
Download our ” 4 benefits of TCO implementation for Defense” infographic !
