You Have to Understand Costs to Buy a Cell Phone?
“Companies are now concluding that in order to control costs they must better understand them.”
This seemingly obvious conclusion from CFO magazine surprisingly is the state of most companies. In other words, they don’t know HOW to control costs. In the same paragraph CFO then gives some incomplete guidance:
“Increasingly, analyst firms are uging clients to get a grip on TCO [Total Cost of Ownership] as a useful benchmark by which to base purchasing decisions.”
Sadly, many companies think like the first time cell phone buyer: “Wow, they’re giving me a free phone, what a deal” forgetting they will pay 35 cents a minute once over plan. We are still missing the point however because what should count is the VALUE of the decision, balanced against the TCO. Value driven investment is what the best of the best are doing. Back to the cell phone buyer: what is the value of having a cell phone? Does it justify the TCO?
Are you with a best of the best company? Do they drive investments with value/TCO based decisions?
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