The total cost of ownership (TCO) is a great tool to calculate the money to be spent on a surveillance project during its entire lifecycle. If the right technology or product is used, it can help save on the TCO to be incurred during the project’s lifetime.
The total cost of ownership (TCO) is a great tool to calculate the money to be spent on a surveillance project during its entire lifecycle. If the right technology or product is used, it can help save on the TCO to be incurred during the project’s lifetime.
That’s the argument presented by Axis Communications in a recent whitepaper titled “Better insight for better business decisions: Analyzing the total cost of ownership (TCO) of video surveillance systems.”
The report was based on a TCO study the company conducted on a video surveillance project in 2015. The large-city surveillance project in a mature market entailed the use of various components, including 1,500 Axis outdoor cameras, some with 720p and some with 1080p image resolution; camera mounting accessories including cabinets, wall mounts and pole brackets; a market-leading storage area network (SAN) professional solution with around 1,400-TB capacity; a market-leading network switching solution; a market-leading corporate video management system; and a control room with a 16-screen video wall, workstations and accessories from a leading supplier.
For the project, Axis identified 40 types of cost spread across the three main stages of the project’s lifecycle: acquisition, operations, and decommissioning. These costs include contract and deployment costs under acquisition; system operating, maintenance and system failure costs under operations, and hardware removal, site restoration, recycling and disposal costs under decommissioning.
Axis then arrived at the figure of US$17 million as the total cost of ownership of the project. The figure breaks down roughly into US$11.4 million or 67 percent for acquisition, US$5.2 million or 31 percent for operations, and US$300,000 or 2 percent for decommissioning.
“Around two thirds of the contract cost, or 34 percent of the whole TCO, is for video management software, network, storage and hardware other than cameras. A third of the contract costs is camera cost, making up around 16 percent of the TCO for the system,” the paper said. “During operation of the surveillance system, a number of costs are incurred, the main one being system maintenance. This covers all planned and regular maintenance of cameras, servers and software. Operation also includes costs due to system failure as well as software license fees and power consumption. Maintenance costs represent the single largest share of the TCO for this system, amounting to around 20 percent of the TCO.”
According to Axis, the surveillance industry is constantly innovating to improve product and image quality, optimize video compression, speed up installation, and simplify maintenance. If the right technology is used, according to the company, savings on the TCO can be achieved to a certain degree.
The company cited as an example its Zipstream technology, which lowers bandwidth and storage requirements by an average 50 percent or more for many common 24/7 surveillance use cases. “So far in the TCO, the cameras in the system do not have Zipstream included, but it is easy to simulate the effect if the cameras were to compress video with Zipstream,” the study said. “With an assumption of 25 percent savings on storage, in this kind of scenario, the impact of Zipstream on the TCO amounts to 3 percent. This may sound insignificant, but translated to money it represents approximately US$450,000 in savings in total, or around US$300 per camera.”
Product-wise, the less reliable the product is, the more maintenance cost, and ultimately the TCO, the user needs to worry about. Conversely, better product reliability translates into better TCO down the road. Using Axis’s own study, it said: “How would the TCO be impacted if the failure rates were increased by a factor of four? The system failure cost jumps from the 5 percent to 13 percent, representing a significant cost increase from US$800,000 in the original case to more than US$2.3 million.”
In the end, Axis reminded of the disparate nature of each project. “Be aware that this TCO is not applicable in all its details for all projects. Every project is unique, and the TCO will of course vary considerably depending on project size, industry application, system requirements and other unforeseen attributes,” it said.