Why TCO, ROI matter in security investment

Why TCO, ROI matter in security investment
Increasingly, total cost of ownership (TCO) and return on investment (ROI) are used to justify spending on IT equipment and systems. When investing in video surveillance, these measurements are carefully looked at as well. Choosing a system that helps minimize TCO and maximize ROI is also key.
 
That was the argument raised by Axis Communications in a recent blog post titled “Getting real with TCO and ROI.”
 
TCO looks at not just the initial cost of purchasing the system, but the cost of running the system throughout its lifecycle. Sometimes a system may carry a higher upfront cost compared to competing solutions, but it may actually have a lower TCO in the long run achieved through savings in maintenance, repairs or replacement of parts and components. ROI, meanwhile, measures an investment’s gains compared to its cost.
 
“TCO and ROI analyses are very powerful tools that can help you better calculate the cost of a planned or existing system. TCOs and ROIs also help you estimate the value the system could deliver. Including a TCO and ROI perspective in your buying process can help you evaluate competing offers more reliably, and in the end allow you to make better and more sustainable business decisions,” the post said.
 
Choosing a system that lowers TCO and maximizes ROI is also critical. In Axis’s case, the blogpost cited three case studies in different verticals on how this was achieved.
 

Smart city

 
The first case study details video surveillance installed in Vicente López in the northern section Buenos Aires, with a population of approximately 300,000. The city implemented a large video surveillance project based around Axis cameras. “The analysis revealed a TCO of around US$29 million over ten years. About a third of this cost was investment in hardware and software, while two thirds were staff costs relating to installation, maintenance and operation of the system. The benefits of the system include much faster response time for emergency staff, smoother traffic flow and overall a better sense of security for its citizens,” the post said.
 

Hospitality

 
Christie Lodge in the Rocky Mountains of U.S. has deployed a video surveillance solution with around 40 Axis cameras. According to the post, a TCO analysis was conducted for the Christie Lodge system and with a calculated seven-year lifespan, the total cost arrived at around $90,000.
 
“The main savings for Christie Lodge have come from the reduction of its rented security staff and from battling liability claims, in particular so called ‘slip and fall’ cases where individuals claim to have slipped and injured themselves on the premises,” the post said. “Altogether, Christie Lodge estimates that it saves around $40,000 to $50,000 each year with the Axis system. This means that the investment paid for itself during the second year of operation, creating a total ROI at the end of the seventh year at 250 percent.”
 

Retail

 
RC Willey in Salt Lake City is a leading home furnishings retailer with retail outlets and distribution centers spread across western U.S. It has deployed an enterprise video surveillance system with 800 Axis cameras. According to the post, with a seven-year expected lifespan for the system, the TCO analysis for RC Willey arrived at around $1.4 million.
 
“In this case, two-thirds of the cost relate to hardware and software, while a third includes costs for installation, operation and maintenance,” the post said. “The main savings for RC Willey come from reduced shrinkage. In addition, RC Willey has used the system to mitigate litigation claims, including many ‘slip and fall’ cases. RC Willey estimates that the yearly savings from the Axis video surveillance system is around $5.7 million. With the TCO analysis as a background, it shows that the cost of the system is saved already in the first year, and the final ROI after seven year arrives at an astounding 2,700 percent for RC Willey.”


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