What responsible digital technology costs and saves
The economics of a reduction decision: total cost of ownership, annual cost by period of use, payback period, externalities, internal carbon price and responsible purchasing.
- 28 cards
- 5 topics
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Total cost of ownership: what is it?
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The sum of everything a piece of equipment costs over its period of use: purchase, energy, maintenance, software and end of life.
The purchase price is only part of it: a cheap but fragile device can cost more over its life than a repairable one bought for more.
Two laptops: A costs €600 and lasts 3 years, B costs €800 and lasts 5 years, with the same annual running costs. What does the annual purchase cost show?
- B is cheaper per year: €160 against €200
- A is cheaper per year: €200 against €267
- Both cost the same per year
- B costs more per year: €800 against €600
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B is cheaper per year: €160 against €200
A: 600 / 3 = €200 a year; B: 800 / 5 = €160 a year. The purchase price alone misleads: it must be related to the period of use.
Total cost of ownership adds to the … price the energy, … and end of life, over the whole period of use.
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Total cost of ownership adds to the purchase price the energy, maintenance and end of life, over the whole period of use.
Comparing two devices on purchase price alone ignores the lines that recur every year.
Payback period: what is it?
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The time after which an investment's yearly savings have repaid its initial outlay.
It is computed by dividing the outlay by the yearly saving. It ignores what happens after repayment, so it is not enough to compare two projects.