6.1 Introduction to Financial Analysis, Return on Investment, and Total Cost of Ownership
Anywhere you work in the data center sector, from an enterprise business that operates its own data centers to support business activities, a colocation service provider whose business is to operate data centers, a cloud provider that delivers services from data centers, or for a company that delivers products or services to data center operators, any project you wish to carry out is likely to need a business justification. In the majority of cases, this business justification is going to need to be expressed in terms of the financial return the project will provide to the business if they supply the resources and funding. Your proposals will be tested and assessed as investments; and therefore, you need to be able to present them as such.
In many cases, this will require you to not simply assess the overall financial case for the project but also deal with split organizational responsibility or contractual issues, each of which can prevent otherwise worthwhile projects from going ahead. This chapter seeks to introduce not just the common methods of Return on Investment (ROI) and Total Cost of Ownership (TCO) assessment, but also how you may use these tools to prioritize your limited time, resources, and available budget toward the most valuable projects.
A common mistake made in many organizations is to approach ...