Total Value of Ownership Sample Clauses

Total Value of Ownership. Nowadays, customers are more eager to buy services delivering strategic benefits in order to gain strategic position in the market (Hurkens and Xxxxxxx, 2004). As these authors described, a well-known management-accounting approach called Total Cost of Ownership (TCO) is the consequent of this movement aiming at decreasing the total cost of a purchase including the interest costs as well as maintenance costs. Application rationalization is the way to examine the entire IT organization (department). Rationalization has special focus on TCO by identifying duplicate applications, applications with few users, and high cost ratio modules (Xxxxxxxxxx et al., 2010). TCO approach mainly focuses on costs of development, infrastructure, software, etc. but no value such as “revenue enhancement” (Xxxxxxx and Xxxxxx, 2005; Xxxxxxx and Xxxxxxx, 2004). In 2004 a new concept called Total Value of Ownership (TVO) has been suggested by Xxxxxxx and his colleagues which not only considers the total cost but also it pinpoints the advantages and values that a firm gains from a specific purchase such as revenue enhancement, end user satisfaction, quality, etc. (Xxxxxxx and Xxxxxxx, 2004). Hurkens and Xxxxxxx have also discussed that the value has two dimensions, increasing the efficiency and effectiveness for both the customers and customers of customers. Efficiency and effectiveness are generated in three different ways namely: reduce costs, reduce costs for customers of customer, and revenue enhancement for customers. As they explained, the first category is depicted by TCO while the two latter ones which are “indirect value possibilities” should be illustrated in TVO. In order to maximize TVO, clearly the latest technology and greatest IT facilities do not deliver so much value to the business unless, as stated by Xxxxxxx and Xxxxxx (2005), the business processes and objectives would be aligned with IT investments. For this purpose they have highlighted three factors; portfolio management, governance, and options which is the combination of two latter ones. Portfolio management and options are not in the scope of this study; however, governance has been scrutinized in more details in section 4.1.4 as a critical value for customer. Generally speaking, during the process of value creation, customers of customers have same importance as customers and both encompass same weight in increasing TVO. Hence, end users (customer’s customers) need to be considered in value proposition a...