Total Cost of Ownership concerns diversify

Posted on 22 Mar 2013 by The Manufacturer

Research from Siemens Financial Services shows new factors impacting on Total Cost of Ownership calculations and equipment purchasing decisions.

Defining Total Cost of Ownership (TOC) has become increasingly important to finance professionals approving spend on industrial equipment according to previous research from Siemens Financial Services (SFS), the finance arm of the global technology and equipment manufacturer Siemens.

A new paper released yesterday by the firm, shows however, that increasing numbers of finance professionals are now including two new factors when calculating TOC:

  • The time cost of money and free cash flow issues (characterised as ‘frozen capital’)
  • Savings through energy efficiency

The first concern is leading to a growing interest in asset finance as a means of thawing frozen assets says Julian Hobbs, sales director of commercial finance at SFS.

“The new TCO mindset, in our view, increasingly recognises the importance of incorporating frozen capital and energy efficiency in the TCO calculation,” he commented following the release of the new SFS research.

“As a result of those calculations, many organisations are turning to asset finance techniques in order to liberate ‘frozen’ capital and afford energy efficiency equipment upgrades. Instead of simply funding the purchase cost of equipment or systems, these finance solutions are covering other requirements identified in the TCO analysis, such as installation, maintenance, service, training and upgrades etc.”