Note: This post originally appeared as an online article at Commercial Integrator on July 30, 2014. It was written to address on of the roundtable topics scheduled for DSEOne, “Reducing Total Cost of Operations”.
An important precursor to a discussion of reducing the total cost of operations in a digital signage network is a semantic resolution of what we are discussing. The cost of operations should not be confused with the commonly used metric, total cost of ownership (TCO), even though it is an important part of the TCO calculation. It should also not be confused with the other key element of TCO, cost of acquisition, even though many people, especially those in sales, make that leap instinctively. Total cost of operations begins after any necessary capital investments are made to acquire the goods and services needed to launch or expand a network.
Systems integrators can deliver the most value to their customers by going beyond typical launch tasks: procurement, integration and deployment. Actively engaging with the customer to help them understand the dynamics of acquisition cost and cost of operations as drivers of TCO makes the systems integrator a partner, rather than a vendor. The advantages of a partner relationship are well appreciated by those of us who have experienced the alternative. Taking the time to truly understand the customer’s network objectives, strategies and capabilities allows the integrator to guide the customer to optimal decisions on acquisition of equipment, software and services. That does not necessarily mean the lowest cost of acquisition, because integrating the right pieces to enable a lower cost of ongoing operations can have greater TCO impact that a marginally lower cost of acquisition.
Understanding some of the larger “buckets” of operational costs is useful and can also help provide the framework for making the right capital investments. Here are a few of the important post-deployment cost drivers:
All of the tasks associated with development and acquisition of content, programming, management of content assets, scheduling and monitoring the network drive operational costs. In short, content management is people and process oriented, and greatly impacted by tools and services that support both. An integrator who develops a shared understanding of the customer’s content and network strategy can help develop the processes and identify the tools that optimize employee utilization and workflow. Automated procedures, streamlined interfaces and powerful tools associated with projected tasks can reduce the headcount required for this critical set of responsibilities, with a dramatic impact on total cost of operations.
Ongoing Software Costs
The most common operational cost associated with software relates to subscription fees for software-as-a-Service (SaaS) platforms, the most common delivery method in the industry today. SaaS deployments can certainly reduce acquisition costs, as there are typically no purchase or deployment costs. However, understanding how vendors charge for their service can mitigate ongoing operational costs. For example, many modern media players can support two separate outputs. Certain vendors charge by screen (output), while others charge by connection (player). If your customer can utilize dual output players smartly and pay SaaS fees by the player, the ongoing software costs can be as much as 50% lower than a deployment of all-in-one (system on chip, or SoC) displays or other architectures that by definition charge by the screen for SaaS. The operational savings can greatly outweigh any reduced capital expenditure in the calculation of TCO.
Customers with larger networks (greater than 1,000 end points) and sophisticated IT capabilities may realize significant operational cost savings by considering an enterprise software licensing arrangement. In an enterprise license, blocks of seats are licensed for an upfront capital investment, and the ongoing operational cost is related to maintenance fees that are typically a fraction of SaaS fees, plus the IT costs of maintaining servers and a content distribution capability. It is wise to bring enterprise licensing into the discussion with large clients, and to understand options for that type of arrangement available in the marketplace.
Because digital signage involves electronics, occasional failures in the field will be a fact of life. Cheap devices tend to skimp on parts that fail most often, such as power supplies, so beware! While warranties will cover most equipment failures in the first one to three years, network downtime, truck rolls and depot stock can drive operational costs up. In situations where uptime is mission critical (for example, digital menu boards), redundancy and failover strategies are as essential as warranties. It may be important to consider the use of multi-output players and to weigh the external media player against SoC options for mission critical applications. To keep truck rolls and tech time to a minimum, aim for high reliability, clever failover strategies and consider upgraded warranties in the acquisition process.
You can bet that two years into a new network, network owners will have developed new requirements that may demand more firepower than was designed into the initial equipment purchases. At a minimum, you should ensure that the software vendor could provide software upgrades and patches over the network. Hardware upgrades require more forethought. Displays tend to have a longer useful life than media players, so once again, the lure of the SoC sales pitch comes at a cost: getting that extra firepower requires an entirely new unit, including the display. If your customer can foresee expanding requirements, it may be useful to have a separate media player or an OPS-based player-display set-up to ensure a simple upgrade path.
In a digital signage network, total cost of operation is separate from the capital investments made at launch, yet is closely tied to those up-front decisions. Together they form the basis for total cost of ownership. Savvy integrators will partner with customers at the outset to help optimize both at the start and on an ongoing basis.