Capital Costs | Solaris System Management (New Riders Professional Library)

Capital costs are usually one-off costs that represent significant expenditure and that are normally implemented as a project. These could include new investments, such as building a new computer room, replacing air conditioning, doing UPS upgrades, and so on.

Sometimes capital costs must be funded over more than one financial year. There might not be sufficient funding in one single financial year, so the project might be designed to span two or even three years .

New Systems

Companies work in different ways, but the purchase of a new computer system can normally be attributed to a distinct project, so the budget of that project would usually pay for the new system and associated software. When the system has been commissioned and tested , it becomes the responsibility of the system manager.

The servers and workstations used by the IT staff in the execution of their duties , however, must be funded by the system manager. For example, the purchase of a new server with a disk array can amount to a significant cost, especially when software products must be purchased as well to evaluate new versions of the operating system and to establish the risk of installing it into the live environment.

Asset replacement is often another area of contention . Some companies have an asset replacement policy in which PCs or workstations are to be replaced , say, every two to three years. Most important, these replacements are funded from a central budget, not the IT manager's budget. Sometimes this is done because the desktop computer that each employee has is deemed "essential office equipment," just like the desk itself. If this equipment isn't funded from another source, then the system manager must ensure that sufficient additional funds are allocated to the budget to allow for asset replacement.

Cost/Benefit of Upgrades

The system manager is responsible for upgrading the computer systems, both hardware and software, so he must decide whether an upgrade is cost-effective and advantageous to the business. Service level agreements often can aid in this decision because they highlight areas of inadequacy that could point to an upgrade that is necessary to provide an acceptable level of service. The SLA can also be used to justify expenditure on upgrades.

Sometimes the hardware and software vendors remove support for either the system itself or the operating system. The justification for upgrading under these circumstances is the risk of running the systems in an unsupported state. Normally the vendors issue desupport notices on older hardware or versions of the operating system. Desupport notices usually are released by the vendor at least a year before they come into force, giving the system manager plenty of time to include it in the budget forecast. It is also worth noting that the vendors are often willing to provide a level of support even when the product is in desupport mode, but the cost is much greater, making it effectively cheaper to carry out the upgrade. Quite often the system manager must present the available options to senior management so that the business can decide whether the upgrade is necessary.

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