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Siemens study shows new TCO mindset

World Cement,

Siemens Financial Services (SFS) has carried out research into the new Total Cost of Ownership (TCO) mindset, which reveals that financial managers today incorporate energy efficiency and frozen capital into their TCO evaluations.

TCO is a measurement of the full cost of business equipment and systems, from acquisition, through operation and all associated expenditure throughout the life of the equipment. The SFS study was based on internal research and business insight in equipment financing, as well as references from third party sources.

Frozen capital was the subject of an earlier SFS study in April 2010, which defined frozen capital as ‘inefficiently deployed capital or untapped liquidity’. This report went on to state:

‘Frozen capital is defined as capital funding which is not appropriate for the purposes to which it is being applied, and is therefore not delivering adequate return on investment. In short, the notion of frozen capital in the industrial sector identifies the amount of money that could be freed up and more effectively applied to capital asset acquisition, if asset-financing techniques such as leasing and rental were more widely employed.’

Meanwhile, other SFS studies have shown that energy savings of more than 25% can be achieved in organisations in industry, commerce, healthcare and the public sector, depending on the technology application.

Julian Hobbs, Sales Director of Commercial Finance at SFS, comments: “The new TCO mindset, in our view, increasingly recognises the importance of incorporating frozen capital and energy efficiency in the TCO calculation. 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.”

Adapted from press release by Katherine Guenioui.

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