Understanding Total Cost of Ownership (TCO) in ServiceNow Hardware Asset Management

[HarshiniReddy]

Overview

Total Cost of Ownership (TCO) represents the complete cost incurred by an asset throughout its lifecycle. In ServiceNow Hardware Asset Management (HAM), TCO includes both initial capital costs (such as purchase price) and ongoing operational costs (such as repairs, upgrades, labor, and services).

Tracking TCO helps asset managers gain clear financial visibility, make informed decisions, and optimize asset investments over time.

Benefits of TCO

Using TCO in ServiceNow enables organizations to:

• Track and analyze expenses incurred across the entire asset hierarchy.
• Benchmark asset costs against similar assets or asset models to compare performance.
• Generate TCO reports (including predefined reports) for better budgeting and financial planning.

How TCO Is Calculated

In ServiceNow, all costs associated with an asset are recorded as expense lines. These expense lines form the foundation of TCO calculation.

Expense Lines

An expense line represents a cost incurred on an asset and maintains the historical cost record. TCO is calculated as the sum of:

• Initial capital cost
• Operational costs
• Costs from child assets (if applicable)

Cost Behavior by Asset Type

• When an asset is created: The purchase cost is automatically added as a capital expense.
• Additional costs over time (repairs, upgrades, services): Added as operational expenses.

Serialized Assets (e.g., laptops, servers)

• Purchase cost is added once as a capital cost.
• Any future costs are added as operational expenses and increase TCO.

Parent–Child Assets

• Costs recorded on child assets contribute to the parent asset’s TCO.
• If a child asset is removed, its historical costs remain but no longer impact the parent’s TCO.
• If a child asset is swapped, a new operational expense line is created.

Rate Card–Generated Costs

• Expense lines created through rate cards (labor, task, or service fees) are also included in TCO.

Benchmark Cost and Threshold

• Benchmark cost and benchmark threshold are defined on the Asset Model record.
• The default benchmark threshold is 75% of the benchmark cost.

Formula:
Benchmark Threshold = 75% × Benchmark Cost

• Asset TCO is displayed directly on the Asset record.

NOTE: The benchmark threshold percentage can be modified using the system property:
sn_itam_common.asset_tco_benchmark_threshold_percentage

Rate Cards, Expense Categories, and Expense Lines

Rate cards are used to standardize and automate cost calculations. These costs are recorded as expense lines and categorized accordingly.

Supported Rate Cards in HAM

• Task Rate Card
• Labor Rate Card

When a task is completed and closed, ServiceNow HAM:

1. Captures the time worked on the task.
2. Generates expense lines based on applicable rate cards.
3. Adds the expense to the associated asset’s TCO.

Expense lines are visible in the Expense Lines tab on the Hardware Asset form.

Task Rate Card

Task rate cards calculate costs associated with working on a task.

Behavior Based on “Use time worked” Field

Case A: Use time worked = Checked

Cost calculation depends on labor rate cards.

• If a labor rate card exists for the fulfiller: Hourly rate from the labor rate card is applied.
• If no labor rate card exists: Default labor rate defined on the task rate card is used.

After task closure, expense lines are generated and added to the asset’s TCO.

Case B: Use time worked = Unchecked

• Cost is calculated using the default task rate specified on the task rate card.

Labor Rate Card

Labor rate cards define the hourly cost of a fulfiller’s work.

They are used when:

• Tasks track time worked, and
• The fulfiller matches the conditions defined on the labor rate card.

Example: Hardware Asset Reclamation

When a reclamation request is submitted, multiple tasks may be generated (e.g., Schedule Pickup, Receive Asset).

Configuration Steps

 1. Task Rate Card – Schedule Pickup

• Use time worked: Checked
• Provide a default labor rate
• Condition: Task name is Schedule Pickup

2. Labor Rate Card

• Define hourly rate
• Set condition to identify applicable fulfiller

1. Task Rate Card – Receive Asset

• Use time worked: Unchecked
• Provide default task rate
• Condition: Task name is Receive Asset

Result

• Upon task closure, expense lines are generated based on the configured rate cards.
• These expense lines are linked to the asset.
• All expenses are summed up and reflected in the asset’s TCO.

The asset’s TCO can be viewed from the TCO icon on the right-side pane of the Asset form from the workspace.

Asset Analytics

The Asset Analytics view provides insights into:

• Total Cost of Ownership
• Asset performance
• Cost trends and distributions

Filters are available for:

• Location
• Stockroom
• Model category

Key TCO Metrics

KPI	Description
Reached benchmark TCO	Assets with TCO ≥ benchmark cost
Approaching benchmark TCO	Assets with TCO ≥ benchmark threshold but < benchmark cost
Capital planning	Active (non-retired) assets eligible for capital planning
Top 10 models by average TCO	Models with highest average TCO over 12 months
Expense distribution	Cost split by categories (labor, shipment, purchase, etc.)
Monthly expense trend	Initial and operational costs over last 12 months

Asset Performance Metrics

The Asset Performance tab highlights average KPIs such as:

• Availability
• Mean Time Between Failures (MTBF)
• Mean Time To Repair (MTTR)

KPI Definitions

• Availability: Average availability percentage of tracked hardware assets
• MTBF: Average time between asset failures
• MTTR: Average time required to repair assets