How To Build TCO Baseline

🧭 Step 1: Build 3-Year TCO Baseline (Current State)

TCO = Total Cost of Ownership.

You calculate what the bank is spending today to run those 40 applications.

You break it into 4 buckets.

🔹 1️⃣ License Cost (Annual Recurring)

Collect:

• Core LOS license

• Middleware (WebLogic, MQ, ESB)

• DB (Oracle / SQL Server)

• Reporting tools

• Batch scheduler

• Monitoring tools

Example:

Component	Annual Cost (₹ Cr)
LOS license	6
DB license	4
Middleware	2
Reporting tools	1
Monitoring	0.5

Total License = ₹13.5 Cr per year

Over 3 years = ₹40.5 Cr

No guesswork — use finance data.

🔹 2️⃣ Infrastructure Cost

Include:

• Data center hosting

• Storage

• DR infra

• Backup infra

• Network cost

• Hardware AMC

Example:

Infra = ₹10 Cr per year3-year infra = ₹30 Cr

🔹 3️⃣ Manpower Cost

Include:

• L2/L3 support team

• Vendor AMS contract

• DBAs

• Infra support

• Release management

Example:

Support team cost = ₹8 Cr per year3-year manpower = ₹24 Cr

🔹 4️⃣ Change & Enhancement Cost

Average yearly enhancements:

₹5 Cr per year3-year = ₹15 Cr

📊 Current 3-Year TCO

Category	3-Year Cost (₹ Cr)
License	40.5
Infra	30
Manpower	24
Enhancements	15

Total 3-Year TCO = ₹109.5 Cr

Now you have a CFO-level baseline.

🏗 Step 2: Modernization Investment Estimate

Now calculate transformation cost.

Include:

• New platform development

• Cloud migration setup

• DevOps tooling

• Data migration

• Training

• Parallel run cost

Example:

Item	Cost (₹ Cr)
Development	20
Cloud setup	5
Migration	4
Tools	3
Parallel run	3

Total Modernization Investment = ₹35 Cr

Spread across 2 years.

📉 Step 3: Post-Modernization Cost (Future State)

After modernization:

• License drops (OSS stack / SaaS)

• Infra optimized (auto-scale cloud)

• Support reduced (automation)

• Faster releases

New annual cost:

Category	New Annual Cost
License	6
Infra	7
Manpower	6
Enhancement	4

New annual = ₹23 Cr3-year future cost = ₹69 Cr

📈 Step 4: ROI Calculation

Old 3-year TCO = ₹109.5 CrNew 3-year cost = ₹69 CrSavings = ₹40.5 Cr

Investment = ₹35 Cr

Net Gain = ₹5.5 Cr in 3 years

Payback ≈ 30–36 months

That’s conservative and believable.

🔥 But Here’s Where You Level Up

Revenue Impact

If faster loan processing increases loan book by even 10%:

Extra interest income say ₹20 Cr annually.

Now ROI becomes transformational, not just cost-saving.

🎯

We established a 3-year TCO baseline by consolidating license, infra, manpower, and change costs from finance records. That gave us ₹110 Cr projected spend. We estimated modernization investment at ₹35 Cr across two years. Post-modernization run cost reduced by approximately 30–35%, delivering operational savings plus revenue acceleration from faster loan turnaround. The business case showed payback within 3 years.