Total cost of ownership

From Hill2dot0

The total cost of ownership (TCO) has received a lot of press recently. Almost every equipment vendor was claiming improved TCO. TCO is a measure of all of the costs associated with owning something. For example, the cost of a car is what you negotiate at the sales lot, but the TCO also considers costs such as insurance, registration, fuel, maintenance, repairs, loan repayments, car washes, oil, and tires. The TCO of a network includes many costs beyond the initial purchase price for equipment and facilities rental. Gartner, an IT research and advisory company, has been credited for bringing the awareness of TCO to the IT industry. Gartner has developed many tools to help in the analysis of TCO.

A drawback of TCO is that it only considers costs. As such, it does not indicate whether a project should be adopted. However, it is a good tool for comparing two options as long as their outcomes are similar and achieve similar benefits. These often form a great basis for business cases to management and so may be raided by the customer IT staff to produce the internal business case.