Total Cost of Ownership:   is a financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or system.  TCO tries to quantify the financial impact of deploying an information technology product over its life cycle.  These technologies include software, hardware, and training.

In the case of comparing TCO of existing versus proposed solutions, consideration should be put toward costs required to maintain the existing solution that may not necessarily be required for a proposed solution.  Examples include cost of manual processing that are only required to support lack of existing automation, and extended support personnel.

Some important factors to consider are:

Computer hardware and programs

  • Network hardware and software
  • Server hardware and software
  • Workstation hardware and software
  • Installation and integration of hardware and software
  • Purchasing research
  • Warranties and licenses
  • License tracking – compliance
  • Migration expenses
  • Risks: susceptibility to vulnerabilities, availability of upgrades, patches and future licensing policies, etc.

Operation expenses

  • Infrastructure (floor space)
  • Electricity (for related equipment, cooling, backup power)
  • Testing costs
  • Downtime, outage and failure expenses
  • Diminished performance (i.e. users having to wait, diminished money-making ability)
  • Security (including breaches, loss of reputation, recovery and prevention)
  • Backup and recovery process
  • Technology training
  • Audit (internal and external)
  • Insurance
  • Information technology personnel
  • Corporate management time

Long term expenses

  • Replacement
  • Future upgrade or scalability expenses
  • Decommissioning