Total cost of ownership (TCO)
TCO covers a solution’s total costs over a defined period, including implementation and any later exit.
Total cost of ownership, or TCO, covers all costs of a solution over a defined period. Depending on scope, it includes setup, migration, integration, recurring use, operation, maintenance, internal effort and a later exit. The licence price is one component.
A simplified fictional calculation includes 2,000 EUR setup, 36 months at 200 EUR in fees, 1,000 EUR internal handover effort and 500 EUR exit costs. These items total 10,700 EUR. They are not market prices. Operation or maintenance costs not yet captured must be added.
Compare solutions over the same period, user count and scope. Keep uncertain assumptions visible. TCO describes costs; value and fit with the workflow need separate assessment.
Sources
Related terms
- Exit strategyA prepared route to switch, take over or retire an IT service in an orderly way.
- Migration costsEffort and expenditure for the planned move of data or functions to another environment.
- Investment costsCosts of building a new or expanded IT capability, as considered in project planning.
- Operating costsExpenditure to plan for the ongoing operation of an IT solution.
- Scope creepScope creep is gradual expansion of project scope without adequate assessment and corresponding changes to the plan.
- Project summaryA project summary briefly brings together an initiative’s purpose, boundaries, owners and key constraints.
Articles on this topic
IT Consulting & Strategy with ASES
Strategy, architecture and technology choice