Total Cost of Ownership

Problem Definition

The root cause of the problem is the determination whether an information systems investment has directly contributed to increased profits in a company.

Situational Analysis

Definition of TCO

TCO (Total cost of ownership) is the total cost of a computer asset throughout its lifecycle, from acquisition to disposal. The aim of TCO analysis is to identify, quantify, and ultimately, reduce the overall costs associated with ownership of networked assets.

TCO is the combined hard and soft costs of owning networked information assets. 'Hard' costs include items such as the purchase price of the asset, implementation fees, upgrades, maintenance contracts, support contracts, and disposal costs. These costs are considered 'hard costs' because they are tangible and easily accounted for. Even more significant in most environments however, are the 'soft' costs related to management, support, training, hidden costs, and downtime. Because they don't occur at acquisition time, they are often overlooked in budgets, often leading to unexpected increases or worse, a transfer of management and support responsibility to end users.

(Reference: http://www.micromationinc.com/what-is-tco.htm)

TCO goes beyond initial purchase price or implementation cost to consider the full costs of an asset over its useful life.

(Reference: http://www.clarity-consulting.com/DeterminingROI&TCO.pdf)

Risks of TCO

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 related...