TCO - total cost of ownership

Post date: Apr 7, 2013 7:23:09 PM

Enterprise Architects or Solution Architects have to look at total cost of ownership before taking decision on buying or selecting products for a solution or IT system. Here is some general stuff defining what it is and how it can be calculated along with some interesting resources on internet about TCO:

What is it?

TCO is a method to analyze the overall costs associated with ownership of Information Technology (IT) assets. Using TCO model, strategic decisions can be taken and based on TCO analysis, cost control decisions can be identified. There are different aspects to consider while identifying TCO model, they are taken as direct cost and indirect cost; one time cost and recurring cost; tangible cost and intangible cost etc.

Factors to consider

Tangible factors

    • Software and hardware cost

    • Installation cost

    • Cost of a service and maintenance

    • Testing, training and education cost.

    • Fixed operating costs, such as power consumption, cooling cost; and other supporting infrastructure like including rack mounts, space required for the system etc.

Intangible factors

    • Migration and conversions (server migration, data conversions and migration if required)

    • Cost to maintain redundant resources for contingency and risk mitigation

    • Cost to integrate with other systems (if there are legacy systems it may be a requirement)

    • Operational costs to make sure reliability, availability and performance.

Interesting resources