Description

Total cost of ownership (TCO) is a comprehensive model designed to help organizations compare, understand, and manage the direct (i.e., budgeted) and the indirect (i.e., unbudgeted) costs incurred in owning and using a system (for example, an IT component throughout its lifecycle) or a process (for example, the manufacture of an item). TCO recognizes that there are both direct and indirect costs that must be considered. This report offers strategies for measuring and reducing TCO.

Total cost of ownership (TCO) is a comprehensive model that helps organizations compare, understand, and manage the direct (i.e., budgeted) and indirect (i.e., unbudgeted) costs incurred with owning and using a process, for example, an IT component, throughout its lifecycle. Organizations may otherwise emphasize the direct costs and overlook or minimize the indirect costs. Determining TCO can be a complicated matter, involving repeated examination of costs. On-line calculators are available to assist with the task. The larger the organization and/or the task, the more complex is the task of determining the true TCO. On the other hand, the goal of TCO is not to come up with a precise dollar figure but to determine how costs can be effectively reduced, or to select between competing processes or systems