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TCO : Total Cost of Ownership


Reference: http://itstrategyblog.com/total-cost-of-ownership-for-business-intelligence-application/

TCO:
– Direct Cost
– Indirect Cost

Total cost of ownership (TCO) is a financial estimate. Its purpose is to help consumers and enterprise managers determine direct and indirect costs of a product or system. It is a management accountingconcept that can be used in full cost accounting or even ecological economics where it includes social costs.

Computer and software industries

TCO analysis was popularized for the Gartner Group in 1987[1]. The roots of this concept date at least back to the first quarter of the twentieth century.[2] It has since been developed in a number of differentmethodologies and software tools. TCO tries to offer a statement on the financial impact of deploying an information technology product over its Life cycle. These technologies include software and hardware, and training.

Some of the Total Cost of Ownership elements that can be considered in the deployment of technology include the costs of:

  • 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
    • Other 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 related personnel
    • Corporate Level Management time
  • Long term expenses
    • Replacement
    • Future upgrade or scalability expenses
    • Decommissioning

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