TCO - Total cost of ownership

Total cost of ownership (TCO) is a financial estimate designed to help consumers and enterprise managers assess direct and indirect costs related to the purchase of any capital investment, such as (but not limited to) computer software or hardware.

A TCO assessment ideally offers a final statement reflecting not only the cost of purchase but all aspects in the further use and maintenance of the equipment, device, or system considered.

This includes the costs of training support personnel and the users of the system, costs associated with failure or outage (planned and unplanned), diminished performance incidents (i.e. if users are kept waiting), costs of security breaches (in loss of reputation and recovery costs), costs of disaster preparedness and recovery, floor space, electricity, development expenses, testing infrastructure and expenses, quality assurance, incremental growth, decommissioning, and more.

Therefore TCO is sometimes referred to as total cost of operation. When incorporated in any financial benefit analysis (e.g., ROI, IRR, EVA, ROIT, RJE) TCO provides a cost basis for determining the economic value of that investment.

For example, the decision to buy a computer may result in the following TCO analysis: the greater initial price of a high-end computer is to be balanced by adding likely repair costs and earlier replacement to the purchase cost of the cheaper bargain brand, among other factors. The initial price becomes just the beginning of the life cycle of costs.

For the rest of the Wikipedia entry on the above term, go here.

This video, from the University of Washington explores the implications of going open source in terms of Total Cost of Ownership. Unfortunately, as it is Copyright material, the only way to access it is through Google's website here.