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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 (opens in new tab).

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.

http://video.google.com/videoplay?docid=-4941649224089726855&q=total+cost+of+ownership&hl=en

Désiré has been musing and writing about technology during a career spanning four decades. He dabbled in website building and web hosting when DHTML and frames were en vogue and started writing about the impact of technology on society just before the start of the Y2K hysteria at the turn of the last millennium. Following an eight-year stint at ITProPortal.com where he discovered the joys of global tech-fests, Désiré now heads up TechRadar Pro. Previously he was a freelance technology journalist at Incisive Media, Breakthrough Publishing and Vnunet, and Business Magazine. He also launched and hosted the first Tech Radio Show on Radio Plus.