What is TCO and Why Should You Care?

Total cost of ownership is a measurement whereby you determine how much a technology solution will cost over the course of its “useful” lifecycle. It’s particularly useful if you’re attempting to determine whether to buy a solution that is maintained by an outside vendor or purchasing one that is maintained in house, for instance. As this article by Laurie McCabe explains, TCO can help an organization make smarter choices in the long run—choices based off of numbers rather than gut feelings. McCabe uses the following example to showcase her point:

For example, on-site solutions usually require significant upfront capital expenditures for hardware, software and application software, along with IT resources to install and configure these components. As a result, first-year costs for on-site solutions are often much higher than those associated with SaaS or cloud computing solutions, and total costs to maintain and manage on-site infrastructure and solutions continue to be a factor over time. On the flip side, TCO analysis may actually favor on-site solutions as the number of users rises and the total time period factored into the calculation increases.

So what kind of questions should you ask when looking at TCO? McCabe suggests understanding how long it will take to plan and select the solution, what are the infrastructure requirements and the licensing costs, if any. How much will application design, configuration an implementation cost the company—and how much will maintenance cost over time? These sorts of questions can help reveal how much each possible solution may cost—and furthermore will help your company understand the true cost of building in-house or going to a vendor. Read the full article here:

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