Calculating Tech's Total Cost of Ownership

Business.com / Technology / Last Modified: February 22, 2017

Total Cost of Ownership (TCO) is a commonly used calculation designed to help businesses assess the direct and indirect costs ...

Total Cost of Ownership (TCO) is a commonly used calculation designed to help businesses assess the direct and indirect costs associated with information technology purchases. By doing a TCO analysis, you can make more informed purchase decisions.

When evaluating the TCO of hardware, software, or networking equipment, you should consider:

  1. The initial costs of the hardware and software.
  2. Costs for the initial deployment and employee training.
  3. On-going maintenance fees for software updates and upgrades as well as help-desk support.
  4. Expenses related to system and network maintenance, backup and other data protection services.
  5. Costs associated with downtime.

Use a TCO calculator

You can do your own Total Cost of Ownership analysis on any piece of equipment, from laptops to printers.

Bring in a TCO specialist

Some smaller businesses may be overwhelmed at the notion of doing a TCO analysis. If that's the case or if you have a larger company where the technology is complex, you may want to bring in a TCO expert.

Standardize your hardware and software configurations

You can lower your TCO by standardizing desktop hardware, software and PC configurations. To do so, you may have to spend more money up front to get everyone on the same system. Ultimately, you can save money by eliminating "one-of-a-kind" troubleshooting and support and by creating an environment where users can easily move from one desktop to another. In addition, this approach generally makes installation, repair and maintenance less expensive.

Use asset management software

With IT asset management tools, you can audit and manage your company's PC and software. By doing so, IT managers can quickly identify noncompliant systems (for instance, systems that don't meet your security standards or have out-of-date operating systems) and upgrade them. Using asset management tools will often help you improve your company's IT support and response time, decrease down time and reduce TCO.
  • It's important not to base buying decisions completely on TCO. Sometimes more expensive products offer benefits that make them a better fit for the long run.
  • To get a full understanding of ongoing costs associated with an application or new system, experts recommend calculating TCO over a three-year period.
  • Don't get sidetracked by TCO and prioritize projects based on lowest cost. In certain cases, technology investments that cost more should take precedence because they deliver more value to your business.

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