What is total cost of ownership (TCO)?

- December 09, 2021

“Our understanding of TCO is not very scientific”, said a senior IT leader we spoke with recently.

We hear this a lot.

While our research shows that 76% of businesses look at TCO when assessing IT procurement and investments, accurately calculating TCO has had IT managers scratching their heads for years.

 

So, what does TCO mean?

The total cost of ownership refers to the full expenditure required to run a business IT device throughout the entire IT asset lifecycle.

It’s the hidden costs, beyond the first outlay and purchase price.

Purchase usually accounts for about 20% of TCO, with the remaining 80% dedicated to managing costs like support, fixes and recovery.

 

Purchase usually accounts for about 20% of TCO, with the remaining 80% dedicated to managing costs like support, fixes and recovery.

 

And how is it calculated?

This is where it can get tricky. Some costs are easy to keep track of – a service provider may have a simple monthly fee, for example. But other budget outlays are harder to monitor, like how much time the IT team is spending on device maintenance throughout the IT asset lifecycle or how much productivity is lost resolving tech issues.


Typically, TCO takes into account:

 

TCO takes into account support services, lost working time, managing IT, device, licences, deployment, acquisition and disposal




It’s a long list, where should I start?

At the beginning, of course. By choosing an IT procurement model, like Technology Lifecycle Management, you can access the latest technology for your team when you need it, without the big TCO price tag.


We take care of everything from finance solutions, to management and disposal as part of one simple service, so you can optimise your budget and focus on your core IT operations.


Want to find out how to avoid the hidden costs of IT? Read our Stop Buying IT report for the latest IT procurement insights.


Want to drive down costs, reduce your total cost of ownership and improve efficiency? Contact us today to find out more about Technology Lifecycle Management.

 

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