Total Cost of Ownership

• Total Cost of Ownership (TCO) is an analysis meant to uncover all the lifetime costs that follow from owning certain kinds of assets. Ownership brings purchase costs, of course, but ownership can also bring costs for installing, deploying, operating, upgrading, and maintaining the same assets. For this reason, TCO is sometimes called life cycle cost analysis. For many kinds of acquisitions, TCO analysis finds a very large difference between purchase price and total long term cost, especially when viewed across a long ownership period.

1. Obvious costs in TCO analysis
Obvious costs in TCO are the costs familiar to everyone involved during planning and vendor selection, such as:

    Purchase cost:  The actual price paid.
    Maintenance costs: warranty costs, maintenance labor, contracted maintenance services or other service contracts
  
2. Hidden costs in TCO analysis

The so-called hidden costs are the less obvious cost consequences that are easy to overlook or omit from acquisition decisions

    Acquisition costs: the costs of identifying, selecting, ordering, receiving, inventorying, or paying for something.
    Upgrade / Enhancement / Refurbishing costs.
    Reconfiguration costs.
    Set up / Deployment costs: costs of configuring space, transporting, installing, setting up, integrating with other assets, outside services.
    Operating costs: for example, human (operator) labor, or energy/fuel costs.
    Change management: costs:  for example, costs of user orientation, user training, workflow/process change design and implementation.
    Infrastructure support costs:  for example, costs brought by the acquisition for heating/cooling, lighting,  or IT support.
    Environmental impact costs: for example, costs of waste disposal/clean up, or pollution control, or the costs of environmental impact compliance reporting.
    Insurance costs.
    Security costs:
        Physical security, for example, security additions for a building, including new locks, secure entry doors, closed circuit television, and security guard services.
        Electronic security, for example, security software applications or systems, offsite data backup, disaster recovery services, etc.
    Financing costs: for example, loan interest and loan origination fees.
    Disposal / Decommission costs.
    Depreciation expense tax savings (a negative cost).
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