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TCO (Total Cost of Ownership)

A complete accounting of costs to reflect not only the acquisition cost but also the costs of use and maintenance of system. For an enterprise information system the components include the following costs:

• Training the users and support personnel
• Diminished performance due to a lack of system features requiring manual procedures
• Planned and unplanned system down time and wait time
• Security breaches, loss of reputation and recovery
• Disaster preparedness and recovery
• Floor space
• Electricity
• Enhancement, integration and upgrade expenses

A common mistake is to rely on TCA (Total Cost of Acquisition) alone. Although TCA is a component of TCO, TCA does not predict TCO. For example, a system with a high TCA and features to reduce manual procedures and better inform customer service will produce a lower TCO than a system with a low TCA that lacks the features needed by the organization.