What Is Total Cost of Ownership (TCO)?

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TCO is a term used in finance but has a specific meaning regarding IT. TCO generally refers to the total cost of owning a product or service over its lifetime. It's a financial estimate of all direct and indirect costs of possessing an asset. For example, if you buy a car, the TCO might include not just the price of the vehicle itself but fuel costs and maintenance fees over time. It can also include insurance premiums, parking fees for your garage and depreciation of your vehicle over time. In IT terms, TCO refers to how much it costs to manage and maintain your computer network over time. It includes hardware purchases like servers, software licensing fees; labor costs for network administrators; electricity costs for running server farms; cooling costs for server farms; bandwidth charges from ISPs, etc. Let's look at the three general categories of deploying technology: The first is the initial cost of the technology. It includes everything that you need to buy to get started. It also provides training costs and fees associated with setting up your network or implementing new security measures. The second category is operational costs—the ongoing expenses of using the technology once implemented. These include maintenance, upgrades, software licensing fees, and so on. Finally, there are disposal costs—what happens when it's time to retire your system or equipment? It can include recycling costs or replacement with newer models. The True Cost of Ownership (TCO) is a great buzzword for the actual cost of using a personal computer (PC). It is sometimes described as the time, money and effort you'll spend on a PC before taking it home. Some estimates place the TCO at 300 to 400 percent of the PC's purchase price. But there's a catch: There are two different kinds of TCO. One is for consumers, who pay for equipment, upgrades, training and training time, repairs, maintenance and increased utility bills. The other is that companies who use PCs in their offices have to pay for office furniture too!

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