Total Cost of Ownership
Total cost of ownership (TCO) is a financial estimate whose purpose is to help consumers and enterprise managers determine direct and indirect costs of a product or system. It is a management accounting concept that can be used in full cost accounting or even ecological economics where it includes social costs.
Contents
• 1 Use of concept o 1.1 Computer and software industries o 1.2 Transportation industry • 2 See also • 3 References
4 External links
Use of concept
TCO, when incorporated in any financial benefit analysis, provides a cost basis for determining the economic value of an investment. Examples include: return on investment, internal rate of return, economic value added, return on information technology, and rapid economic justification.
A TCO analysis includes total cost of acquisition and operating costs. A TCO analysis is used to gauge the viability of any capital investment. An enterprise may use it as a product/process comparison tool. It is also used by credit markets and financing agencies. TCO directly relates to an enterprise 's asset and/or related systems total costs across all projects and processes, thus giving a picture of the profitability over time.
Computer and software industries
TCO analysis was popularized by the Gartner Group in 1987.[1] The roots of this concept date at least back to the first quarter of the twentieth century.[2] Microsoft then embraced the concept and commissioned various white papers and case studies in the late 90s to show that Windows had a lower TCO than Linux. The studies have not been found to be either objective or conclusive.[3] Many different methodologies and software tools have been developed to analyze TCO. TCO tries to quantify the financial impact of deploying an information technology product over its life cycle. These technologies include software and hardware, and training.
Technology deployment can include the following as part of TCO: •
Contents
• 1 Use of concept o 1.1 Computer and software industries o 1.2 Transportation industry • 2 See also • 3 References
4 External links
Use of concept
TCO, when incorporated in any financial benefit analysis, provides a cost basis for determining the economic value of an investment. Examples include: return on investment, internal rate of return, economic value added, return on information technology, and rapid economic justification.
A TCO analysis includes total cost of acquisition and operating costs. A TCO analysis is used to gauge the viability of any capital investment. An enterprise may use it as a product/process comparison tool. It is also used by credit markets and financing agencies. TCO directly relates to an enterprise 's asset and/or related systems total costs across all projects and processes, thus giving a picture of the profitability over time.
Computer and software industries
TCO analysis was popularized by the Gartner Group in 1987.[1] The roots of this concept date at least back to the first quarter of the twentieth century.[2] Microsoft then embraced the concept and commissioned various white papers and case studies in the late 90s to show that Windows had a lower TCO than Linux. The studies have not been found to be either objective or conclusive.[3] Many different methodologies and software tools have been developed to analyze TCO. TCO tries to quantify the financial impact of deploying an information technology product over its life cycle. These technologies include software and hardware, and training.
Technology deployment can include the following as part of TCO: •
References: March 21, 2008 • Vol.30 Issue 12 Page(s) 24 in print issue