Five thoughts on total cost of ownership

All too often, TCO is just a buzzword. For TCO to provide reliable criteria upon which to base a procurement and financing decision, an end-to-end calculation must be carried out. But most companies (and providers) lack the expertise, experience, benchmarks, and time to do so.

CFOs love TCO calculations, but they often do not trust them. Unless all internal and external costs are included, the calculation is worthless to the finance department. CIOs are therefore well advised to provide their colleagues in finance with a comprehensive TCO overview.

Every large service provider offers TCO calculations, but they are biased toward the provider’s offerings, of course. Unless you have access to reliable benchmarks, it can be difficult to gauge this bias. Only independent (funding) partners can do that.

It is fairly easy to calculate the TCO for a single server, but only few can handle such a calculation for an entire international IT infrastructure. That requires experience, benchmarks, and expertise that most companies simply do not have.

If you base your purchasing decision on TCO, are you locked in over the entire period of the contracts? No. Flexibility is key – it is not just about financial aspects, it is also about satisfied users. The right financing partner can manage the contractual situation accordingly.