| Total Cost Of Ownership |
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For example, the decision to buy a computer may result in the following TCO analysis: the greater initial price of a high-end computer is to be balanced by adding likely repair costs and earlier replacement to the purchase cost of the cheaper bargain brand, among other factors. The initial price becomes just the beginning of the life cycle of costs. TCO analysis originated with the Gartner Group in 1987 and has since been developed in a number of different Methodologies and software tools. The purchase of equipment can include initial purchase price, repairs, maintenance, upgrades, service and support, networking, security, user training, and software licensing, among other expenses. The TCO concept is widely used in the Automobile industry. In this context, the TCO denotes the cost of owning a vehicle from the purchase, through its maintenance, and finally its sale as a used car. Comparative TCO studies between various models help consumers choose a car to fit their needs and budget. Many consumers, businesses, and governments fail to understand and calculate TCO and instead rely on TCA (Total Cost of Acquisition) to make buying decisions. Also, in some cases, purchasers may not bear all of the TCO-related costs directly even though their parent organizations always do (i.e. "cost shifting"). TCO can and often does vary dramatically against TCA, although TCO is far more relevant in determining the viability of any capital investment, especially with modern credit markets and Financing . TCO also directly relates to a business's total costs across all projects and processes and, thus, its profitability. "TOTAL COST OF OWNERSHIP" VERSUS "TOTAL COST TO USE" Since software is not "owned" (but licensed), it has been argued that the "total cost of ownership" is a Misnomer . "Total cost to use" and "total cost to lease" are considered by some to be more appropriate terms. REFERENCES |
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