IT Financials Glossary

TCO (Total Cost of Ownership)

Posted in Costs by mgentle on August 26, 2010

TCO (Total Cost of Ownership): total lifetime costs, from “cradle to grave”, comprising both acquisition costs and ongoing operational costs. In the absence of TCO, people may focus incorrectly – by accident or design – on either the acquisition costs (“it only costs this much …”) or the ongoing costs (“look how low the running costs are…”), especially when this also includes hidden costs.

The concept of TCO first gained notoriety in IT when Gartner introduced the concept in 1978 to demonstrate that for a desktop computer, the initial price tag accounted for an average of only 20% of the total lifetime costs, with the rest consumed by administration, training and support.

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