What does TCO mean?
February 24, 2011
TCO stands for total cost of ownership. It is a calculation that reveals the cost of owning a product or service for a given period. The calculation covers the total cost of acquisition and operation rather than just acquisition. Total cost of ownership can help you judge the viability of making an investment.
For example, instead of buying a car solely on its sale price, a TCO assessment would include the cost of insurance, repairs, fuel, depreciation and taxes over the length of time you would like to own the vehicle. The analysis might conclude that a car with a higher price tag might have a lower total cost of ownership over the car’s lifetime than a car sold at a cheaper price.
Cloud computing services will almost always have lower costs of ownership than the same software hosted on premise because the latter must include the cost of hardware to run it, maintenance, security and backup. For users of cloud computing services, all these costs are met by the vendor.