What is the TCO of That Shiny New System You're About To Buy [Calculator]

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How to Determine Your TCO

Have you ever struggled to develop a Total Cost of Ownership number or TCO for a complex system?  It can be a real challenge if you don't know where to start.

TCO Total Cost of Ownership Caculation Template

What's hidden often times makes up the most important elements of a system's overall cost.

 

Download FREE  Total Cost of Ownership  Calculation Template

 

Just what is TCO anyway?  "TCO is defined as the total cost of procuring, using, managing and disposing of an asset over its useful life" Bill Kirwin, Gartner, Father of TCO.

In today's challenging business environment, virtually 100% of businesses require a financial justification for systems acquisition.  The problem is creating an Apples-to-Apples framework to evaluate various alternatives.  

TCO and ROI are two of the most common Frameworks.

While ROI is fairly simple as it is a mathematical formula, determining TCO is more complex. 

TCO Analysis Requires a Common Language

The TCO Framework requires that you capture:

For each of these broad general cost categories, you need to collect information in sub-categories such as:

Once you have decided what cost categories will be your common cost category standards, you also need to decide on the comparative time periods when you calculate TCO.  Many companies use 3 or 5 years, but long life items may require more but beyond 3 to 5 years, the accuracy of any cost figures becomes doubtful.  If you want to develop a common TCO framework, we have put together a very simple TCO calculator template. 

TCO Graph Built In

This template has been designed to simplify the calculation of both the TCO of a system and provide you with an easy way to see (TCO Graph) the potential ROI of your project.

 

Download FREE  Total Cost of Ownership  Calculation Template

 

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Lonnie Ayers

About the Author: Lonnie Ayers is a Hubspot Certified Inbound Marketing consultant, with additional certifications in Hubspot Content Optimization, Hubspot Contextual Marketing, and is a Hubspot Certified Partner. Specialized in demand generation and sales execution, especially in the SAP, Oracle and Microsoft Partner space, he has unique insight into the tough challenges Service Providers face with generating leads and closing sales using the latest digital tools. With 15 years of SAP Program Management experience, and dozens of complex sales engagements under his belt, he helps partners develop and communicate their unique sales proposition. Frequently sought as a public speaker in various events, he is available for both inhouse engagements and remote coaching.
Balanced Scorecard Consultant

He also recently released a book "How to Dominate Any Market - Turbocharging Your Digital Marketing and Sales Results", which is available on Amazon.

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