Complex Systems Can be Expensive
Do You Have A TCO Evaluation Framework?
Calculating TCO can be a real challenge. You need to evaluate the Total Cost of Ownership of a complex system using a proven TCO Framework. You may even struggle to define the meaning of TCO. There are many cost elements to consider when determining your TCO.
Are you sure you have selected the best system based on TCO?
- Do you know what cost categories you need to track?
- Direct
- Indirect
When it comes to evaluating TCO, you may find that what is below the surface far exceeds the initial cost.
You need a common TCO Chart of Accounts framework to capture all the relevant value data. That's why we have developed a simple excel Total Cost of Ownership template for just this purpose. It's a simple, excel based proven TCO Calculator, that helps you project the TCO of any system out for five years.
How to Calculate Cost of Ownership
The total cost of ownership formula is actually very straight forward. You simply are estimating the expected cost as well as expected revenue, over the expected life time of the system or solution you're implementing. This TCO analysis template has been used as a total cost of ownership information technology template on both very large ERP projects and small IT projects.
TCO Evaluation
Net Margin Impact Evaluation
The TCO evaluation template provides both a TCO Chart as well table so you can see your expected cost, year-by-year, as well expected revenue. The TCO Graph shows Net Margin Impact and Net Revenue Impact.
Cash Flow Analysis
The total cost of ownership excel template also includes a Cash Flow Analysis template. The TCO example comes from an actual ERP project the author delivered. When you combine Net Margin Impact, Net Revenue Impact with Cash Flow Analysis, you get a total cost of ownership graph that provides very impactful information about the project investment under evaluation.
Who Is This For
This Total Cost of Ownership Calculator is for procurement professionals, project managers, CIOs, CEOs, CFOs, and CMOs, and is designed to allow you to evaluate multiple, full-lifecycle IT system proposals. But it is useful in construction, real estate and any other industry where you need to evaluate different systems using consistent, constant information. Other professions where we have seen it used include:
- SAP
- Hubspot
- Salesforce
- Anywhere a project business case needs to be built
Offshoring Decision Making Support
Actual offshoring costs are often difficult to ascertain and are not fully baked into most TCO templates. With this TCO analysis template, you have the option to aggregate those costs into simple cost buckets, and take their full impact on TCO into consideration.
Complex Recapitalisation Costs Scenarios
This simple TCO analysis template has also been successfully used in scenarios where a business is being recapitalized. In these fairly common business cases, existing projects will have to be reevaluated, especially when changes to previous assumptions, i.e., depreciation cost schedules, changes in WACC (Weight Average Cost of Capital), ownership structures and other factors that affect the underlying project assumptions, occur.
Get Your Free Copy of the TCO Template
You can download your FREE, fully editable copy of the TCO Template by completing the form.