Total Cost of Ownership, usually the abbreviation TCO is used. It is method of evaluation of cost variations. This method is common in areas such as investment in information technology.
Through the TCO complete costs of the investment and on its operation are expressed, taking into account, not only the purchase price but also expenses incurred by the ownership of assessed property. To calculate the cost of the project, we have to get all cost inputs, not only immediately affecting the project, but also those that enter into costs later. It is for example:
- Direct investment costs (price)
- Fees associated with the operation/maintenance
- Costs associated with training the users of the investment
- Costs associated with inactivity of the investment unit from the cause of repairs, innovation, etc.
The disadvantage of this method is that it does not take into account the value of money and evaluates the investment only in terms of costs, not revenues.
Use of the TCO in practice: Total Cost Ownership method is used by enterprises when evaluating the costs of investment options.