Total Cost of Ownership (TCO):

Understanding the true cost of a technology initiative can help you determine when (or whether) you should take on a new system initiative, usually in combination with some sense of the potential benefits to be realized from the implementation.  We’ll discuss different ways to evaluate the Return from a project in a future post. What contributes to the purchase cost of technology?

  • Acquisition cost
  • Implementation cost
  • Support/maintenance cost

Acquisition Cost

  • Internal labor: time required to evaluate different platforms and solution providers
  • Solicitation and proposal writing process.  Specialized knowledge might be required, so members of the technology team or outside implementation partners may be included in the process. This results in potential consulting costs.
  • Purchase costs of upgrades to existing hardware (laptops/PCs) and software (e.g. Microsoft Office), and/or operating system
  • Licensing/subscription fees

Implementation Cost

  • Hardware deployed to users
  • Software/operating system upgrades to users
  • Installation costs of a more robust broadband internet connection (for web-based platforms)
  • Time/cost to configure and deploy connectivity changes to users
  • Change management
    • User training
    • Temporary drop in user productivity/efficiency due to early adoption challenges
  • CRM system build (assuming with the help of an implementation partner)

Maintenance/Support Cost

  • (Optional) Hiring full-time support staff to keep the new system up and running
  • Support staff or implementation partner cost to deploy new features / add-ons
  • Scaling to additional users / business groups / business units
  • Warranties
  • (Optional) Support contracts with external implementation/support partners
  • On-going license costs
  • Upgrade costs (based on current vs. forecast future state)