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Total cost of ownership (TCO) is a type of calculation designed to help consumers and enterprise managers assess direct and indirect costs as well as benefits related to the purchase of computer software or hardware.
A TCO ideally offers a final statement reflecting not only the cost of purchase but all aspects in the further use and maintenance of the computer components considered. This includes training support personnel and the users of the system. Therefore TCO is sometimes referred to Total Cost of Operation.
For example, the decision to buy a computer may result in the following TCO analysis: The greater initial price of a high-end computer is to be balanced by adding likely repair costs and earlier replacement to the purchase cost of the cheaper bargain brand. And the initial price becomes just the beginning of the life cycle of costs.
TCO analysis originated with the Gartner Group in 1987 and has since been developed in a number of different methodologies and software tools. The purchase of a computer can include purchase, repairs, maintenance, upgrades, service and support, networking, security, user training, and software licensing.
The TCO concept is widely used in the Automobile industry. In this context, the TCO denotes the cost of owning a vehicle from the purchase, through its maintenance, and finally its sale as a used car. Comparitive TCO studies between varies Models help Consumers choose a car of their choice.
The expression and analysis of TCO is opposed to the total benefits of ownership (TBO) which determines the viability of the purchase.
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