Total Cost of Ownership (TCO) is a financial estimate that takes into account all of the costs associated with owning and using a particular asset or system over its entire lifecycle. It is a comprehensive cost analysis that goes beyond the initial purchase price or capital expenditure (CAPEX) and includes all the expenses associated with the asset's acquisition, operation, maintenance, and disposal.
TCO takes into account not only direct costs, such as the purchase price, installation costs, and ongoing maintenance expenses, but also indirect costs, such as training and support for users, downtime, repairs, and upgrades. It also considers the costs associated with disposing of the asset, including decommissioning, removal, and disposal of any hazardous materials.
TCO is an important metric used in business and finance, particularly in procurement and supply chain management, as it provides a more accurate picture of the true cost of an asset or system over its entire life. By understanding the TCO of a product or service, businesses can make more informed decisions about purchasing and managing assets, and can identify opportunities to reduce costs and improve efficiency.