Total cost of ownership (TCO) is a financial estimate to determine the direct and indirect costs of a product or system. By calculating TCO managers can determine which of available solutions has the best pricing or value for money.
With a TCO calculation you are looking beyond just (direct) license fees or acquisition costs. A company might find that a “free” solution will cost them more than an ESP with a sturdy price. TCO tries to quantify the financial impact of a product over its entire life cycle (which can be multiple years). It is also often used to determine the pro’s and con’s of an in-house solution versus outsourcing to a supplier.
With email service providers, TCO calculations might include things like:
* Purchase research
* Hardware / software
* Migration expenses
* Licenses and fees
* Risks and insurance
* Operational expenses
* IT personnel
* Future upgrade or scalability expenses