Total cost of ownership (TCO) is a financial estimate to help you determine the direct and indirect costs of a product or system. By calculating TCO, you can determine which email marketing solutions or marketing automation tools offer the best pricing/value.
Use of Total Cost of Ownership
With a TCO calculation, you must look beyond just (direct) license fees or acquisition costs. You want to prevent that a “free” solution will end up costing more in the long run (and not just in dollars) than an email service provider with a hefty price.
A TCO is designed to quantify the financial impact of a product over its entire life cycle (which can be multiple years). It also often is used to determine the pros and cons of an in-house solution versus outsourcing to an external ESP.
With email service providers, a TCO calculation can include:
- Purchase research
- Migration expenses
- Licenses and fees
- Risks and insurance
- Operational expenses
- IT personnel
- Future upgrades or scalability expenses