Total cost of ownership (TCO)

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
  • Hardware/software
  • Training
  • Migration expenses
  • Licenses and fees
  • Risks and insurance
  • Operational expenses
  • Testing
  • IT personnel
  • Future upgrades or scalability expenses

About Jordie van Rijn

Jordie van Rijn is an independent email marketing consultant and Analyst. He is the Founder of Email Vendor Selection and specializes in smart email marketing, optimisation and RFP / vendor selection. Named one of "50 Online Marketing Influencers to Watch " by Entrepreneur magazine.

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