Total Cost of Ownership (TCO) : The clue is in the name!

When you read the term “Total Cost of Ownership” (TCO), the word “Total” is pretty important!

Here is a paraphrased conversation I had recently…

  • Person: Product X is free!
  • Myself and others: The staff training costs to enable the long term support of product X, are not free though. Added to that, these people still have to support products Y and Z, so you are adding to their workload. You might even have to add people to the existing team, so the TCO may be far from free.
  • Person: But the product is free!

You can see where this is going. :)

I love free software. I use it alot. There is loads of great free software out there. The problem is, many people focus so much on the price tag they forget to factor in what this really means in terms of total cost of ownership. Depending on the product and the company culture, the cost of training associated with a product shift may be more than the licensing costs of your existing products. As a result, you may see a short term increase in costs, followed by a reduction in costs over time. The point is, blindly saying “Product X is free!” is incredibly naive.

So next time you are discussing the cost of something, don’t forget the word “total” in TCO.

Cheers

Tim…

PS. The conversation was not about Oracle products, so this isn’t a case of me trying to justify Oracle license costs. :)