Question

When calculating Total Cost of Ownership (TCO) for a proposed ERP purchase, beyond the obvious purchase price of the product itself, what components, actions, tangibles, and intangibles should be included in TCO? Why should – or not – TCO be included in the final purchase decision?

Answer 1

• TCO is used to uncover a type of assets
• It is also called as life cycle cost analysis
• TCO is used for making decisions for purchases in wide range of assets
• The assets include a maintenance and operation cost across the ownership of life
• It acts as a central component for purchasing and making decisions in large scale industry for.vehicles, buildings, labaratories, machines
• TCO is used as a central component for the following purposes like budgeting, assets for life cycle management, selecting a vendor, lease or buy decisions
• By including the TCO in the final purchase decision is that the decisions which are used to decide gives an accurate information whether to purchase a hardware or need to select a vendor for a particular resources
• If this is not included in the purchase the vendor might get loss due to less resources
• If he want to purchase a software or hardware this includes more amount rather than taking lease
• If he take a lease with the vendor then the comapny growth will be high and this reduces the cost cutting for a company
• It provides a clear advantage of decisions making over the business
• The including of TCO is used to identify the risks and used to control minimising the cost
• Without the TCO there might be a loss for software or hardware because vendor can't take a accurate decision for purchasing a hardware