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Total cost of ownership

Evaluating true cost and long term financial impact

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What is Total Cost of Ownership?

The Total Cost of Ownership (TCO) encompasses all direct and indirect costs associated with a product, service, or asset over its entire lifecycle.

 

Having a clear picture of your full spending is key to help you reduce your costs, negotiate with suppliers, increase your return on investment and make informed decisions.

 

  • What costs does a TCO include?

    Beyond the initial purchase price, it includes direct and indirect costs that accumulate over an asset’s or service’s lifespan, including:

    • Maintenance fees – Repairs, upgrades, and servicing costs.

    • Operational costs – Energy consumption, training, and day-to-day expenses.

    • Transition costs – Migration, implementation, and change management expenses.

    • Performance inefficiencies & downtime – Lost productivity due to system failures or poor performance.

  • Why is Total Cost of Ownership important to measure?

    Most companies underestimate their hidden costs. Yet, they represent (on average) 20 to 30% of the Total Cost of Ownership of goods and services purchased. Getting a comprehensive view of these overlooked expenses is key to optimize a company’s profitability.

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    Analyzing Total Cost of Ownership helps businesses make informed financial decisions by considering long-term implications rather than just upfront costs. A comprehensive TCO analysis can reveal cost-saving opportunities and improve budget planning.

Why TCO analysis matters

  • Assessing investment opportunity If you consider a new investment, you need to get a clear and holistic understanding of the financial implications on the long-term. This means breaking down the costs over the full investment’s life cycle, from acquisition to recycling or destruction.
  • Bringing clarity to opaque cost structure You find yourself frequently surprised by unanticipated expenses due to a lack of comprehensive visibility into your total costs. A TCO will help to get predictability and full visibility to stay on track with your budgets.
  • Improve vendor negotiations Lacking a holistic understanding of costs weakens your negotiation with vendors, preventing effective comparison and favorable terms. This leads to missed cost-saving opportunities and blocks your ability to justify prices to clients.
  • Think long term Focusing on immediate cost savings without considering long-term implications can lead to procurement choices that are costly over time, hindering long-term financial goals and investments in valuable solutions.

What TCO analysis will bring you

We help you understanding all your spending to reveal the real total cost of ownership of your expense or expense category. Our comprehensive analysis goes beyond the initial purchase price, to uncover hidden costs such as maintenance and repair, training, upgrades, energy use, etc. This detailed approach ensures you grasp the full spectrum of your investment impacts on the long-term.

Ask for TCO support

  • Hollistic insights

    We help uncover all hidden and indirect costs associated with your purchases to make better-informed decisions.

  • Sustainable procurement strategies

    Our guidance will orient you towards economically viable purchasing strategies on the long-term (eg. Make or Buy).

  • Strategic vendor negotiations

    Equipped with detailed cost insights from our analysis, you’ll be in a stronger position to negotiate terms that are more favorable and reflective of true value.

  • Increased ROI

    We help you pave the way to better profitability, ensuring your investments pay off in the long run and align with your long-term financial goals.

TCO analysis support deliverables

After our analytical exercise, you will receive: ​

  1. A full overview of you costs, direct and indirect, linked to a certain purchase or purchase category. This includes detailed breakdowns of expenses like maintenance, support, training, transition, and downtime.​
  1. Evaluation of new investment opportunities.
  • Recommendations for optimizing cost management.
  • Key considerations for supplier negotiations and detailed guidance for crafting effective requests for proposals.
  • Projections for future spending and cash flow, enabling better financial planning.

How NOT to approach Total Cost of Ownership (TCO)

A short-sighted TCO perspective can work against you and your suppliers. When the focus shifts from long-term value to short-term pressure, it can weaken relationships and lead to decisions that cost more in the end.

 

When working with you, we ensure we avoid the typical pitfalls of unbalanced TCO approaches, such as:

 

  • Creating financial strain for suppliers, understanding that fair negotiations foster long-term, mutually beneficial partnerships.

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  • Focusing solely on prices, neglecting key elements like payment terms impacting your company’s cash flow, or product quality impacting your maintenance costs.

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