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An effective Total Cost of Ownership (TCO) capability aims to:

• Establish a standardized method of estimating, tracking, comparing, and managing the life cycle costs of IT assets and IT-enabled business services.
• Improve IT investment decisions by systematically comparing the incremental costs (direct and indirect) of competing systems to the full costs of existing systems.
• Raise awareness in the organization of the full costs of IT, and promote strategic budgeting by collecting and disseminating data on the full life cycle costs of technology.
• Improve the accuracy of total cost of ownership forecasts based on lessons learned from comparing forecasted and actual costs incurred.

The Total Cost of Ownership (TCO) capability is the ability to identify, compare, and control all direct and indirect costs associated with IT assets and IT-enabled business services.

Representative POMs are described for TCO at each level of maturity.

2Basic

• Practice

  Prioritize an inventory list of IT assets and IT-enabled business services for collating costs.

  Outcome

  There is an emerging database for querying costs associated with IT assets and services.

  Metric

  Percentage of IT assets and services covered.

• Practice

  Refresh total cost of ownership models by linking into the organization's financial system of record.

  Outcome

  Confidence is emerging that TCO models are underpinned by actual cost data.

  Metric

  Percentage of total cost of ownership models underpinned by actual cost data.

• Practice

  Define a standardized total cost of ownership calculation template for proposed investments.

  Outcome

  A common total cost of ownership methodology allows investments to be evaluated consistently.

  Metric

  Percentage of proposed investments for which total cost of ownership is calculated using a standard template.

3Intermediate

• Practice

  Initiate tracking of direct and indirect costs across all IT assets and IT-enabled business services.

  Outcome

  The cost of ownership database is expanded, enabling better cost management of IT assets.

  Metric

  Percentage of IT assets and services whose total cost of ownership is tracked.

• Practice

  Automate the tracking of costs.

  Outcome

  Total cost of ownership modelling becomes timelier, less onerous, and less prone to error.

  Metric

  Percentage of data that is collected via automated means.

• Practice

  Fully integrate total cost of ownership activities with the organization's financial system of record, and with IT asset and software licensing databases.

  Outcome

  Data can be centrally managed and refreshed in a timely manner to calculate and track costs.

  Metric

  Percentage of total cost of ownership data that is sourced from the organization's financial systems.

4Advanced

• Practice

  Ensure total cost of ownership projections are within acceptable tolerance ranges — for example, in the range of 3 to 5 per cent.

  Outcome

  Decision makers are confident that total cost of ownership projections are accurate and can be used in decision-making.

  Metric

  Percentage of projections that are within tolerance limits.

• Practice

  Measure and recognize the success of business units in meeting cost management targets.

  Outcome

  Stakeholders engage more readily in cost management activities.

  Metric

  Percentage of IT total cost of ownership targets realized.

• Practice

  Ensure that total cost of ownership data is used in developing strategic plans.

  Outcome

  Systematic use of total cost of ownership data informs strategic investment choices.

  Metric

  Percentage of strategic portfolio/investment decisions supported by total cost of ownership data.

• Practice

  Promote the use of total cost of ownership data in all investment decisions organization-wide.

  Outcome

  Investment decisions consistently take both direct and indirect costs into account.

  Metric

  Percentage of investment decisions supported by total cost of ownership data.

5Optimized

• Practice

  Regularly revise and update the IT assets and IT-enabled business services list in a Configuration Management Database (CMDB).

  Outcome

  The list of assets and services reflects actual cost drivers.

  Metric

  Frequency of review of the IT assets and services list.

• Practice

  Continually refresh total cost of ownership data with actual costs.

  Outcomes

  • Total cost of ownership data remains accurate.
  • There is a high degree of confidence that the costs of IT are managed appropriately.

  Metrics

  • Frequency with which the data is refreshed.
  • Percentage of actual costs that differ from projections by more than agreed tolerances.

This capability was introduced in Revision 18.10 as an update to Total Cost of Ownership (16).

The following CCs cover topics that are related to TCO in some way:

AAAccounting and Allocation

Allocating/charging back direct and indirect costs.

BGMBudget Management

Refining the IT spending plan based on the calculated total cost of ownership.