total cost of operations

See term:cost, term:true cost accounting and full cost accounting for some unresolved questions regarding any use of the terminology "total cost". This phrase however is in very widespread use especially as abbreviated TCO.

The total cost of operations, in management accounting for signal infrastructure, refers to all costs that can be traced to the acquisition (or "ownership" - thus total cost of ownership), maintenance. Some measures include more of the actual cost of use of the systems or cost of regret when they are not available.

However, this is controversial. In the standard FEA ontology, OMB exhibit 53 and OMG exhibit 300 reporting includes all Agency IT Investment Portfolio information including the funding source and business case information. Only those costs paid by those sources (perhaps in anticipation of avoiding some regret) count. Thus, in the context of US OMG IT Management and Governance efforts, the total cost includes at least the "capture of initial and ongoing vendor costs for hardware, software and professional and network services, plus internal costs at every state of the system lifecycle."

In this form, not including the actual use or cost of regret of lost use, the total cost is variously calculated as between 6x and 12x the initial cost of acquisitions depending on what is actually included. To avoid this confusion, it's best to avoid the term "ownership". The costs do not accrue solely or even primarily to the "owner" of the equipment.

The "48/lifecycle" rule of themb says that a longer lifecycle (say 6 years) results in a lower TCO (8x costs), while a shorter one (say 4 years) typically indicates a poor management discipline and poor control of real requirements analsysis thus a higher (TCO) (12x costs). Multiplying the multiple of acquisition costs by the lifecycle yields a 48. This underscores the desirability of associating a time horizon with any use of the term:cost whatsoever. That is, an "8-year total cost of operations" for two different options, one with shorter lifecycle, would quickly reveal the advantage of more durable equipment.

Toronto example

Estimates of the total cost of Toronto operations suggested that tens of millions of dollars could be saved with a disciplined use of quality management in government and in particular zero e-waste hardware based on single board computers using AMD Athlon processors.

industry view

A more general reference is en: wikipedia: total cost of operations.

Predictably, Microsoft propaganda argues that Windows has a lower TCO than Linux.


Various solutions including reliance on bootable CDs, or interchangeable standard boot images, are thought to very drastically reduce TCO regardless of the OS. Failures can usually be recovered from extremely rapidly with a single standard procedure, making it easy to incorporate IT Management and Governance into an ISO 9000 regime of business process standards.