Total Cost of Ownership (TCO)

The Total Cost of Ownerwhip is a tool used to estimate the costs of a product or service. It provides a cost basis to determine the economic value of an investment. In opposition to the Whole-life cost, the TCO does not take into the account the early costs (planning, design, construction) nor the later costs (replacement disposal).

In the IT industry, the total cost of ownership (TCO) is synonym of the whole-life cost when applied to IT hardware and software acquisitions. The definition evoluated to include all the costs associate with operating a solution or a platform. Such costs not only include the acquisition and operational cost of the product, the platform and services but also the licenses, the speed of treatment, the resilience and the interruption risks, the qualification of new composants and their evolutions, the monitoring, the data sensiblity, the opportunities created by the diversity of the eco-system, the flexibility and the productivity of the teams as well as the Time to Market value.

For example, using Erlang as the main programming language can impose a challenge in recruiting or training the engineers to master the language and its ecosystem. However, at the time of its acquision, it allows the Whatsapp team to be constitued of 32 people, of which only 10 worked on the server-side, to serve 450 million active users 2013, to scale the service to 54 billion message on the single day of december 31th 2013 while developping new features, maintaining existing ones and supporting the whole system.

Another example is Bleacher Report, a news app and website focusing on sports, which reduce their hardware requirements from 150 servers to 5 when migrating from Ruby to the BEAM platform on which Erlang is running.

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