Total Cost Of Ownership For Enterprise Software - A Guide For CIOs

By John Bugnacki posted 05-02-2017 15:02 (serving Chief Information Officers (CIOs), other IT leaders, as well as the ecosystem that surrounds and interacts with them) describes the most common TCO elements for enterprise software. 

What are the key takeaways?

As stated in the article:

“The Total Cost of Ownership (TCO) for enterprise software is the sum of all direct and indirect costs incurred by that software, and is a critical part of the  ROI calculation. However, it is often ignored or woefully underestimated.”

Building on the above point, when considering a purchase of enterprise software, understanding a clear picture of your TCO is critical in a couple key ways:

  • The full cost picture that informs ROI: It will help you understand the full cost picture, not just licensing costs or any initial purchase costs. This will in turn help you develop a more accurate estimate of return on investment (ROI).  Otherwise, lacking a complete picture of of TCO, your ROI would very likely be overstated.
  • Comparing costs across suppliers: It will help you make a better and more meaningful comparison across competing suppliers. In comparing the value that different suppliers bring to the table for your procurement, you will want to see how your suppliers compare in terms of the total cost across the lifetime of the solution you are buying.  Some suppliers may seem attractive in the cost to get up and running but might end of being more expensive over the life cycle of the IT solution.

As the article mentions, the TCO elements presented in the article are meant to help you develop a TCO picture of the three main types of enterprise software, namely:

  1. Cloud software, e.g. Salesforce or NetSuite
  2. Off-the-shelf software. Typically runs in an on-premises or hosted data center
  3. Custom software that is developed by a company, usually because it gives them a competitive advantage (e.g. Netflix’s movie selection software), or because they can’t buy something close enough to what they need.

Full Article:



  • All Government Levels
  • All Regions
  • Articles and Perspectives
  • Best Practices
  • CIO Dot Com
  • Cost Risk and Innovation
  • Featured
  • Public Procurement Measurement
  • Sourcing and Category Management

Public Spend Forum Recommends

1 to 3 of 61 total
The “procurement guys” of the future probably won’t recognize the term. And they certainly won’t have the word “procurement” in their job titles. They won’t work in in a stand-alone department at some distance from customers, taxpayers or decision-makers. ...
When I went out for pizza with my family the other night, the only number that mattered to me when I got the check was the bottom-line price. It didn’t matter to me what the price for each pizza or each lemonade was, as long as the total price was within ...
Hosted by The World Bank, the Fourth Colloquium on Suspension and Debarment taking place on Thursday, Sept. 14, 2017 , showcases recent developments in suspension and debarment systems worldwide, examining the various uses of suspension and debarment ...

Most Read

Join the Community

Get full access to research and content, networking opportunities, and other exclusive benefits by becoming a member today.