An important factor in the buying decision for any large capital purchase is determining the “total cost of ownership.” For example, in purchasing a new car, you take into consideration not just the selling price, but the gas mileage, expected breakdown frequency, average cost of repairs, etc.
The same general approach also applies when evaluating multi-million dollar software investments that you hope will be the backbone of your operations for the next 10 or 15 years. But the factors for consideration are very different in technology-based purchases. It’s imperative to get this process right if you want to have a system that fits your needs, provides the highest benefit, and has the lowest lifecycle cost of ownership. There are two common mistake areas in TCO analysis that everyone should note and avoid.