Total cost of ownership is a decision model that estimates relevant costs across the acquisition, use, support, risk, change, and end-of-life period of a good or service. The model’s value depends on a stated horizon, scope, assumptions, probabilities, sources, currency, and sensitivity. It supports comparison but does not remove strategic or qualitative judgment.
In plain English
It considers the full cost of owning or using something, not only the purchase price.
Illustrative example
At Northstar Industrial Systems, the team compares machines using acquisition, installation, energy, maintenance, downtime, spares, training, and disposal assumptions over seven years.
- Related terms
- Landed cost; Business case; Bid comparison; Life-cycle cost
- Lifecycle stages
- Strategy; Source; Award
- Stakeholders
- Procurement; Finance; Operations; Executive leadership