24 Nov Calculating the Total Cost of Ownership for Enterprise Software
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. In this article, we look at the lifetime costs incurred by 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.