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What is the Total Cost of Ownership (TCO) in Intelligent Automation Solutions?

Featured Insights
March 16, 2023

Implementing new technologies is what every enterprise must do to sustain, survive, and grow in the cutthroat global business landscape. But the adoption of new technologies brings with it an unavoidable financial impact, which often entails fresh challenges for enterprises that seek to minimize their expenditure and maximize their return on investment.

The Total Cost of Ownership or TCO examines this financial impact and assesses a broader view of the investment. Identifying the TCO, thus, is key to estimating the Return on Investment (ROI).

Understanding TCO in IA Solutions

The Total Cost of Ownership for IA solutions includes all direct and indirect costs associated with licenses, infrastructure, development, implementation, maintenance, and support of the automation program.

Enterprises employing process & intelligent automation primarily focus on lower costs, faster results, and more tangible returns. Considering the TCO of the automation solutions can provide the enterprises with deep insights about its feasibility, potential, and effectiveness.

By analyzing the TCO, organizations can determine the difference between short-term (impulse buy) and long-term (TCO) costs, ensure accuracy in numbers, identify surprise expenditures, and make better-informed decisions. Overall, TCO helps enterprises recognize cost-saving opportunities and ensures a higher probability of success. Thus, in short, the lower the Total Cost of Ownership, the higher value the organization gains in the long run.

Total Cost of Ownership (TCO)

Key Components

01.Upfront Costs – These include the costs associated with the initial development and implementation of the automation program.
02.Ongoing Costs – These include the costs associated with the day-to-day maintenance and support of the automation program.
03.Hidden Costs – These include the unforeseen and indirect costs associated with the automation program.

The Total Cost of Ownership of any solution involves three cost categories. These are

Upfront Costs

Upfront costs are the most predictable and easy to analyze. These include the costs associated with the initial development and implementation of the automation program. Thus, the upfront costs are what organizations pay at the very beginning for purchasing assets.

Ongoing Costs

Although direct, the ongoing costs are often neglected or underestimated. These include the costs associated with the day-to-day maintenance and support of the automation program. As such, the ongoing costs are hard to keep accurate track of.

Hidden Costs

The hidden costs or surprise costs are the hardest to anticipate. These include the unforeseen and indirect costs associated with the automation program. Hidden costs may include all the indirect expenses including support & maintenance costs, infrastructure costs, license fees, and so on. Since they are not apparent upfront, hidden costs can accrue over time and lead to failures.

Want to learn more about TCO? Get the TCO Checklist.