Total cost of ownership (TCO) is a financial estimate designed to help consumers and enterprise managers assess direct and indirect costs commonly related to software or hardware. It is a form of full cost accounting.

TCO analysis originated with the Gartner Group in 1987 and has since been developed in a number of different methodologies and software tools. A TCO assessment ideally offers a final statement reflecting not only the cost of purchase but all aspects in the further use and maintenance of the equipment, device, or system considered. This includes the costs of training support personnel and the users of the system, costs associated with failure or outage (planned and unplanned), diminished performance incidents (i.e. if users are kept waiting), costs of security breaches (in loss of reputation and recovery costs), costs of disaster preparedness and recovery, floor space, electricity, development expenses, testing infrastructure and expenses, quality assurance, boot image control, marginal incremental growth, decommissioning, e-waste handling, and more.

Therefore TCO is sometimes referred to as total cost of operation. When incorporated in any financial benefit analysis (e.g., ROI, IRR, EVA, ROIT, RJE) TCO provides a cost basis for determining the economic value of that investment.

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