The full cost of an information system
What an IT service really costs over its lifetime: total cost of ownership, capital and operating expenditure, direct and indirect costs, allocation keys, hidden costs and internal chargeback to the user departments.
- 25 cards
- 5 topics
- Free
The outline, topic by topic
Each topic is weighted the way the exam weighs it.
- Concepts
- Questions
- Sort and link
- The numbers
- Scenarios
A few cards from the deck
Total cost of ownership: what is it?
Show the answer
The sum of everything an asset or a service costs over its lifetime: acquisition, operation and exit.
The purchase price is often only a fraction of it: a 900 € PC kept four years costs 2,400 € with its licences, support and electricity.
Software costs 20,000 € to buy, then 4,000 € a year in maintenance and 3,000 € a year in support. What is its total cost of ownership over five years, with no exit cost?
- 55 000 €
- 35 000 €
- 40 000 €
- 27 000 €
Show the answer
55 000 €
20,000 + 5 × (4,000 + 3,000) = 55,000 €. 35,000 € forgets the maintenance; 40,000 € forgets the support; 27,000 € counts only one year of operation.
Total cost of ownership adds three phases: …, … and exit.
Show the answer
Total cost of ownership adds three phases: acquisition, operation and exit.
Operation (licences, support, energy, staff) usually weighs more than acquisition over the lifetime.
Capital expenditure: what is it?
Show the answer
Spending that creates a lasting asset, depreciated over several years: buying servers, a perpetual licence, building an application.
It differs from operating expenditure, consumed within the year: a monthly subscription to an online service is operating spending, not capital spending.