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.

  1. Concepts
  2. Questions
  3. Sort and link
  4. The numbers
  5. 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.