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Cloud Computing · Foundational

Total Cost of Ownership (TCO)

Full cost of owning and operating an IT system over its life, including hardware, facilities, power, staff and licensing.

Definition

TCO analysis compares on-premises and cloud costs by including direct costs (servers, storage, network, software) and indirect costs (facilities, power, cooling, labor, downtime). Providers offer tools such as AWS Migration Evaluator to build data-driven TCO and migration business cases.

Example

A TCO study shows that retiring a data center lease saves more than the added cloud consumption costs.

Exam tip

Exam traps compare only server prices; correct TCO answers include facilities, staffing and power.

Related terms