47 lines
2.0 KiB
Markdown
47 lines
2.0 KiB
Markdown
---
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title: "Total Cost of Ownership (TCO)"
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type: concept
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tags:
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- Cloud
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- FinOps
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- Cost-Management
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- AWS
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- VMware
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last_updated: 2026-05-07
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---
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## Total Cost of Ownership (TCO)
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A financial framework used to evaluate the total cost of acquiring, operating, and maintaining a technology solution over its entire lifecycle, compared across different deployment options.
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## Definition
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TCO encompasses all direct and indirect costs associated with a technology investment, not just the upfront acquisition cost. In cloud migration and hybrid cloud contexts, TCO analysis is used to compare on-premises infrastructure against cloud-hosted solutions like VMware Cloud on AWS or native AWS services.
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## Components
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- **Acquisition Costs**: Hardware/software procurement, licensing, implementation
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- **Operational Costs**: Staff, maintenance, support contracts, utilities
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- **Infrastructure Costs**: Data center space, power, cooling, physical security
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- **Hidden Costs**: Underutilization, downtime, technical debt, migration effort
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- **Exit Costs**: Data transfer out, licensing cancellation, decommissioning
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## Key Applications
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### VMC on AWS TCO Analysis
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- Cloud economics team performs TCO calculations for VMC on AWS vs. on-premises vs. native hyperscaler
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- VMware sells entire hosts, enabling over-provisioning and cost reduction
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- VMC on AWS offers 27% cost saving compared to going to a regular cloud
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- Compare TCO with on-premises or other hyperscalers for informed migration decisions
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### General Cloud TCO Considerations
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- On-premises: CapEx heavy, but can have unused capacity (Micro Focus hardware utilization < 40%)
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- Cloud: OpEx model, pay-as-you-go, but egress costs and lock-in risks
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- Hybrid: Balances migration flexibility with gradual transition costs
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## Connections
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- [[VMware-Cloud-on-AWS]] ← evaluates ← [[TCO]] for cloud migration decisions
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- [[Cloud-Transformation]] ← uses ← [[TCO]] for business case justification
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- [[FinOps]] ← practices ← [[TCO]] analysis for cloud cost optimization
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## Sources
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- [[ctp-topic-43-vmware-cloud-on-aws]]
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