How to Calculate Total Cost of Ownership Before You Buy Anything — Research Notes
Companion post for Tech Manager Lab — Part 3 of the vendor series. Download the 7-row TCO spreadsheet template (CSV).
| Row | Line item | How to price it | Default if unknown |
|---|---|---|---|
| 1 | License / subscription | Written per-seat quote, years 1-3 | — |
| 2 | Implementation | Fixed vendor figure or team-days x loaded daily cost | 3 team-weeks |
| 3 | Training dip | 10% of one month loaded cost per seat | Doubled ticket volume x 1 month |
| 4 | Renewal escalation | Contracted year-2/3 rates from footnotes | 10% annual uplift, highlighted |
| 5 | Commitment cost | Month-18 exit cost: export + migration + 1 quarter parallel run | — |
| 6 | Internal labour | Admin hrs/month x loaded hourly cost x 36 | 2-4 hrs/month |
| 7 | Exit + data | Stated export fee or one migration sprint | — |
Worked 50-seat example (INR, illustrative — your rates decide): Quote A 40k renewing 48k/54k + 60k implementation + 4 hrs/mo labour + export fee = ~4.3L over 3 years. Quote B flat 55k + included implementation + 2 hrs/mo = ~3.9L. The cheaper-looking quote costs ~40k more to own.
Three costs vendors never mention: renewal escalation (5-15% uplifts), the discount that is really a lock-in, and internal labour — the line that decides most deals. Get exit terms (format, cost, days) in writing before signing.
Sources: 5-15% uplift range and 10% default are working assumptions stated in the episode — verify against your quotes. Series: Part 1 — renewal numbers, Part 2 — helpdesk metrics. — @techmanagerlab