When TCO calculations work, they tend to roll up within a single organization or manager. The hardware, the software, the installation, and the maintenance are under the domain of a single organization that covers the direct cost.
The problem with TCO arises when it’s used as a metric for justifying cross-functional or analytical systems. With these systems, the value isn’t delivering commodity processing but rather supporting decision making. TCO focuses on construction and maintenance costs. But for analytical systems, usage occurs across different organizations and varies with business value and need. TCO can in fact be misapplied.
At a simple level, TCO is often limited to processing hardware, storage, software, and IT resources necessary to configure and manage the platform on an ongoing basis. But this is usually limited to IT staff focused on system development and maintenance. Unfortunately the most expensive cost—not normally included in TCO calculations—is the business user’s time. While TCO quantifies costs for a data warehouse developer, there is no clear way to calculate costs for the dozens or hundreds of business users who are actually analyzing data and creating reports every day. The reality of analytical systems is that development continues every day on the business side.
Nevertheless it’s common for TCO calculations to be reduced to the cost of processing or storage, rather than reflecting the exponential costs of users circumventing slow-running queries and inaccurate data. At the end of the day, TCO shouldn’t only be about the cost of hardware and software installation and maintenance. It should be about the cost of continued business usage.
Evan also blogs at EvanJLevy.com.
For example: if a DC (data center) uses x-based blades for the infrastructure, even with virtualization, the number of staff to maintain a large enterprise will ultimately be ginormous. "Commodity hardware" + "Commodity ""expertise / knowledge"" !
Just an opinion!
I have worked on several tools in Software and services that build ROI tools based on a value model apporach. To estimate the benefits of Quality improvements in process due to SW applications, or the increase in collaboration due to more effective communication and sharing of knowledge, centralization of knowledge one uses proxy indicators to capture the potential benefits. The trick is to identifying the indicators and how you will convert them to dollar terms.
Such an estimation can be cumbersome for the TCO approach which is very detailed and is activity based. Soft beenfits impact vary with the operating environment and also are not related to the action one-to one. There is some 'fuzziness' around the measure of knowlege spread or efficiency increases in human interactions.
So I agree with you TCO is too bottoms up to apply to the impact of several emerging technology based products.