Payback calculation and TCO

In short: The payback calculation shows after what time an investment has paid for itself through savings or revenue. TCO (total cost of ownership) sums up all costs over the lifetime.

In more detail: Payback period = acquisition cost ÷ annual return (profit plus depreciation or savings). TCO adds purchase, operation (power, maintenance, licences), training, support and disposal.

In Depth

Payback example: A new network device costs €6,000 and saves €2,000 maintenance costs per year. Payback period = 6,000 ÷ 2,000 = 3 years.

TCO example over 5 years: Server A: €4,000 + 5 × €600 power and maintenance = €7,000. Server B: €3,000 + 5 × €900 = €7,500. The more expensive server A is cheaper over 5 years.

• Static vs. dynamic: The simple payback ignores interest. Dynamic methods (net present value) discount payments.
• Hidden costs: training, migration, downtime, annual licence fees.
• Electricity costs: Estimate with the energy calculator.

See also: Weighted scoring analysis, Break-even analysis