Finance:Total Cost of Consumption

TCC or the Total Cost of Consumption serves as a replacement for TCO in the area of Cloud economics and Utility Computing.

Total cost of ownership has been rendered irrelevant/insufficient/inadequate by the cloud delivery model - “ownership" is not relevant in cloud world because it doesn’t matter who actually owns the infrastructure. Business unit and operational unit owners don’t care if their company owns the infrastructure or not - they care what the app is costing them to use and how that impacts the P&L of their business.

What should be measured is the Total Cost of Consumption (TCC), which measures the cost per unit of consumption of IT services. TCC is the foundation for real economic improvement of IT services and applications in an on-demand/cloud world. Once the TCC is established, it unlocks the ability to baseline cost efficiency, benchmark positions, and budget with accuracy to improve the cost effectiveness of IT consumption.

TCC becomes even more relevant with the global focus in Service Integration And Management (SIAM). Since SIAM consumes services (business, IT and non-IT services) from multiple service providers, it becomes utmost important that cost that organization incurs for consumption of these services is rightly factored. This cost is reflected by TCC. TCC would include:

• cost of service which could be the subscription cost, provisioning cost, etc.
• Cost of maintenance of services
• Administrative costs
• Cost of changes
• etc.