Total cost of ownership: why the purchase price is only half the truth
AI video created with Google NotebookLM
In the previous sections of this guide to IT equipment in companies, we have already highlighted important fundamental questions:
How is hardware financed? Buying, leasing or renting?
- How will devices be deployed? Mobile device strategies: BYOD, CYOD or COPE
- How diverse should the device fleet be - standardization vs. individualization?
All of these decisions have an impact on the cost of IT equipment in the company. The key question that IT managers have to ask themselves today is:
👉 What are the actual costs when you consider IT hardware over its entire life cycle?
The answer is provided by the concept of Total Cost of Ownership (TCO).
TL;DR - The most important facts about Total Cost of Ownership
- The purchase price of an IT device only covers a fraction of the actual total costs.
- A complete TCO analysis includes acquisition, operation, maintenance, support, energy, return and indirect opportunity costs.
- Typical misjudgements (e.g. underestimated maintenance and support costs) often lead to massive budget overruns.
- The TCO comparison shows: Rental models such as Device-as-a-Service offer clear advantages in terms of predictability, flexibility and overall cost control.
- Companies should integrate TCO calculations into procurement decisions at an early stage and use their own empirical values.
- Smart procurement is based on the entire service life - not just the purchase price.
Table of contents
🔎 A definition - What is Total Cost of Ownership?
The principle of total cost of ownership (TCO) is designed to help determine the total cost of an investment. In the context of IT equipment, TCO describes all costs incurred by an IT asset during its useful life—from purchase to disposal.
When considering the total costs of your IT equipment, it is important to consider more than just the obvious expenses such as the purchase price. In particular, indirect costs for operation, maintenance, support, energy consumption and lifecycle management must be included for a holistic view.
Important: Those who value IT solely on the basis of acquisition costs often massively underestimate the true financial burden.
The aim of determining the total cost of ownership is to
- make hidden costs visible
- Identify cost drivers
- Derive opportunities to exploit savings potential and reduce costs
How is the total cost of ownership made up - The most important components in the life cycle
The provision and operation of IT equipment incurs costs not only at the time of purchase, but over the entire life cycle. We present the most important ones below:
Acquisition costs
Acquisition costs include all direct expenses incurred when purchasing a device. This also includes required accessories, installation services and license costs.
Typical cost elements:
- Device price
- Operating system and software licenses
- Accessories such as monitors, docking stations, protective covers and screen protectors
- Rollout and setup services
When it comes to procurement and financing, many companies only calculate the basic price of the device. Additional costs such as accessories, licenses and set-up costs are usually forgotten. These can quickly account for up to 20-30% of the total amount.
Example:
The purchase price for a high-performance company laptop is €1,200. The costs for accessories and licenses add up to a further €400. At €1,600, the effective purchase price is significantly higher than the purchase price alone.
How can costs be optimized?
Careful analysis of requirements and clear standardization of equipment can avoid unnecessary additional costs. Tenders and framework agreements help to negotiate bundled offers more favorably.
Provision & Deployment
Once purchased, the IT hardware is usually not yet ready for use. Further costs are incurred, particularly in the form of time. The costs for provision and deployment include all the work involved in getting a new device ready for use - from installation to integration into the company network.
Typical cost elements:
- Setup and configuration of the device according to the requirements of the company and the respective department
- Integration into the MDM environment and security systems
- Training for end users on correct use
It is true that more and more companies are already taking the cost of setup and integration into account. However, it is often estimated as a lump sum. In fact, the preparation time can increase considerably, especially for customized devices.
Example:
In our experience, the setup of a standard laptop requires approx. 2 hours of work. With personnel costs of around €80 per hour, the cost per device is €160.
What optimization potential is there?
Automated rollout processes and ready-made images significantly reduce the setup effort. Standardized platforms facilitate MDM integration. Full-service providers such as Lendis take on many setup tasks according to specific requirements, such as MDM integration. This allows work to be outsourced and costs to be partially or completely avoided.
Operation and use
Of course, IT hardware not only incurs costs when it is purchased, but also during its use. Ongoing costs during use include energy consumption, updates and user support.
Typical cost elements:
- Electricity costs
- Regular software updates
- Helpdesk and support costs
- Training and further education measures
The view of hardware often ends with the physical device. Support tickets, inefficient energy consumption or additional costs due to outdated systems are rarely systematically evaluated.
Sample calculation:
An inefficient laptop can cost around €200 more in energy costs over 4 years than a modern model.
How can costs be optimized?
Costs can be reduced by selecting energy-efficient devices, targeted patch management and systematic IT support optimization. However, regular investment in the latest technology also helps to reduce operating costs.
Maintenance and repair
Regular maintenance and, if necessary, repairs are necessary to ensure proper operation.
Typical cost elements:
- Repairs outside the warranty
- Spare parts
- Technician hours
- Shipping logistics for repairs
Initially new devices usually work without any problems. However, from the second or third year of use, the defect rate increases measurably - usually when the standard warranty has expired.
Example
Replacing a defective display leads to direct costs of €300-400. A sales employee who is unable to work can mean additional sales losses of several thousand euros.
How can costs be avoided or reduced?
Extended warranties or maintenance contracts, replacement pool strategies and preventive maintenance can significantly reduce repair costs. At the same time, regular investments should be made in a modern, less maintenance-intensive IT infrastructure.
Return, disposal, and data deletion
Once the decision has been made to replace mobile devices and IT, there are usually additional costs at the end of the useful life. This includes the cost of returning devices securely and deleting data in compliance with the GDPR. If old devices are to be disposed of or marketed, this also leads to expenses.
Typical cost elements:
- Costs for secure data erasure
- Recycling fees
- Logistics costs for return shipment or storage
- Risk discounts for the return of old appliances
At the end of the life cycle, many companies only focus on new acquisitions. However, returns, data deletion and environmental regulations continue to cause measurable costs and compliance risks.
Example:
Professional data erasure costs around €20-50 per device. Incorrect data destruction can result in fines in the six-figure range.
How can costs be optimized?
Through integrated take-back solutions, certified data erasure services and early planning for the recycling or remarketing of old devices. Service partners such as Lendis also score points here by handling take-back, data cleansing and subsequent remarketing in addition to procurement.
Opportunity costs: Productivity losses due to downtime
Once set up, IT hardware requires continuous maintenance. Downtime must be avoided as far as possible, especially when it comes to critical IT infrastructure hardware. This is because IT downtime, such as servers that cannot be reached or employees who are unable to work, leads to costs and loss of revenue. When calculating the total cost of ownership, all indirect losses must therefore also be included.
Typical cost elements:
- Delays in projects
- Missed sales opportunities
- Productivity losses due to waiting times for replacement devices
Why are opportunity costs often underestimated?
The pure repair costs are visible and therefore tangible for most people. The indirect effects on business development or employee satisfaction are not directly present and can rarely be quantified.
Sample calculation:
According to a study, every hour of IT downtime in SMEs costs an average of $8,000-20,000.
How can costs be optimized?
Options for reducing downtimes include fast replacement services, preventive maintenance and transparent replacement device management processes.
Typical misjudgments in IT procurement projects
Even if companies select devices carefully and compare prices, hidden additional costs often arise because typical risks are overlooked:Underestimation of operating costs
Many organizations assume that modern IT hardware hardly generates any follow-up costs. In reality, however, energy consumption, software maintenance and user support have a significant impact during use.Miscalculation of repair and support costs
Defects after the warranty has expired, increasing support requests for older devices or a lack of replacement devices are rarely factored in realistically - even though they can have a considerable impact on the budget.Neglecting disposal and data security at the end of life
New tasks arise at the end of the device life cycle: GDPR-compliant data erasure, recycling and compliance documentation. Companies that neglect these processes risk high fines and reputational damage.No risk buffer for unplanned replacement purchases
Sudden defects, changes in project requirements or growth spurts often lead to short-term hardware requirements. Without a budget buffer, such special situations drive up IT costs unexpectedly. ➡️ In more detail: Hidden costs when purchasing devicesHow companies calculate TCO correctly
A well-founded TCO calculation considers all costs incurred during the entire life cycle of an IT asset - from acquisition to operation and disposal.
What needs to be taken into account?
A complete TCO calculation includes both direct and indirect costs.
- Direct costs: purchase price, software licenses, accessories, implementation, maintenance, support, energy consumption.
- Indirect costs: productivity losses due to downtime, training costs, internal support times, opportunity costs.
These costs should be recorded over the entire life cycle of the IT asset in order to obtain a realistic picture of the total costs.
Models for determining TCO
There are various models for calculating TCO. One of the best known is the Gartner model, which divides the total costs into direct and indirect costs.
- Direct costs: hardware and software costs, operation, administration.
- Indirect costs: end-user support, downtime, inefficient use.
Further information on the Gartner model can be found here:
👉 Total Cost of Ownership according to the Gartner Group
Companies can also develop their own models based on their specific experience and requirements. These individual models enable a customized analysis and take company-specific factors into account.
Determining the total cost of ownership - an example:
A medium-sized company is planning to equip 50 employees with laptops. The following calculation shows the TCO over a period of 3 years.
| Cost type | Individual costs (€) | Total costs (50 devices, €) |
|---|---|---|
| Acquisition (incl. accessories, licenses) | 1.600 | 80.000 |
| Setup and rollout | 160 | 8.000 |
| Operation (energy, updates, support) | 600 | 30.000 |
| Maintenance and repairs | 300 | 15.000 |
| Return and deletion of data | 50 | 2.500 |
| Opportunity costs due to downtime | 400 | 20.000 |
| Total costs over 3 years | 155.500 |
This example illustrates that the acquisition costs only make up part of the total costs. Operation, maintenance and indirect costs such as downtime contribute significantly to the TCO.
By taking all direct and indirect costs into account, companies can make well-founded decisions and realistically assess the profitability of their IT investments.
Our recommendation: TCO should not be used retrospectively in order to calculate investments. TCO should be included in budget planning and procurement strategy at an early stage - only then can well-founded, sustainable decisions be made.
TCO comparison: buying vs. leasing vs. renting
Model | TCO effects |
|---|---|
Purchase |
|
Leasing |
|
Rent (DaaS) |
|
Why rental models such as Device-as-a-Service (DaaS) optimize TCO
Rental models such as Lendis are usually offered as a full-service solution. The aim is for the provider to take care of the majority of the device life cycle. The lessee thus reduces its total cost of ownership and receives a flexible, scalable solution. This includes, among other things:
- Plannable monthly costs without high one-off investments (CAPEX becomes OPEX).
- Integrated support and replacement reduce operating costs and minimize downtime.
- Flexible adaptation of the equipment fleet in the event of staff growth or downsizing avoids capital commitment and downtime costs.
- Secure return and data erasure are included - compliance is made easier.
Rental models combine financial predictability with operational advantages and are therefore particularly attractive for companies that want to operate flexibly and efficiently.
A company would like to equip 50 employees with laptops (standard office devices), planned over a period of 3 years.
| Cost type | Purchase model | Rental model (DaaS) |
|---|---|---|
| Device costs (incl. accessories) | 1,600 €/device → 80,000 € | 45 €/month → 108,000 € (over 3 years) |
| Setup & Deployment | 160 €/device → 8,000 € | inclusive |
| Repairs and maintenance | 300 €/device → 15,000 € | inclusive |
| Operation (energy, updates, support) | 200 €/year/device → 30,000 € | Similar to purchase → € 30,000 |
| Return & secure data deletion | 50 €/device → 2,500 € | inclusive |
| Opportunity costs (e.g. downtime) | 400 €/device → 20,000 € | reduced: € 200/device → € 10,000 |
| Total costs over 3 years | 155.500 € | 148.000 € |
Why renting is better here:
A direct comparison clearly shows:
The purchase of IT hardware leads to high one-off costs, whereas with rental, the expenses are evenly distributed and can be planned. There are also differences in terms of ongoing use:
- Operating costs such as support, maintenance and updates are additional when purchasing, whereas they are usually fully integrated in rental models.
- Repair and replacement costs are a burden on the budget in the purchase model as soon as defects occur - they are usually included in the rental model.
- Opportunity costs due to downtime are noticeably higher when purchasing, as replacement devices and processes are often missing or delayed. Rental providers, on the other hand, provide quick replacement solutions.
- Companies always remain at the cutting edge of technology - devices can be replaced more quickly as required without having to reinvest.
✅ The bottom line of the TCO analysis is:
Despite seemingly higher monthly payments, renting performs better in terms of overall TCO - thanks to reduced effort, better planning and lower indirect costs.
👉 For many companies, this means that renting not only offers more flexibility - it is also the better choice economically.
Smarter planning, better decisions, cheaper procurement
Looking at the total cost of ownership forces companies to deal with IT procurement in a more strategic, sustainable and efficient way:- If you only compare the lowest purchase price, you run the risk of incurring massive hidden costs in the long term.
- The realistic assessment of all costs along the life cycle enables better planning, optimizes budgets and minimizes operational risks.
- Rental models such as Device-as-a-Service offer a decisive advantage here: they integrate many of the TCO-relevant areas into one service, create cost transparency and significantly reduce the burden on internal resources.
Make sure your employees have efficient IT equipment and save costs at the same time.
👉 Let's get started.
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