The whole process of total cost of ownership starts by putting up an nice spreadsheet. It's the file you should nourish, it's the digital companion you should always have with you (or in good old hardcopy) during e.g. software selection process. As you will know, a spreadsheet begins with specifying some categories, some items where, later on, you will put numbers next to. The cost structure.

Experience and common sense will get you a long why setting up the cost structure for TCO. Typical components are hardware, licenses and some cost for network alterations. But I'm now getting ahead of myself.

2.1 Stuff vs People

Buying a computer is one thing, getting it running and available for users to work with is another. From a cost perspective you have the purchase of the product, in this case the computer, and the bill for the people installing and troubleshooting the thing. You have costs for products, stuff, things and costs for people.

It seems like an open door, but in nature they are very different. Buying things is easy -getting the right stuff is the hard part. But once you have a rather clear idea about what to purchase, calculating the cost is like 1-2-3. They're fixed numbers and the accuracy of the amounts is pretty ok. A vendor can tell you without to much room for error the price for a certain computer.

Enter people. Now, they are difficult to calculate. The estimate on how long a certain job will take is a very nasty one, and plays therefor a different role within the cost structure of the TCO.

2.2 Fixed price vs Time &Material

It's not completely true what I told you about the cost of people in the previous paragraph; you can have people working for you for a fixed amount of dollars. A service performed by resources can have a fixed price; regardless how long the task will take, you will pay one certain predefined amount of money.

The opposite of a fixed price deal, is time & material based. For this type of deal you will only agree on a fee (per hour, per day, whatever), and for every hour spend, the vendor will send you a bill.Cost is in this way always determined in retrospect. This makes it difficult to calculate, as the hours that will be spent on a task may range from a "wild guess" to a "pretty good informed guess".