Cost of ownership, ROI, and cost/benefit
analysis: What's the difference?
Cost of Ownership, Return on Investment, and Cost/Benefit analysis are all special kinds of business
case analyses. Each term implies a different approach to the general business case question: “What
are the likely financial and other business consequences if we take this or that action (or decision)?”
Whether developing your own case or evaluating someone else's, remember that none of these terms
has a single precise or universally agreed definition. Therefore, it is important to document and
communicate which cost (and/or benefit) line items are included and which are not, the time period
covered, and major assumptions used in calculating financial metrics. Here are some of the important
characteristics of each approach.
Cost of Ownership
Cost of Ownership (sometimes called “Total Cost of Ownership”, or (TCO) usually means:
The total cost of