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Before we embark upon an IT project/initiative, it is fundamental to simulate a financial return for these investments. There are two primary approaches to measuring returns: 1) total cost of ownership (TCO) or 2) return on investment (ROI). Which approach do you favor, and why?

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It is without doubt that the business environment today is so much more competitive and complex than it was few years ago. This is the reason why companies have to continually improve their processes in order to maintain and develop competitive advantages over their competitors. Hence, companies in embarking upon an IT project or initiative, needs to identify whether such is financially beneficial for the organization, otherwise they should not be allocated scarce financial resources. Scarce resource should be allocated to the initiative that uses it most effectively and efficiently.

In evaluating the financial viability of the IT project or initiative, companies usually use the total cost of ownership or the return on investment measures. The following section of the paper compares these two financial measurements.

Total cost of ownership or ...

Solution Summary

This solution discusses TCO and ROI.