Total Cost of Ownership Model
The full multi-year cost of an option including the people, the exit and the things that never appear on an invoice.
The comparison finance will actually make. Its credibility rests on the rows nobody wants to estimate — engineering time to operate, migration effort and exit cost — because leaving them out is what makes the cheap option look cheap.
The shape
Three-year comparison, ₹ lakh.
| Cost line | A: Managed SaaS | B: Self-hosted OSS | C: Build |
|---|---|---|---|
| Licence / subscription | 420 | 0 | 0 |
| Compute + storage | 60 | 310 | 340 |
| Network + egress | 15 | 45 | 50 |
| Implementation (one-off) | 90 | 160 | 520 |
| Migration off current (one-off) | 70 | 70 | 70 |
| Engineering run — 0.3 / 1.8 / 2.4 FTE | 108 | 648 | 864 |
| Support contract | 0 | 90 | 0 |
| Training + ramp | 20 | 45 | 30 |
| Compliance + audit effort | 15 | 40 | 55 |
| Exit / portability provision | 40 | 15 | 10 |
| Three-year total | 838 | 1 423 | 1 939 |
| Time to first value | 6 weeks | 4 months | 11 months |
| Unit cost at 3× volume | 1 980 | 1 610 | 1 520 |
Sensitivities. Option A's licence is per-seat: at 3× users its total exceeds B. Option B assumes 1.8 FTE, which is one person plus cover — if that person leaves, B's real cost is closer to C's. All options assume the current volume forecast; the crossover for A and B sits at roughly 2.2× today's volume.
When you produce it
For any build-versus-buy decision, any vendor selection above a material threshold, and any migration business case. Produce it before the technical recommendation, so the recommendation is informed by it rather than defending it.
Who reads it
Finance and procurement, who will test the assumptions. Executives choosing. Architects, who need to understand which technical decisions actually move the number — usually the operating headcount, not the infrastructure.
What good looks like
- Engineering time is a line item, costed at a real rate. It is normally the largest number and it appears on no invoice.
- Exit cost is included. It is the price of the option to change your mind.
- Sensitivities are stated, with the crossover point named — that is what makes the model useful when reality differs from the forecast.
- Unit economics at a different scale, not just today's total.
- Time to value is on the same page; a cheaper option arriving eleven months later is not obviously cheaper.
- One-off and recurring costs are separated.
Common mistakes
- Infrastructure only, comparing cloud bills and calling it TCO.
- Assuming the self-hosted option needs no one. It needs at least two people, because one person is not a rota.
- Ignoring exit, then discovering the proprietary format three years later.
- False precision. These are estimates; show ranges and say which assumptions the conclusion is sensitive to.