… the pretty follies that themselves commit
Organizations today invest heavily in technology to optimize performance, enhance capabilities, and accelerate growth. But in their enthusiasm to “own” their IT, many unintentionally overlook the real cost of owning IT. Boards push for modernization, CFOs track budgets line-by-line, CIOs focus on control and delivery — yet the full picture of Total Cost of Ownership (TCO) is often forgotten or misunderstood.
This oversight leads to inflated long-term costs, misaligned investments, and decisions based on incomplete financial visibility.
How We Got Here: A Brief Reflection
Think back to the early days of many organizations — IT’s role was simple:
Provide internet, keep communications running, and fix whatever broke.
Often, a single “IT guy” handled everything.
More ambitious boards invested in in-house software development early on.
Then came specialized roles: managers, CIOs, CTOs, CSOs. With them came the push to control more internally, build more internally, and own more infrastructure, people, and tools.
Over time, these investments grew into extensive HR requirements, infrastructure demands, and perpetual operating expenses. Yet while the scale changed, the habit of overlooking the real long-term cost remained.
Boards reset their vision from time to time, CIOs classify previous investments as sunk costs, and CFOs often revert to calling IT a necessary evil rather than an enabler — all while forgetting the lessons learned in the past.
Today’s Reality: A Forgotten Ledger of TCO
Somewhere in the paperwork lies a record of IT’s true cost — but it’s rarely revisited until problems surface. The renewed excitement around digital transformation blinds organizations to the deeper financial commitments technology requires.
This is where Shakespeare’s quote feels most relevant:
Organizations fall in love with new IT ideas, not seeing the “pretty follies” hidden beneath.
Self-Perpetuating Causality in IT Spending
Every technology investment has two cost dimensions:
- Cash Flow (CAPEX & OPEX)
- Human Capital (HR, training, security, support, etc.)
Take a simple example: a VoIP implementation.
A realistic TCO includes:
- SIP servers (CAPEX)
- IP phones (CAPEX)
- Electricity & cooling (OPEX)
- Server administration (HR/training)
- Redundancy (CAPEX)
- Preventive maintenance (HR/training)
- Cybersecurity (CAPEX)
- Physical security (HR/training)
Or consider custom software development:
- Developers (HR)
- Application servers (CAPEX)
- Server administration (HR)
- Electricity & cooling (OPEX)
- Redundancy (CAPEX)
- Cybersecurity (CAPEX)
- Physical security (HR)
Two core truths are repeatedly ignored:
1. Month-one cost ≠ one-sixtieth of a five-year TCO
Many long-term costs appear later and grow significantly over time.
2. All CAPEX must eventually be replaced
Servers, storage, firewalls, and switches have lifespans. Replacement cycles are rarely accounted for in early decisions.
This creates a slippery slope where decisions seem cost-effective on paper but lead to massive underestimated expenses.
Cognitive Biases That Distort TCO
Several mental shortcuts shape poor IT investment decisions:
1. Sunk Cost Fallacy
Organizations continue with in-house development, data centers, or support teams simply because they have already invested in them.
2. Anchoring Bias
If a technology once delivered a positive result, leadership anchors to that experience — even if true TCO was miscalculated.
3. Ignoring Failed Investments
When an investment underperforms or adoption is low, the initial cost is forgotten:
“We’ve already paid for it, so it’s basically free now.”
4. Availability Cascade & Bandwagon Effect
“If everyone else is doing it, it must be right.”
Organizations copy their peers without verifying whether the choice suits their context.
5. Zero-Sum Bias
New perspectives, especially around outsourcing, create a feeling that one side must lose for the other to gain. This prevents objective evaluation of new options.
The Impact: An Inaccurate TCO and Poor Decisions
Organizations often view technology costs as one-off expenses, but the reality is very different:
- HR costs persist and grow
- OPEX continues every month
- CAPEX reappears in cycles
- Some expenses occur before a project even begins
- Some cannot be accurately measured and are ignored altogether
The result is an incomplete, inaccurate TCO that misguides strategic decisions.
Every cost continues. Every CAPEX has a replacement cycle.
Accurate TCO requires acknowledging this on day one.
What Leaders Need to Do
For Boards
Your role is governance.
TCO analysis is a powerful tool to ensure responsible, informed oversight. Use it.
For CFOs
IT is not a cost center — it is an investment center.
When properly implemented, IT provides visibility that enables better financial decision-making across the organization.
For CIOs
TCO is your ally.
- It establishes baselines
- Justifies improvements
- Helps you communicate value
- Prevents unpleasant surprises
Remember:
Servers don’t run themselves — they need power, cooling, and people. These are part of the application’s real cost.
For Everyone
Stay open to new ideas.
Better ways of working often appear when old assumptions are challenged.
Final Thought
The true cost of IT ownership is not just what you pay at the start — it is everything that comes after. Understanding TCO is essential to making smarter, more sustainable technology decisions.