Add software, external delivery, internal labour and transition costs over the same period. Keep cash expenditure, allocated internal effort and optional exit scenarios visible separately.
Desk-proposed formula:
Three-year TCO = subscriptions + implementation + internal setup + ongoing administration + separately charged services/infrastructure + dual-running + other planned transition costs
The following is a hypothetical USD example, not a supplier quote:
| Cost item | Assumption | Three-year cost |
|---|---|---|
| Software | USD 150,000 annually, no increase | USD 450,000 |
| External implementation | One-off | USD 150,000 |
| Internal setup | 800 hours × USD 75 | USD 60,000 |
| Administration | 60 hours/month × 36 × USD 75 | USD 162,000 |
| Legacy dual-running | Assumed transition cost | USD 30,000 |
| Total | USD 852,000 |
In this example, software, implementation and dual-running total USD 630,000; allocated internal labour adds USD 222,000. Internal labour is not automatically incremental cash expenditure.
The example excludes separate connector, support, tax, storage and AI charges. A real model must price them or explicitly mark them unresolved.
Run sensitivities for delayed cutover, increased administrator effort and renewal increases. For example, an assumed 5% annual subscription increase makes the three software years USD 150,000, USD 157,500 and USD 165,375: USD 472,875, rather than USD 450,000.
Do not automatically assume an exit in year three. Show exit expenditure as a separate scenario unless replacement is part of the approved plan.