Total Value of Ownership (TVO), or total value of opportunity is a methodology for measuring and analyzing the business value of IT investments.Total Value of Ownership (TVO), or total value of opportunity is a methodology for measuring and analyzing the business value of IT investments.
Gone are the days when Total Cost of Ownership (TCO) was the sole methodology to make technology investment decisions. There is a paradigm shift in how to quantify and articulate value. With a TVO methodology, we take a holistic view of the solution which includes both costs and benefits.
TVO can be used to compare investment alternatives that incorporate costs as well as benefits – tangible and intangible over a time horizon – say 3 or 5 years.
This cost-benefit analysis framework considers cost/benefit drivers in a 2 by 2 continuum: Direct vs. Derived and Technology vs. Business mapped into four quantified quadrants: Costs, Productivity, Revenues/Profits and Risks.
Our unique TVO framework enables the inclusion of qualitative gains into a ROI calculation as well as financial gains that go beyond cost reductions. It essentially consists of:
- Quantifying the cost of the solution – which includes all costs e.g. cost of acquisition, operation and maintenance, disposal at the end of life etc.
- Quantifying the benefits of the solution – enhanced productivity, higher revenues/profits, lower risks, etc.
- Calculating the Total Value of Ownership (TVO), which is (Total Benefits – Total Costs)
- Deriving key financial metrics for the time-horizon: ROI, Payback Period, Net Present Value, etc.
Cabot Partners provides strategic advisory services to:
- IT Solution Providers: Conduct TVO studies to compare their solutions with that of competitors, leverage the findings in marketing and sales campaigns
- Enterprises: Conduct TVO studies to facilitate investment decisions, assist management in justifying the solution to executive management
Here are some examples: