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March 21, 2008
• Vol.30 Issue 12
Page(s) 24 in print issue
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Info-Tech Insight
TCO: What’s Old Is New
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George Goodall has been in the information technology field for over 10 years. Prior to becoming a research analyst, Goodall was a
consultant with the enterprise software company i2 Technologies. Since joining Info-Tech, Goodall has written on a variety of IT topics, including Internet telephony, NAS, and enterprise applications. |
A colleague of mine recently posed an innocent question, “When did the concept of total cost of ownership emerge?” Several responses pointed to the actions of the IT analyst community in the mid-1980s. Another colleague said, “Phooey. We used TCO at UNIVAC in the 1970s.” But the concept seems to be much older.
 In Search Of TCO
The New York Times is always a good source for harnessing zeitgeist. The first technology article in the Times that mentions “total cost of ownership” dates from March 1995. It’s called “The Executive Computer; A Dinosaur in Open Systems Clothing” and parrots the analyst lingo. It’s about—no surprise—the AS/ 400. The classifieds are more interesting. An ad from July 16, 1967, lists total cost of ownership as a crucial skill for a “Support Systems Life Cycle Cost Analyst” for the aerospace industry. I should note that this ad predates the birth of the IT analyst industry by several years.
The academic literature also points to this era as the possible beginning for TCO. A 1976 article in the Journal of Finance, “Leasing, Buying, and the Cost of Capital Services,” discusses the “total cost of ownership” for production machinery. More remarkably, a review in Quality Progress from 1968 notes, “Total cost of ownership is being used profitably in the elevator industry.”
OK, elevators aren’t IT, but the concept certainly seems the same. So TCO dates back at least to the late 1960s, perhaps a result of free love and pervasive civil disobedience (as anyone with experience at UNIVAC could doubtless relate). But a little additional digging demonstrates that the concept is even older and appears in a few dusty books. “Principles of Engineering Economy” from 1938, for example, includes the term in the introduction and on pages 17 and 18. Most dramatically, however, “Manual of the American Railway Engineering Association” (1929) notes that, “in the event there is a surplus of power then the total cost of ownership should be multiplied by the ratio of the cost of repairs to the total.”
Just How Old Is TCO?
After reveling in my discovery that TCO dates from at least 1929, a colleague noted that the ancient Egyptians probably used the concept (assisted, no doubt, by some handy big iron from UNIVAC). I doubt that the Egyptians had the concept of TCO given their habit of making capital investments with extreme durability. The notion of “replacement period” doesn’t make a lot of sense when we’re talking about housing the eternal souls of living gods. And labor costs are largely moot for a nation of slaves.
The Greeks and Romans probably didn’t really have TCO either. They divided the world of knowledge into three realms: episteme, knowledge of the world as best represented by mathematics; praxis, the applied knowledge of political leaders; and techne, the base knowledge of masons, weavers, and other artisans. As with the Egyptians, techne was the realm of slaves and was despised by the rest of society. This prejudice persisted through the collapse of the Roman Empire and through the Middle Ages. The medieval traditions of scholasticism and, later, humanism deprecated anything to do with technology. It wasn’t until the introduction of gunpowder at the Battle of Crécy in 1346 and the rise of bastioned fortification to resist gunpowder artillery that technologists really started to get the recognition, and compensation, with which we are now familiar.
TCO: “Revolution” In French
The concept of utility and efficiency, core principles of TCO, didn’t emerge in the Renaissance. As in the realm of art and sculpture, technology was the product of virtuosi, not to be repeated on a mass scale. I suspect that the base principles of TCO emerged with the French physiocrats of the late 18th century, such as Anne-Robert-Jacques Turgot or Françoise Quesnay. They established crucial elements, such as "investment capital" and "diminishing returns." Their concepts were subsequently expanded by Adam Smith in his "Wealth of Nations." They were crucial for the later institutionalization of engineering and science that occurred during the French revolutionary era, particularly the rationalization of the armories. Napoleon’s engineers began to pay very close attention to issues like the effectiveness of cannons, how easily they were moved and repaired, and how long they lasted in active service. While they didn’t call this process TCO, the core elements were certainly there.
So, if I had to guess, TCO dates not from the late 1980s but from the late 18th century. There’s an important lesson in this. The key takeaway for me is that most good advice has a much longer history that we realize. Sometimes, it even predates UNIVAC. 
Send your comments to infotech@processor.com
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