--- title: "What Is Total Cost of Ownership (TCO)?" url: https://www.uncap.com/glossary/total-cost-of-ownership author: "Denis Dyli" published: 2026-10-11 updated: 2026-10-11 summary: "Total cost of ownership (TCO) is the full cost of an option. It includes not only implementation and operational costs but also related costs, such as overhead, salaries, benefits, technology upgrades, software support and maintenance. Identifying that full cost lets decision makers accurately weigh the value of one option against another." --- # What Is Total Cost of Ownership (TCO)? > Total cost of ownership (TCO) is the full cost of an option. It includes not only implementation and operational costs but also related costs, such as overhead, salaries, benefits, technology upgrades, software support and maintenance. Identifying that full cost lets decision makers accurately weigh the value of one option against another. **Total cost of ownership**: Total cost of ownership (TCO) is the full cost of an option. It includes not only implementation and operational costs but also related costs, such as overhead, salaries, benefits, technology upgrades, software support and maintenance. Identifying that full cost lets decision makers accurately weigh the value of one option against another. ## How it works NIST's guide to IT security services describes TCO as the principle of full cost. Decision makers use it, together with metrics, to establish a baseline of what the current setup costs. They then compare the costs of other arrangements with that baseline when they build the business case. **How a TCO comparison runs** ### 1. Baseline, Cost the current setup Decision makers use metrics and the principle of TCO to establish a baseline of the existing environment. ### 2. Estimate, Cost each alternative TCO estimates are built for each alternative, with similar cost elements and the same assumptions. ### 3. Compare, Weigh the options With the full cost identified, decision makers can relate the value of one option over another. NIST says estimates for each alternative and for the current environment must be consistent, have similar cost elements, and be based on the same assumptions. Metrics can help put a dollar cost on events such as downtime. US federal buying uses a related idea. The Federal Acquisition Regulation defines life-cycle cost as the total cost to the government of acquiring, operating, supporting and, if applicable, disposing of the items being acquired. ## What goes into TCO for a commerce platform As an illustration only (the sorting below is ours, not NIST's), the costs of a B2B commerce stack can be placed in NIST's three groups like this: - Implementation costs: the build and the move, including any migration project. - Operational costs: the platform fee, transaction fees, apps and any separately billed hosting. - Related costs: staff time, development work, technology upgrades, software support and maintenance. Whatever the grouping, NIST's consistency rule still applies: every option's estimate needs similar cost elements and the same assumptions. ## Example A distributor compares two options over three years: A, its current self-hosted platform, and B, Shopify Plus on a 3-year term. Both use the same five cost elements, and payment processing is left out of both. Every input is illustrative except the Shopify Plus fee. - Platform: A, an illustrative license of $25,000 a year x 3 = $75,000. B, Shopify Plus at its published $2,300 a month x 36 = $82,800. - Hosting: A, an illustrative $2,000 a month x 36 = $72,000. B, no separate hosting bill in this illustration. - Apps: A, $0 (illustrative). B, an illustrative $400 a month x 36 = $14,400. - Development: A, an illustrative retainer of $3,000 a month x 36 = $108,000. B, an illustrative $1,000 a month x 36 = $36,000. - Migration: A, $0 (illustrative). B, an illustrative one-time project of $50,000. With these inputs, Option A totals $75,000 + $72,000 + $108,000 = $255,000. Option B totals $82,800 + $14,400 + $36,000 + $50,000 = $183,200. Over three years, B costs $71,800 less, with the migration already counted. ## On Shopify Shopify publishes the [Shopify Plus](/glossary/shopify-plus) plan as starting at $2,300 a month for standard setups and integrations on a 3-year term, or $2,500 a month on a 1-year term. More complex, higher volume businesses switch to a variable platform fee based on their revenue and business model. Shopify's pricing FAQ names the other costs to plan for: Shopify Plus Partners if you need custom development, plus optional one-time theme purchases and any third-party apps. It doesn't charge to migrate, but migration costs depend on your business and existing platform. Orders through Shopify Payments aren't charged third-party transaction fees. With a third-party processor as the primary gateway, Shopify charges 0.20% per transaction on top of the processor's fees. ## How Uncap helps The stronger use of Uncap's [three-year total cost of ownership model for B2B sellers](/post/magento-vs-shopify-plus-3-year-tco) is as a worksheet: pull twelve months of invoices across licensing, hosting, extensions, developer retainer and security work, build your own annual figure, and multiply by three. ## Related terms - Shopify Plus - Landed cost - ERP integration - Middleware - Headless commerce - Composable commerce ## Sources - NIST SP 800-35: Guide to Information Technology Security Services - Federal Acquisition Regulation 7.101: Definitions - Shopify Plus pricing ## Frequently asked questions ### What is the formula for calculating the total cost of ownership (TCO)? In NIST's description, TCO adds an option's implementation and operational costs to its related costs. NIST adds that each option's estimate must be consistent, with similar cost elements and the same assumptions. ### What three main categories of costs are considered in figuring the total cost of ownership? NIST groups them as implementation costs, operational costs and related costs, such as overhead, salaries, benefits, technology upgrades, software support and maintenance. ### What is the total cost of ownership over the entire life span of an asset? US federal acquisition uses a related term, life-cycle cost: the total cost to the government of acquiring, operating, supporting and, if applicable, disposing of the items being acquired.