TCO – Total Cost of Ownership: Should Businesses Buy Equipment or Subscribe to a Service Solution?

During the process of investing in technology, many businesses tend to focus only on the initial purchase price while overlooking a wide range of costs that accumulate throughout the entire lifecycle of the equipment. This often leads to inaccurate investment evaluations and causes the actual Total Cost of Ownership (TCO) to be significantly higher than expected.

What is TCO and Why Is It Important?

TCO – Total Cost of Ownership refers to all costs incurred from the moment a business invests in equipment until it is disposed of or replaced. This includes:

• Initial purchase cost

• Operating and energy costs

• Maintenance, repairs, and component replacement

• Technology upgrades

• Staff training

• End-of-life disposal

• Potential risks such as downtime, operational disruptions, and loss of business opportunities

TCO helps businesses accurately assess the true value and true cost of equipment, rather than relying solely on initial CAPEX. It forms the foundation for deciding whether to purchase, lease-to-own, or adopt an As-a-Service model.

Key Components of TCO

Any technology investment involves hidden costs. TCO includes:

• CAPEX: equipment purchase, transportation, installation

• Operating Costs (OPEX): energy, consumables, technical personnel

• Maintenance & Repairs: periodic servicing, component replacement, troubleshooting

• Technology Upgrades: hardware/software updates based on operational needs

• Staff Training: operation and technical training

• End-of-Life Processing: liquidation, recycling, replacement

• Risk Costs: downtime, reduced productivity, operational interruptions

Together, these elements provide a comprehensive view that helps businesses choose the optimal solution.

TCO in Practice: What Do Businesses Usually Choose?

Many F&B and retail chains in Ho Chi Minh City have adopted smart lighting service models from the VIoT ecosystem. Results show a 20% reduction in TCO compared to self-purchasing equipment, thanks to:

• No maintenance cost

• No repair expenses

• Continuous technology upgrades

• Energy optimization that significantly reduces electricity bills

Meanwhile, large manufacturing enterprises often choose a hybrid model—owning some equipment while subscribing to services—to balance cost and risk.

TCO Across Industry Scenarios

Industrial Manufacturing

• Very high ownership TCO due to complex equipment and difficult maintenance

• EEaaS helps reduce downtime and significantly optimize energy consumption

Office Buildings

• Moderate CAPEX but high operating and maintenance expenses

• EEaaS helps maintain stability and reduce technical risks

F&B Sector

• Limited cash flow, requires flexibility

• EEaaS minimizes breakdown risks and reduces electricity costs

Across all three sectors, EEaaS consistently delivers lower TCO and greater flexibility.

Analyzing TCO not only helps businesses understand how much an asset costs, but more importantly, how much it truly costs over its entire lifecycle.

In the context of rapid technological change and increasing pressure on cash flow, the service-based model—especially Energy Efficiency as a Service (EEaaS)—offers outstanding advantages:

• Significant reduction in upfront investment

• Lower TCO through energy optimization and risk reduction

• Always-updated technology

• Stable operations with zero downtime

VIoT accompanies businesses on their digital transformation journey and operational cost optimization through flexible models: purchase – lease-to-own – and service subscriptions tailored to each industry.