Explain TCO and ROI in evaluating IT investments.

Explain TCO and ROI in evaluating IT investments.

• A. TCO is total life-cycle cost; ROI measures financial return relative to cost, used to justify investments.
• B. ROI measures financial return; TCO is ignored in IT investments.
• C. TCO is the time-to-complete; ROI is rate of investment.
• D. TCO is total cost of outages; ROI is return on infrastructure.

Answer: (A)

The main idea here is using two financial lenses to assess IT investments. TCO, or total cost of ownership, captures all costs tied to an asset over its entire life—from purchase and deployment to operation, maintenance, energy use, downtime, support, training, and eventual disposal. ROI, or return on investment, measures how much financial benefit the investment generates relative to its cost, typically expressed as a percentage or ratio of net benefits over the amount invested. Together, TCO shows the full cost burden, while ROI indicates profitability and value, helping justify whether the investment is worthwhile. That’s why the best answer says TCO is the total life-cycle cost and ROI measures financial return relative to cost, used to justify investments. The other options misdefine the terms: time-to-complete is not TCO, ROI is not simply the rate of investment, total cost of outages is not TCO, and ROI is not defined as return on infrastructure.

The main idea here is using two financial lenses to assess IT investments. TCO, or total cost of ownership, captures all costs tied to an asset over its entire life—from purchase and deployment to operation, maintenance, energy use, downtime, support, training, and eventual disposal. ROI, or return on investment, measures how much financial benefit the investment generates relative to its cost, typically expressed as a percentage or ratio of net benefits over the amount invested. Together, TCO shows the full cost burden, while ROI indicates profitability and value, helping justify whether the investment is worthwhile.

That’s why the best answer says TCO is the total life-cycle cost and ROI measures financial return relative to cost, used to justify investments. The other options misdefine the terms: time-to-complete is not TCO, ROI is not simply the rate of investment, total cost of outages is not TCO, and ROI is not defined as return on infrastructure.