Most businesses make decisions about IT and telecoms contracts based on a limited view of the market. The information they have available often comes from one or two suppliers, previous contracts – or internal assumptions about what is «reasonable».

The result is that assessments are made on a narrower and weaker basis for decisions than is necessary.

The problem is not a lack of competence in the CFO or CTO, but limited market insight; how agreements are actually structured in comparable businesses and why, which cost elements are typically underestimated, and which mechanisms to watch out for – those that tend to kick in over time.

When the basis for decision-making is weak, the total cost of ownership (TCO) becomes a theoretical exercise. TCO appears as a management tool on paper, but the actual consequences are only visible much later in the contract period.

What is Total Cost of Ownership (TCO) – and why is it relevant?

Total Cost of Ownership (TCO) describes all costs associated with an IT or telecoms solution throughout the entire contract period. Not just what is stated in the offer, but the sum of what the business actually pays – directly and indirectly – to make the solution work in practice.

In IT and telecom procurements, this is precisely where many decisions slip up. The total cost is affected by far more than the price per service. It's shaped by how the solution is implemented, how changes are handled, how much internal time is tied up, and what commercial agreements are in the contract. It is these factors that often receive little attention in the tender phase but become highly significant over three to five years.

This is why TCO is relevant: because it provides a more realistic picture of what an agreement will actually cost the business over time – not just what it appears to cost on paper.

Why price is almost always misleading

In practice, there's a well-known market pattern: the supplier that appears most cost-effective in the tender phase is not necessarily the one that provides the lowest cost over time. Small caveats in the contract, unclear SLAs, or limitations in flexibility can lead to noticeable extra costs later on.

Deficient agreements rarely lead to one large, visible cost. Instead, many small burdens arise: extra invoices, changes that are priced highly, internal resources that must compensate for poor delivery, or solutions that do not scale in line with the business's needs. Over time, the sum becomes significant.

For many companies, this is also the explanation as to why actual IT and telecom costs are gradually moving away from the budget, without a single decision being identifiable as the cause.

Many considerations necessitate a holistic view.

It's no wonder that larger companies take a long time to finalise the right IT and telecommunications agreements. The decisions almost always affect several parts of the organisation simultaneously, and the considerations to be taken are both numerous and partly contradictory:

• Economy looks for predictability, control, and long-term cost development.
• The IT department is considering flexibility, architecture, security, and the ability to support business development.
• ... and in addition, procurement, operations, and business come into play – all with legitimate needs and priorities.

Putting these perspectives into context is challenging. The requirements must be assessed and weighted correctly, both for what is known today and for what may change in the future. This requires a holistic view that is rarely fully present internally – especially when decisions are made under time pressure or within established supplier relationships.

When each perspective is considered in isolation, it becomes difficult to see how commercial choices actually affect operational reality – and vice versa. This is where total cost of ownership gets its true function.

Total cost of ownership as a common framework

TCO is not an attempt to simplify complexity, but a framework to highlight the interconnections. With TCO as a common framework, it becomes clear how price, contract structure, technical choices, and operational burdens collectively affect the company's scope of action over time.

When TCO is used correctly, it provides a common language across roles. Not by eliminating disagreement, but by making the consequences of different priorities clearer by:

• Uncover the gap between technical and operational consequence
• Reduce silo-thinking and risk in the organisation
• Increase scope of action during the contract period

The benefit of an external holistic view

An external perspective primarily adds comparability. When agreements are assessed against how similar solutions are actually structured in the market – across suppliers, industries, and organisational models – it becomes clear which costs are driven by genuine needs, and which are the result of historical choices or a weak negotiating position.

At the same time, a gap is often revealed between the technical choice and the operational consequence. Solutions that appear rational in isolation can in practice tie up internal resources, reduce flexibility, or make changes unnecessarily expensive. These costs rarely appear during the tender phase but materialise gradually during operation.

This is also where many decision-making processes get stuck. Finance, technology, procurement, and business assess the same deal from different perspectives, without a common language to weigh them against each other. The result is often compromises based on assumptions, rather than a holistic view of cost, risk, and scope.

Experience from large, complex organisations shows that the value of an independent perspective precisely lies here: in the ability to gather these considerations, put them into context, and highlight the consequences before they are locked into a contract. Not to drive change for change's sake, but to give decision-makers a more accurate picture of what IT and telecom agreements actually entail over time.

What we value most about Adite is that they are always at the forefront and know the market better than us. They come with updated insights, concrete recommendations, and clear decision support. This allows us to make the right decisions faster – and with confidence.

- Jan Haslev, IT Operations Manager at Ecura

When should businesses question their own TCO assessments?

When the total cost of ownership in practice is based on tenders, historical agreements, or internal assumptions – and not on insight into how similar agreements are structured in the market – there is reason to pause.

The same applies when finance, IT, and purchasing have conducted thorough assessments separately, but without a common framework to view the consequences collectively. In such cases, TCO often becomes a calculation on paper, while the actual costs are only gradually revealed during operation.

Typical signs include:

• actual IT and telecom costs over time deviate from budget
• more cost drivers only become visible after signing
• changes are perceived as expensive or difficult to handle
• The scope for manoeuvre is more limited than expected

In such situations, it's rarely about a lack of internal expertise. It's about a limited basis for comparison and a lack of a holistic view. When decisions are made without sufficient market insight, the total cost of ownership is assessed on a narrower and weaker foundation than necessary.

Then it may be wise to bring in an external perspective. Not to overturn previous decisions, but to strengthen the basis for decisions before new agreements are made – and before costs and commitments are locked in for several years to come.