IT Total Cost of Ownership covers everything from buying and maintaining network devices to running and eventually replacing them. Understanding these costs helps businesses make smarter financial decisions.

This guide breaks down:

• The IT total cost of ownership for enterprise networks
• Components of IT total cost of ownership for your enterprise network
• How to calculate the IT total cost of ownership for your network
• How to reduce TCO and optimize IT spending
• A look at some TCO tools
• How to reduce your TCO with Meter

What is the IT total cost of ownership (TCO) for enterprise networks?

Total Cost of Ownership (TCO) includes every dollar spent on a network from setup to replacement. It’s more than the upfront price—ongoing costs like hardware, software, labor, maintenance, energy, and downtime add up over time.

Some costs aren’t obvious at first but can drain resources fast. A network that looks affordable can turn expensive if maintenance, outages, or outdated hardware drive up expenses. Let’s break down where the money actually goes.

Hardware eats up a big chunk

Every enterprise network starts with physical hardware—routers, switches, access points, and servers. These aren’t one-time purchases, either.

Devices need to be replaced every few years as:

• Technology improves
• Performance needs increase
• Manufacturers stop supporting old models

The price tag on new equipment is one thing, but planning for upgrades and expansions keeps the costs coming.

Software costs don’t stop after purchase

Networks rely on software, from cloud management tools to security systems and operating systems for network devices. Some software comes with the hardware, but others require ongoing licensing fees.

Subscription-based management tools add to the cost, and compliance software—like security monitoring for regulated industries—can push expenses even higher.

Labor costs go beyond setup

IT teams handle installation, monitoring, troubleshooting, and upgrades. If there’s no in-house expertise, outsourcing to a managed service provider (MSP) adds to the cost. Hiring and training staff isn’t cheap either, and high turnover keeps those expenses coming back.

Maintenance is a never-ending cycle

Networks need regular updates, security patches, and hardware replacements. When equipment reaches the end of its life, it either gets replaced or becomes a security risk. Even swapping out aging parts before they fail adds to the cost.

Energy bills add up

Networking gear runs all day, every day, and that power isn’t free. Older hardware and poorly managed data centers use more energy, driving up costs. Energy-efficient equipment, PoE devices, and smart cooling systems help, but electricity still adds to TCO.

Downtime is the silent budget killer

A network outage doesn’t just slow things down—it can bring operations to a halt. Lost productivity, missed revenue, SLA penalties, and damage to customer trust all add up fast.

Businesses often invest in redundancy and failover systems to minimize downtime, but those safeguards come with their own costs. The alternative, though, is leaving things to chance, and that’s rarely a good idea.

Components of IT total cost of ownership for your enterprise network

Managing IT costs is about everything that keeps a network running over time. Some costs are obvious, like hardware and software, while others sneak in through maintenance, security, and downtime. Here’s where the money really goes.

Hardware isn’t a one-time purchase

Routers, switches, access points, and servers aren’t forever. They need to be replaced every few years, whether due to wear and tear, performance needs, or vendors pulling the plug on support. Even virtual infrastructure needs investment, though cloud-based networks shift more costs to subscriptions instead of big one-time purchases.

Running the network costs more than you think

Power, cooling, internet service, IT salaries, managed service fees—these all stack up fast. Cloud-based networks reduce some of these costs, but they come with their own recurring fees. Compliance costs vary depending on industry regulations, and some businesses spend heavily to stay audit-ready.

Maintenance and upgrades never stop

Firmware updates, security patches, and hardware refreshes keep things running. Most enterprises follow a network lifecycle plan, replacing gear every 3–7 years. Scaling up the network to handle growth adds another layer of spending, whether it’s new equipment or cloud service expansions.

Downtime burns money fast

When the network goes down, everything stops. Lost productivity, missed sales, and SLA penalties pile up quickly. Investing in redundancy, failover systems, and disaster recovery plans keeps downtime from turning into a financial disaster.

Security isn’t optional

Firewalls, threat detection, monitoring tools, and security teams all cost money—but breaches cost even more. The price tag for cybersecurity depends on the level of risk, but cutting corners here is never a good idea. The better the protection, the lower the chance of a costly attack.

A step-by-step way to calculate Total Cost of Ownership (TCO)

If you're setting up or upgrading a network, you need to know what it will cost long term, not just upfront. Here’s how to break it down in a way that helps with budgeting.

Please note: The prices given are for the purpose of illustrating examples only. Your actual costs may vary considerably.

Step 1: List upfront costs

Start with the one-time expenses. These are the things you’ll buy at the beginning:

• Hardware: This includes servers, switches, routers, and firewalls. Look at actual vendor prices or quotes. Let’s say it costs $15,000.
• Software & licensing: Add the costs of any required operating systems, security tools, or network monitoring software. Assume $5,000.
• Installation & setup: This includes IT staff time or outside consultants. Say $3,000.

Total upfront cost: $23,000

Step 2: Calculate ongoing costs

These are the costs that repeat yearly. Track these based on your actual bills or estimates:

• Electricity & cooling: Check past utility bills or estimate them based on hardware power consumption. Let’s say $4,000 per year.
• IT staff costs: If one IT employee spends 20% of their time managing the network, multiply their salary by 0.2. If that’s $100,000/year, this costs $20,000 per year.
• Maintenance & upgrades: Factor in firmware updates, replacements, and software renewals—roughly $2,000 per year.
• Security costs: Firewalls, monitoring tools, and cybersecurity services—about $3,000 per year.

Total recurring cost: $29,000 per year

Step 3: Factor in downtime

Network failures cost money. Estimate this by asking:

1. How often does the network go down per year? (Let’s say two days.)
2. How much does downtime cost per day? (Lost productivity, lost sales, etc. If it’s $1,000 per day, that’s $2,000 per year.)

Now, adjust the total yearly cost:

$29,000 + $2,000 = $31,000 per year

Step 4: Find the five-year total

To get the full five-year TCO, multiply yearly costs by five and add the upfront costs:

• Upfront cost: $23,000
• Yearly cost over five years: $31,000 × 5 = $155,000

Total TCO over five years: $178,000

How to use this calculation

Adjust the numbers based on real vendor quotes, salaries, and utility costs.

If you're comparing different solutions, run the same numbers for each one to see which makes the most financial sense. If downtime is a big concern, investing in failover systems could reduce losses, but that cost should be factored into TCO as well.

The goal is to get a clear, realistic picture of long-term expenses so there are no surprises down the line.

How to reduce TCO and optimize IT spending

Cutting IT costs isn’t about making sacrifices—it’s about making smarter decisions. The right approach keeps expenses under control while ensuring the network stays reliable and efficient.

Stop over-provisioning and right-size infrastructure

Buying more servers, storage, or network capacity than necessary drives up costs without adding value. Right-sizing infrastructure means matching resources to actual needs and scaling only when demand increases.

Optimize cloud spending with smarter scaling

Autoscaling adjusts cloud resources based on usage, preventing overpayment for idle capacity. Regular monitoring helps spot underutilized instances and eliminate waste.

Cut energy costs with efficient hardware

Power-hungry data centers burn through budgets fast. Investing in energy-efficient servers, optimized cooling, and Power over Ethernet (PoE) devices reduces electricity use without sacrificing performance.

Use AI-driven monitoring to simplify maintenance

Waiting for problems to happen is expensive. AI-powered tools detect network issues early, allowing teams to fix them before they cause downtime or require costly repairs.

Get more life out of IT assets

Replacing hardware too soon wastes money, but running outdated equipment increases risks. Tracking usage and performance helps determine the right time to upgrade, extending asset lifespans without compromising reliability.

Make data-driven decisions with TCO tools

Relying on guesswork leads to unnecessary spending. These tools help calculate long-term costs and guide smarter investments:

• Microsoft Azure TCO Calculator – Compares the costs of cloud versus on-premises infrastructure.
• AWS TCO Calculator – Estimates cloud expenses based on workload needs.
• Gartner’s TCO Model – Provides an industry-standard framework for assessing IT costs.

Reduce your IT total cost of ownership with Meter

Meter’s vertically integrated network reduces IT Total Cost of Ownership by bundling hardware, software, and management into a single service. No unpredictable costs, no wasted resources—just high-performance networking with IT teams freed up to focus on bigger priorities.

Key features of Meter Network include:

• Vertically integrated: Meter-built APs, switches, and security appliances work together to create a cohesive, stress-free network management experience.
• Managed experience: Meter provides user support and done-with-you network management to reduce the burden on in-house networking teams.
• Hassle-free installation: Simply provide a floor plan, and Meter’s team will plan, install, and maintain your network.
• Software: Use Meter’s purpose-built dashboard for deep visibility and granular control of your network, or create custom dashboards with a prompt using Meter Command.
• OpEx pricing: Instead of investing upfront in equipment, Meter charges a simple monthly subscription fee based on your square footage. When it’s time to upgrade your network, Meter provides complimentary new equipment and installation.
• Easy migration and expansion: As you grow, Meter will expand your network with new hardware or entirely relocate your network to a new location free of charge.

Read more about what we offer on our Meter blog and get a demo today.