The High Value of TCO Analysis

Software Total Cost of Ownership (TCO) analysis is dry, the numbers are at best a very rough estimate, and who wants to think for even a second that numbers are going to drive an important vendor decision? They’re not, or at least they shouldn’t.

So why go through this exercise? Because it’s very high risk to keep going back to the well over and over again to keep a project funded. At some point in time, if the executive doesn’t see the benefit he’s looking for, whether his expectations are realistic or not, he can cut your funding.

But demonstrate that you have a plan to achieve something of real benefit to the company and estimate what it will cost, and you’re well on your way to getting a commitment. And that commitment is what helps keep expectations in line and IT projects funded, greatly increasing the odds of delivering real benefit.

What’s in your software TCO calculation? Here’s my list.

Licensing Costs

• Main software licensing/subscription costs
• Other software module licensing costs
• Servers, networking, storage/integration hardware & software
• Estimated shipping fees for all purchases
• Staff time to evaluate, purchase and contract
• Professional Services and consulting fees

Implementation Costs

• Staging and setup costs
• Multi-environment (dev/test/prod) costs
• Systems integration and testing costs
• Data migration costs
• Implementation Resources (Project Management, Technical, Oversight)
• Bandwidth costs
• User training
• Sys Admin training
• Incremental backup/recovery processing costs
• Decommissioning costs
• Recycling/disposal fees
• Major upgrade costs

Maintenance Costs

• Software maintenance fees
• Certificate and domain name fees
• Hardware maintenance fees
• Sys Admin/DBA/Developer costs
• User Support costs
• Replacement costs (i.e., hardware failure)
• Incremental audit costs
• Incremental insurance costs
• Incremental asset management costs