Before You Take The Leap…
Don’t sign that software licensing agreement just yet. Do you know your TCO?
What is TCO?
Total Cost of Ownership (TCO) seeks to understand the entire cost associated with the ownership of Software over some period. Usually this assessment is done in comparison to a non-ownership model of software such as a Software as a Service or SaaS model. SaaS models usually have pricing mechanisms that allow you to simply pay as you use the ‘service’ of the software and the business that supports it. It is a common mistake to believe that only the initial purchase price of software is its cost. Depending on the type of software, the number of users and the type of business it supports, the costs could be in the millions over many years.
Do not buy software for your business without a TCO.
No matter what the salesperson says, if you will be responsible for hosting and running the software there will be costs. There are a couple of options:
A. Maximum Control, Maximum Costs
If you’re a ‘control freak’ and must have everything under the same roof and in the room next door then you will have the maximum amount of TCO. You will have:
a) Software Costs
b) Hardware/Infrastructure Costs
c) Personnel Costs
B. Medium Control, Some Costs
You like not having to own the software but perhaps you want to have some degree of control and you’re willing to pay for it.
a) Infrastructure Costs (likely a private cloud)
b) Personnel Costs are possible if you opt to do your own monitoring, etc.
C. Low Control, Low Costs
You don’t want to own software just use it. You’re comfortable with cloud backups, downloading and storing your database.
a) No Infrastructure costs
b) No Personnel costs
c) Pay as you use software costs
Check the Resource Page for our TCO calculator.