Software Costs: Cradle To Grave

Jay Gaustad recalls the time he worked with a midsized, Minnesota-based company on deploying a mission-critical application and the reaction officials had when it came time to discussing the costs post-implementation. In their minds, once the software was purchased, installed, and working correctly, the business needs have been met.

But not so fast. Software, like a young child, needs constant care and attention—and continued investment, long after it makes its initial debut. “They were a little surprised by the lifecycle costs, but at same time, we had discussions early enough in the implementation . . . on what it would take to support the application,” says Gaustad, a software consultant and former vice president of implementation services at Pragmatek Consulting Group, a technology company in Minneapolis.

Gaustad says his client’s reaction was not unusual. Small- to midsized companies, in particular, generally underestimate what the cost will be to maintain an enterprise application post implementation—and that’s where 75 to 80 percent of the lifecycle costs reside. “Yet we spend so much time negotiating licensing and implementation fees rather than getting our ducks in a line for maintenance and support,” he says.

"If they're having a hard time getting the job done, typically something hasn't been implemented correctly with the software."

Software enhancements is “an area businesses don’t plan for in the onset,” agrees Molly Monroe Kridel, president of Ambient Consulting, a management and IT consulting firm in Minneapolis.

One Ambient client, the education department of a large, local medical-device manufacturer, implemented a customer relationship management system in 2005. The new system was embraced by the user community, and by mid-2006, users had accumulated a long wish list of enhancements to extend the system’s capabilities and draw continued value from the system.

“Unfortunately, when the project was originally funded, little or no provision was made beyond the annual maintenance for on-going system enhancements,” Kridel says. “The company didn’t realize that ‘support’ meant not only keeping the system up and running, but also maintaining the system for ongoing business and process changes. The result was the system owner had to re-allocate money and resources from other planned projects to implement the requested enhancements.” The additional cost to fully support the new system added 20 percent to what the company had originally budgeted.

The system owner had learned her lesson. This year, eager not to repeat past mistakes, she requested and received the necessary budget for support to include ongoing system enhancements.