Software Costs: Cradle To Grave

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Software lifecycle costs take a number of forms. As Kridel notes, business needs invariably change and the software must be enhanced to support those needs. “A lot has to do with alignment and establishing a set of expectations with the users,” Gaustad says. If you expect employees to learn the software and use it correctly, the system has to support the work being done.

Keeping all departments connected is another important consideration, and most business processes span multiple software systems. If you are installing a new enterprise-wide application, you have to make sure it is integrated with other technologies.

Businesses may also underestimate the cost of training users and recreating business processes to accommodate the new system. Nick Eian, CEO and principal consultant at Endurant Business Solutions, an IT consulting company in Eden Prairie, says companies may not have budgeted for the training costs, which can be twice what they paid for the software itself.

So companies often fail to properly train users on the new system at the outset, Eian says. They may do a perfunctory training, but the users are often not exposed to system’s more advanced features, which means the company is not reaping the full value of the system.

Training may have to be revisited, because companies rarely use all of the system’s features from the beginning. When additional functionality is needed, companies don’t understand that “a once-and-done training event doesn’t get everyone up to speed forever,” Kridel says, not to mention that with employee turnover, new people have to be trained.

Kridel says there are other often-overlooked lifecycle costs. “A big one is any data cleansing that’s been underestimated and the amount of history they want to carry forward from a legacy system,” she says.

Also adding to the total cost of ownership is that “companies can’t get their people to use the software the way it should be used,” Eian says, despite the initial belief when it was purchased that it will be used as is, out of the box.

The average lifecycle of a software application depends on a number of factors. For example, “you have so many changes happening because of mergers and acquisitions and divestitures that impact those applications and the lifecycles,” says Walt Henderson, cofounder of Minnetonka-based Virteva, Inc., which provides IT consulting and integration services. “A company just acquired may have deployed something that’s getting assimilated into the organization, and the new company may have different needs.”

But companies that spend appropriately will get more value from applications. “Businesses that continue to invest and enhance their software extend the lifecycle,” says Kent Whitworth, customer relationship management practice leader at Ambient Consulting. “The ones that don’t tend to have shorter lifecycles.”