Software Costs: Cradle To Grave

Talk is Good

Accurately estimating lifecycle costs requires research. “Engage a broad cross section of stakeholders to do estimating,” Whitworth advises. “Talk to people both in and out of the company that have been through a similar process and find out what their experiences and surprises were. That can’t be overstated.” If a group of business users haven’t been through an application lifecycle before, “they don’t know what they don’t know,” he says.

And don’t be afraid to ask the vendor specifically what the ongoing costs will be when you’re evaluating the software, Eian adds.

In order to minimize those costs, fine tune your business processes, and keep your eyes open. “The lowest long-term cost of ownership is to continue to invest incrementally in your deployed solutions rather than rip and replace them every five years,” Whitworth says. “The best bang for your buck is keeping up with the software as your business needs change.”

“I call it paying attention,” Kridel adds. “People come to work to do a job and . . . if they’re having a hard time getting the job done, typically something hasn’t been implemented correctly with the software.” If managers are not aware of the challenges employees are having with a particular application, “you end up thinking you have a bad piece of software, when you have a good piece of software that was set up wrong,” she says. Often, Kridel sees companies discovering that a problem goes all the way back when the software was configured and a configuration decision needs to be changed.

Hosted services can also help, Gaustad says. In that model, the software is owned and maintained by an outside organization and users pay a fee for use.

When the software is no longer fulfilling the business purposes adequately, then it’s time to spend the money to upgrade it. But sometimes, the software is not the problem. If users aren’t fully aware of all the features of a system, companies end up paying for software functionality that is not used, Gaustad says.

Companies must also consider the hardware needs, especially when installing software upgrades. “My experience has been there often has to be a server upgrade to keep pace with the software side,” Gaustad says. “There have been a lot of surprises. All of a sudden you upgrade to more recent software and performance may be affected; there may be performance degradation.”

In the end, Kridel believes an application’s lifecycle and aggregate costs depend on “the company’s tolerance for workarounds. Once they have something that works, it’s a little intimidating to think about changing it out so you tend to become tolerant of workarounds to the point where it becomes inefficient to run your operations.” When that happens, and executives see the company’s profit margin isn’t where they want it to be, that’s the time when change is made. The key, she says, is to keep your finger on the pulse.