Get your TCO assessments right - fight the urge for home-cooking

TCO stands for “Total Cost of Ownership”. The concept has been known for decades, yet when it comes to software, even IT professionals have real difficulties to make correct TCO estimations. It’s true that software TCO is a difficult task: first, it’s really hard to compare products especially if the products involve hundred of features as it is usually the case, second, TCO heavily depends on the way you are actually using the product, MS Excel has an excellent TCO if you want to make some personal budgeting operations, but the TCO would be abysmal if you would try to use MS Excel as an accounting system for your mid-size company.

An issue that I have often encountered in software companies is, what I would call, the urge forhome-cooking; home-cooking always taste best, no matter the actual skill of the cook, but you can’t really criticize a relative. Unfortunately, home-cooking usually costs way more than industrial food as soon as you stop considering that the cooker time is just free.

Is your IT company a victim of the home-cooking syndrome?

Typical symptoms include
- Hey, let’s recycle this old PC into a server. Unfortunately, the machine resources are too low for Windows;
thus, you switch to Linux. Then, you start having hardware issues; after all, it’s an old PC, what did you expect. At the end, you spend 4h/week just taking care of the old PC. TCO = more than 800 EUR a month, probably twice the price of a new PC.

- We have an home-grown FOO solution. Replace FOO by keywords like compiler, programming language, accounting, time-tracking, billing-tracking, email management, CRM. All sort of things where cheap on-the-self software solutions exist anyway. Software companies are really weak against this because it’s fun to start a new project but the costs are just terrible.

- We need to hire someone to manage our systems. In software companies, practically anyone has the skill to manage applications, plus the market cover 200% of the needs for software companies. If you start needing full-time people dedicated to your IT
infrastructure in your less-than-20-people-mISV, then something is wrong.

In order to reduce the IT infrastructure TCO, the most efficient solution that I have found so far consist in migrating to hosted & managed solutions whenever possible. For example, instead of building your own Subversion server (cost = 10h at setup + 2h / per week for maintenance) just go for (cost = 10 EUR per month or so). More to come on the subject, stay tuned…