The True Cost of a Solution
- by D'Arcy Lussier
I had a Twitter chat recently with someone suggesting Oracle and SQL Server were losing out to OSS (Open Source Software) in the enterprise due to their issues with scaling or being too generic (one size fits all). I challenged that a bit, as my experience with enterprise sized clients has been different – adverse to OSS but receptive to an established vendor. The response I got was: Found it easier to influence change by showing how X can’t solve our problems or X is extremely costly to scale. Money talks. I think this is definitely the right approach for anyone pitching an alternate or alien technology as part of a solution: identify the issue, identify the solution, then present pros and cons including a cost/benefit analysis. What can happen though is we get tunnel vision and don’t present a full view of the costs associated with a solution. An “Acura”te Example (I’m so clever…) This is my dream vehicle, a Crystal Black Pearl coloured Acura MDX with the SH-AWD package! We’re a family of 4 (5 if my daughters ever get their wish of adding a dog), and I’ve always wanted a luxury type of vehicle, so this is a perfect replacement in a few years when our Rav 4 has hit the 8 – 10 year mark. MSRP – $62,890 But as we all know, that’s not *really* the cost of the vehicle. There’s taxes and fees added on, there’s the extended warranty if I choose to purchase it, there’s the finance rate that needs to be factored in… MSRP – $62,890 Taxes – $7,546 Warranty - $2,500 SubTotal – $72,936 Finance Charge – $ 1094.04 Grand Total – $74,030 Well! Glad we did that exercise – we discovered an extra $11k added on to the MSRP! Well now we have our true price…or do we? Lifetime of the Vehicle I’m expecting to have this vehicle for 7 – 10 years. While the hard cost of the vehicle is known and dealt with, the costs to run and maintain the vehicle are on top of this. I did some research, and here’s what I’ve found: Fuel and Mileage Gas prices are high as it is for regular fuel, but getting into an MDX will require that I *only* purchase premium fuel, which comes at a premium price. I need to expect my bill at the pump to be higher. Comparing the MDX to my 2007 Rav4 also shows I’ll be gassing up more often. The Rav4 has a city MPG of 21, while the MDX plummets to 16! The MDX does have a bigger fuel tank though, so all in all the number of times I hit the pumps might even out. Still, I estimate I’ll be spending approximately $8000 – $10000 more on gas over a 10 year period than my current Rav4. Service Options Limited Although I have options with my Toyota here in Winnipeg (we have 4 Toyota dealerships), I do go to my original dealer for any service work. Still, I like the fact that I have options. However, there’s only one Acura dealership in all of Winnipeg! So if, for whatever reason, I’m not satisfied with the level of service I’m stuck. Non Warranty Service Work Also let’s not forget that there’s a bulk of work required every year that is *not* covered under warranty – oil changes, tire rotations, brake pads, etc. I expect I’ll need to get new tires at the 5 years mark as well, which can easily be $1200 – $1500 (I just paid $1000 for new tires for the Rav4 and we’re at the 5 year mark). Now these aren’t going to be *new* costs that I’m not used to from our existing vehicles, but they should still be factored in. I’d budget $500/year, or $5000 over the 10 years I’ll own the vehicle. Final Assessment So let’s re-assess the true cost of my dream MDX: MSRP $62,890 Taxes $7,546 Warranty $2,500 Finance Charge $1094 Gas $10,000 Service Work $5000 Grand Total $89,030 So now I have a better idea of 10 year cost overall, and I’ve identified some concerns with local service availability. And there’s now much more to consider over the original $62,890 price tag. Tying This Back to Technology Solutions The process that we just went through is no different than what organizations do when considering implementing a new system, technology, or technology based solution, within their environments. It’s easy to tout the short term cost savings of particular product/platform/technology in a vacuum. But its when you consider the wider impact that the true cost comes into play. Let’s create a scenario: A company is not happy with its current data reporting suite. An employee suggests moving to an open source solution. The selling points are: - Because its open source its free - The organization would have access to the source code so they could alter it however they wished - It provided features not available with the current reporting suite At first this sounds great to the management and executive, but then they start asking some questions and uncover more information: - The OSS product is built on a technology not used anywhere within the organization - There are no vendors offering product support for the OSS product - The OSS product requires a specific server platform to operate on, one that’s not standard in the organization All of a sudden, the true cost of implementing this solution is starting to become clearer. The company might save money on licensing costs, but their training costs would increase significantly – developers would need to learn how to develop in the technology the OSS solution was built on, IT staff must learn how to set up and maintain a new server platform within their existing infrastructure, and if a problem was found there was no vendor to contact for support. The true cost of implementing a “free” OSS solution is actually spinning up a project to implement it within the organization – no small cost. And that’s just the short-term cost. Now the organization must ensure they maintain trained staff who can make changes to the OSS reporting solution and IT staff that will stay knowledgeable in the new server platform. If those skills are very niche, then higher labour costs could be incurred if those people are hard to find or if trained employees use that knowledge as leverage for higher pay. Maybe a vendor exists that will contract out support, but then there are those costs to consider as well. And let’s not forget end-user training – in our example, anyone that runs reports will need to be trained on how to use the new system. Here’s the Point We still tend to look at software in an “off the shelf” kind of way. It’s very easy to say “oh, this product is better than vendor x’s product – and its free because its OSS!” but the reality is that implementing any new technology within an organization has a cost regardless of the retail price of the product. Training, integration, support – these are real costs that impact an organization and span multiple departments. Whether you’re pitching an improved business process, a new system, or a new technology, you need to consider the bigger picture costs of implementation. What you define as success (in our example, having better reporting functionality) might not be what others define as success if implementing your solution causes them issues. A true enterprise solution needs to consider the entire enterprise.
