An important factor in the buying decision for any large capital purchase is determining the total cost of ownership (TCO). Learn more about how to complete a proper TCO analysis and avoid early sources of project failure: http://ap.pn/2cLqWDj

1. Avoid the Two Biggest Mistakes
in Software TCO Analysis

2. An important factor in the buying decision for any large
capital purchase is determining the total cost of
ownership (TCO).
It’s an imperative assessment if you want to have
a system that fits your needs, provides the highest benefit,
and has the lowest life-cycle cost of ownership.

3. For Example:
When buying a car, instead of just the selling price,
you think about:
Expected breakdown
frequency
Repair costs Gas mileage

4. The same should apply when evaluating a multi-million
dollar software investment.
Failed IT investments are often in the news.
Knowing how to assess TCO is therefore very important.
Let’s have a look at some common mistakes…

5. Mistake 1: Only Using Hard Cost Input Numbers
Don’t choose a software because its costs are easy to
define and low.
This ignores key factors such as:
How the software sits
with users
How easily it can
be adjusted

6. Traditional software was often easily measured,
e.g. management software increases output
by 10%.
Newer software designs are more complex.
They incorporate difficult to quantify factors,
such as built in communication.
How will this affect your
decision time?
How will this affect your
competitive advantage?

7. Mistake 2: Not Accounting for Unplanned Events
Unplanned events will inevitably change your business plan.
Think of the advent of the
internet in the early 1990s.
Think of the explosion of
mobile communication in the
last ten years.

8. How can you prepare for the unexpected?
Establish potential costs for both small changes,
as well as core logic changes.
Accept that at some point your software will have
to be adapted to meet new conditions.

9. The Right Way to Build a TCO Model
Application start-up costs:
Software licenses
Server and infrastructure costs
The cost of training users
Costs of adaptation:
Expected frequency of changes
Cost per change
On-going support costs:
Maintenance costs
Upgrade costs
Internal costs
Organizational benefits:
Improved productivity of users
Better insights
Efficiency of communication
Improved management control

10. There are usually many factors that account for big
scope, long term projects getting derailed.
The seeds of failure are often planted early.
A complete and proper TCO analysis can help avoid
these early sources of project failure.

11. Learn more