| So You Can Budget, Compare and Save.We
| |
| | in the formula above.3. RETURN ON
|
| all have struggled to find exactly how
| |
| | INVESTMENT (Roi)
|
| much custom software applications cost to
| |
| | This is very important and sometimes
|
| build, maintain, and enhance over their
| |
| | tricky variable in finding out the TCO.
|
| life. Accounting needs to know so they
| |
| | First of all you need to dollarize the
|
| can budget accordingly, HR needs to know
| |
| | benefits of the application you are
|
| so they can assemble the team together,
| |
| | building. That means translate the
|
| Management wants to know the Return On
| |
| | increased efficiency, potential growth,
|
| Investment (ROI) before embarking on
| |
| | or reduction in cost etc. to dollar
|
| implementation. Some applications are
| |
| | amount saved or earned per month. Now
|
| easy to calculate and others are not so
| |
| | estimate how many months will it take you
|
| straightforward. We all want our software
| |
| | to recover the cost of building the
|
| application to be designed, developed,
| |
| | application at that rate. I say estimate
|
| and deployed on time and under budget.
| |
| | because it is a catch-22 situation
|
| Exactly how do you calculate total
| |
| | otherwise, since you are trying to figure
|
| long-term cost of ownership or TCO? Do
| |
| | out the TCO in the first place. For a
|
| you have to stage "The Price is Right"
| |
| | number of custom software applications
|
| for applications? Not really, the formula
| |
| | Roi is around 12 months. You can plug-in
|
| is very simple. When practiced every time
| |
| | a few different values for this variable
|
| it will help you budget, compare
| |
| | and see where do you feel most
|
| different alternatives, and save while
| |
| | comfortable.4. QUALITY QUOTIENT (Qq)This
|
| creating successful software applications
| |
| | is where science meets art. We are
|
| that exceed your customer's
| |
| | calculating long-term cost of ownership
|
| expectations.THE FORMULA:First let me
| |
| | of a custom software application, which
|
| tell you a time-tested empirical
| |
| | depends on factors related to quality of
|
| formula(1),Long-term TCO = (Fx + Lr) * [1
| |
| | the application. If the application has
|
| + (Roi/Qq)](Note) 1: Empirical formulas
| |
| | fewer bugs, the QA to Engineering to QA
|
| are not proven scientifically, but they
| |
| | to Deploy cycle would be short. If
|
| can be accurately applied to most
| |
| | application is documented well, future
|
| scenarios.And I will now explain the 4
| |
| | enhancements will be easier and answering
|
| simple variables it uses:1. FIXED COSTS
| |
| | questions will be quicker. Well, you see
|
| (Fx)
| |
| | they all affect the long-term cost of
|
| Start with the technical specifications
| |
| | running the application. To measure what
|
| and better yet, sit with the technical
| |
| | such unknowns will cost us in dollar
|
| lead or architect to find out what are
| |
| | terms for the life of the application, I
|
| the fixed costs. Look at the deployment
| |
| | find it most effective to put quality
|
| diagram and find out the cost of each box
| |
| | related issues in following four basic
|
| it shows. Now consider the cost of
| |
| | buckets and rate them on a scale of 1 to
|
| operating systems they will run on, and
| |
| | 4:UsabilityReliabilityScalabilitySupporta
|
| cost of all the tools that will be
| |
| | bilityYou can put a number between 1 and
|
| installed. Here are some pointers as to
| |
| | 4 for each of them based on your prior
|
| what a typical project may incur as fixed
| |
| | experience with same team, or software.
|
| cost:Hardware CostsOperating
| |
| | If you don't have past data, select a
|
| SystemsDesign & Development ToolsDatabase
| |
| | number for each that you want your
|
| SystemsBackup SystemsHosting CostsMost
| |
| | application to have. You can even have
|
| recurring costs can be converted to a
| |
| | your own buckets of four most important
|
| fixed cost by multiplying per cycle cost
| |
| | factors. Adding these four will give you
|
| with number of total expected cycles over
| |
| | the last variable Qq needed for the
|
| the life of the application.Adding up all
| |
| | formula.
|
| the values above will give you a total
| |
| | Though the formula asks for Roi in
|
| dollar amount, which is your Fx in the
| |
| | months needed to recover the cost, the
|
| formula above.2. LABOR COSTS (Lr)
| |
| | TCO is for the life of the
|
| Your project plan should have a section
| |
| | application.WORKSHEET:
|
| on time estimates. Again, your team-lead
| |
| | If you got the idea for formula to find
|
| or architect can tell you more accurately
| |
| | TCO of a custom software application,
|
| how long is it going to take to build
| |
| | lets do an exercise with your numbers
|
| your application. Consider all roles and
| |
| | into right column on the worksheet
|
| responsibilities from systems analyst
| |
| | below:Our sample data Your data
|
| gathering requirements, engineers
| |
| | Fx: $120,000 _________________
|
| developing it, to QA testing it and
| |
| | Lr: $300,000 _________________
|
| everyone else in-between. Estimate all
| |
| | Roi: 12 _________________
|
| their hours and put it in following three
| |
| | Qq: 14
|
| buckets:Your Own EmployeesOnsite
| |
| | _________________Substituting values
|
| ConsultantsOffsite & Offshore
| |
| | in TCO = (Fx + Lr) * [1 + (Roi/Qq)]TCO =
|
| ConsultantsIt is better to multiply each
| |
| | 780kThus Total Cost of Ownership for our
|
| individual's required hours and rate, but
| |
| | sample application is $780k over its
|
| for large teams you can use averages.
| |
| | anticipated life (around 10 years). This
|
| Adding up all three buckets will give you
| |
| | figure really helps budget, compare, and
|
| a total dollar amount, which is your Lr
| |
| | save on custom application development.
|
