lifetime total cost of ownership of an application
TRANSCRIPT
Have you ever wondered about the Lifetime Total Cost of Ownership (TCO) of an application when you are considering a new application or
when you are reviewing your application portfolio? Every CIO / Architect / Business Manager has the inherent desire to make well informed
measuring Lifetime TCO? What are the key components of it and the different aspects that have to be considered?
decisions and avoid white elephants!
Having said that, there are several deterrents for accurately measuring TCO.. For example, no one can plan or predict decommissioning dates!
Aging, but cumbersome, applications are difficult to replace! Design decisions highly influence TCO! Evolution of Multi-tenancy (SaaS) bring
in its own share of complexity!
Long-term TCO leads to zero innovation. Poor application performance can cost more than you think! So, how exactly do you even go about
Going live (licenses, implementation, training) - $1 million
It’s so much more than the initial cost!
Software maintenance - $110,000 per year
Operation Cost (infrastructure, help desk, business
continuity management) - $140,000 per year
15-year maintenance and operations
costs - $3,750,000.
15-year cost of enhancements - $1,955,000
The initial cost of the application is just 15% of the lifetime TCO
Lifetime TCO - $6,705,900.
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Lifetime total cost of ownership of an Application
- Average time spent on the portal increased from 19 sec to 130 sec, because of advanced technologies used in UX engineering
- 30% of development time was saved using our Solution Accelerators
- The Portal can support almost one million profiles and it is further scalable
- The portal was designed in an eventual consistency model, to accommodate enormous number of activities from end users
Do all enterprises speculate on the following?
Understanding future cost & expenditure of existing application portfolio
When acquiring or developing a new application, understanding the future costs on these applications
Keeping a clear track of creation costs, operation costs and costs to change
How to measure the TCO of an application
TCO = Create + Operate + Change
At a high level, we would recommend that you take these components in a cumulative manner:
Cost to Create are generally associated with acquiring or developing a new application. Most enterprises maintain good record of these
costs.
The cost to develop / create an application and go live for the first time will include the following aspects,
The cost to develop / create an application and go live for the first time will include the following aspects,
This component actually depends more on the application design aspects which include,
Cost to Create Cost to Operate Cost to Change
License costsations
Implementation costs
Resource costs
Infrastructure costs
Other indirect costs
Cost to Create:
Costs involving day to day operations are defined as cost to operate. It is this area, where most enterprises fail to maintain proper data.
This is mainly because there is rarely a single budget line item for all the costs associated with operating an application, as budget
control and cost centers are spread across the life of the applications.
License costs
Data Center Costs
Help Desk Costs
Business Continuity
Quality Assurance
Security costs
Maintainability – upgrade releases, fix errors, minor changes
Cost to Operate:
Cost to change involves corrective maintenance costs, adaptive maintenance costs, preventive & perfective maintenance costs and all the
investment needed to modify, extend and integrate application functionalities after the initial go-live date.
Cost to Change:
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- Average time spent on the portal increased from 19 sec to 130 sec, because of advanced technologies used in UX engineering
- 30% of development time was saved using our Solution Accelerators
- The Portal can support almost one million profiles and it is further scalable
- The portal was designed in an eventual consistency model, to accommodate enormous number of activities from end users
Adaptability – business logic
Extensibility – new capability beyond original scope
As utility of applications extend, there is more risk associated with the applicatioin, thereby increasing the need for more invest-
ment in security and risk management
Larger applications involve even more changes, which increase the need for control mechanisms to maintain the quality.
This is the major area where costs are difficult to maintain mainly because of the following reasons:
Data depends on the size of applications, larger applications are critical and tend to have more data; more data requires more storage;
more storage requires more backup, thus leading to more investment.
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