Understanding the Cost Implications of your Software Technology Purchase

TL;DR

Software tools ≠ physical tools
One-time costs are likely to be periodically recurring costs
Don’t let “technology debt” impact your competitiveness

Moving from pen and paper systems to software systems can almost assuredly bring efficiencies to your business. But it’s important to understand that software systems bring with them an ongoing upkeep cost and neglecting that upkeep can quickly turn cost savings into cost nightmares that can harm your firm’s market competitiveness.

Making an investment in software is not like making an investment in, let’s say, a screwdriver for each of your technicians on a particular service line. They both solve a particular problem. But even if they’re both capital expenditures, most screwdrivers do not need maintenance. The screwdriver, with use, will eventually wear down and require replacement. But there’s nothing complex about that replacement - you replace it with another fairly single-purposed screwdriver.

Software is complex. It can do many things, serve many purposes. Software can integrate with other software, potentially adding business value but further increasing maintenance complexity in the process. Software runs on hardware, and hardware has a discrete life cycle and its own maintenance issues. These complexities add up. Failure to account for and properly manage life cycles can leave your business dead in the water (in the case of hardware failure, or a broken integration, etc.), open to disruption by competitors (legacy issues, etc.), or worse, open to costly security breaches (end of life apps, operating systems, etc.).

As part of your initial software investment, the vendor or third party solution integrator will have built in so called one-time costs to support implementation and, where applicable, migration. Each new project, software or not, has a cost so you’ll write it off. But it’s vital that you keep in mind that past the implementation, past the initial migration to the new software, and likely beyond the ongoing software maintenance fees, any solution requires upkeep, whether that’s done in house or outsourced. Outage scheduling, patching, testing, and releasing back into production should be a regular, budgeted, occurrence (and hopefully you invested in at least one comparable non-production instance, to mitigate some risk here).

Periodically, even staying with the same software, a major new release could require a whole new project to be spun up to plan and test and make a (hopefully smaller, less costly) migration happen. It’s smart to align these projects with your hardware refresh cycle, but that also brings risk in trying to compare performance before and after (Was it the new hardware that caused the issue? The new software? The new datacenter? Some combination thereof?).

And finally, with any commercial software, there’s product end of life. Maybe the OS has reached end of life and the software doesn’t run on a newer OS. Maybe the vendor has created or acquired a newer, different (More robust? More lean?) software and has thus sunset yours. Maybe the computing architecture it was designed for has went the way of the dodo. In any case, fighting the inevitable won’t help your business. It can only hurt it. Aging hardware brings with it increasing support costs and increasing risks. Being one of few companies running a particular software, or software built on dying languages, or software underpinned by extinct run time environments, gives suppliers pricing control over you and makes it difficult for you to staff supporting personnel. So here at end of life you have yet another “one-time” migration cost, not to mention selection cost, for the replacement software.

Software, unlike the screwdriver, requires constant change. Failure to understand this, and plan for this, can contribute to the failure of your business. Even with moving your software to the cloud, removing 99% of the hardware component out of the complexity equation, there is still a software life cycle to consider and manage. Do not rely on moving to the cloud to eliminate your need for IT management. Someone still needs to understand your business enough to navigate it successfully through the ebbs and flows of the life cycle.

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