By R "Ray" Wang on May 11, 2010
Apps Strategy Options Abound And Organizations Need Accurate Comparison Methodologies
Recent inquiries from blog readers and client engagements highlight a growing need to compare the cost of apps strategies. Common comparison scenarios often include:
- SaaS versus on-premise
- Upgrade versus customization
- Single instance versus two-tier
- Vendor maintenance versus third party options
- Custom apps versus packaged apps
Cost Comparisons Should Encompass The Software Ownership Lifecycle
An inventory of costs should comprise the phases of application ownership (see Figure 1). License fees, implementation, and maintenance often define the most common costs. However, additional factors by phase should include:
- Phase 1 – Selection. Costs include services such as requirements gathering, vendor selection services, contract negotiation fees, and program management.
- Phase 2 – Implementation. Costs include projects such as change management, business process reengineering, integration, customization, and testing.
- Phase 3 – Adoption. Costs include, training, testing, configuration, report creation, and customizations.
- Phase 4 – Optimization. Costs include upgrade, testing, custom development, and other integration fees.
- Phase 5 – Renewal. Costs include third party maintenance, management, and vendor selection.
Figure 1. Total Costs Must Span The Software Ownership Lifecycle.
The Bottom Line For End Users – Cost Comparisons Form The Foundation For ROI Calculations
With ROI being asked about more and more, organizations must improve their ability to calculate costs and compare benefits. Total ownership costs provide one half of the ROI equation. Costs also represent the more controllable factor in improving ROI. Accurate inventory of costs will provide organizations with the transparency required to conduct apps strategy projects and assess the impact of a technology’s benefit.
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Posted in Business | Tagged 3PM, adoption, Apps Strategy, CIO, Cloud, custom apps, customization, enterprise applications, enterprise apps, Enterprise apps strategy, enterprise software, enterprise strategy, implementation, on-premise, optimization, packaged apps, renewal, ROI, SaaS, selection, single instance, single instance erp, software as a service, software ownership lifecycle, Third Party Maintenance, two tier, two-tier ERP, upgrade, upgrades
R “Ray” Wang (pronounced WAHNG) is the Principal Analyst, Founder, and Chairman of Silicon Valley based Constellation Research, Inc. He’s the author of the popular business strategy and technology blog “A Software Insider’s Point of View”. Wang has held executive roles in product, marketing, strategy, and consulting at institutions such as Forrester Research, Oracle, PeopleSoft, Deloitte, Ernst & Young, and Johns Hopkins Hospital. His best selling book, Disrupting Digital Business, published by Harvard Business Review Press provides insights on why 52% of the Fortune 500 have been merged, acquired, gone bankrupt, or fallen off the list since 2000.
Wang is a prominent dynamic keynote speaker, research analyst, and industry commentator working with clients to transform their business models using exponential technologies. He’s spoken around the world at almost every tech related conference including keynotes for tens of thousands of people and intimate executive settings such as Davos. Ray’s clients include a majority of the Fortune 500 and Global 200.
Ray is well quoted in media outlets such as the Wall Street Journal, FoxBusiness, CNBC, Bloomberg, CNN, CGTN, Tech Crunch, Business Week, and Fortune. He has thrice won the prestigious Institute of Industry Analyst Relations (IIAR) Analyst of the Year Award and has repeatedly been in the #1 slot in the AR Power 100 list for over 10 years. Ray resides in Silicon Valley when not traveling 500,000 miles a year in the air.
