Software costs


This post has two parts:

Part 1. Total Cost of Ownership

Part 2. Are you looking at the right prices?

Part 1. Total Cost of Ownership

I often hear from my clients that Open Source Software costs less compared to commercial software. These days most companies are trying to reduce their costs and the desire to save on software is perfectly understandable. However most people tend to overlook the elephant in the room. Wise men look deeper than just license costs for the software. Yet, the license cost (and hardware cost) are two easiest categories to notice. Everyone can point to the bill from the hardware or software vendor and name exact amount, up to the penny. However I rarely meet people who have the command of the true costs of the project. Just look at the picture below. Do YOU know what your true project costs are?

software_costs

Open Source vendors, such as Red Hat and alike play this to their advantage. Their so called “cost calculators” completely ignore true project costs. They even put disclaimer in tiny font size below heir “cost calculators” that only software license cost is included, but none of what is shown “below the water line” above is considered. I think this approach is misleading and not fair. Companies need to be able to compare project costs based on a complete Total Cost of Ownership model, which includes those hidden costs. Several such examples of the TCO model were published on this blog in the past couple of years.

There have been many industry studies on the true cost of projects, including one from Forrester Consulting. Here is a summary of their findings:

forrester

I hear you say – what is an outage cost? It never happens…

Until it does. Ever heard of an outage at the Royal Bank of Scotland Group in 2012? Fascinating article to read! It all happened because of the software glitch. Analysts estimate that this outage cost to RBS was between $100M to $200M. We all wish this never happens, but it does. What is the license cost of the software compared to this massive $200M loss?

Here is another view on the average cost of downtime per industry (Source: ITG Value Proposition for Siebel Enterprise Applications, Business case for IBM System z & Robert Frances Group):

downtime

Next time you talk to your IT vendor, ask them about the true Total Cost of Ownership, not just the purchase cost of hardware and software.

Part 2. Are you looking at the right prices?

Now that we have looked at the TCO, I want to bring your attention to the fact that top of the iceberg (acquisition and support) can cost you less with IBM software – even when you completely ignore the rest of the TCO discussion. Are you looking at correct pricing model for IBM?

For example, WebSphere Message Broker (now called IBM Integration Bus), can actually cost you less than many of the support packages for Open Source ESBs (Mule, JBoss, etc.). The trick is to compare like for like functionality and select the right package for the Message Broker, which  comes in Express, Standard and Advanced versions. Express and Standard will cost you less than Mule or JBoss, while Advanced costs more, but it has a lot more function than those OSS products, not to mention superior performance, manageability and all the other TCO elements we discussed in Part 1 above.

Another example is WebSphere Application Server. The pricing model for WAS is much more flexible than any other vendor offering. Here is an article about the TCA calculator to compare WAS and JBoss license and support costs.

tca_tool



Categories: Cost & Licensing

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5 replies

Trackbacks

  1. New license model for WebSphere App Server | Why WebSphere? Blog
  2. Developer point of view on the App Server debate | Why WebSphere? Blog
  3. WebSphere vs. JBoss license cost calculator « Why WebSphere? Blog
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  5. WebSphere MQ vs. Red Hat JBoss A-MQ cost calculator « WhyWebSphere.com Blog

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