The real cost of new software

February 16, 2009

Making the decision to move to a new software tool typically involves getting budgetary approval. And it’s here that it can all come unstuck because the bean counters are concerned with the dollar costs they can see for each line item, not the real costs.

I’ve written before about the hidden costs of migrating your existing content; about being careful of software demonstrations given by a vendor; about making a business case for getting what you need; and about the real costs of a ‘lite’ version.

But this time I’ll tackle the real costs of implementing a new software tool and how trimming ‘the frills’ from the budget is not always the best option.

Many times I’ve heard people complain about the cost of a particular tool and the training or consulting time they need. They (and perhaps more importantly, the bean counters at their organization) forget to factor in the cost of the time required to get up to speed in a new tool.

As an example, let’s say the cost of a 5 seat license is $5000 and the cost of training those 5 people is another $2000, and the cost of a consultant to help them set up templates etc. is another $2000. So far you have a total of $9000. This is the number that your manager sees and that the finance department sees, and this is the figure they want to reduce. Let’s say they reduce it to $6000 by cutting out the consulting and only training a couple of people. They think they’ve done well.

But what about the hidden costs? The hidden costs of the amount of time (and therefore money) it takes for the untrained people to learn, the amount of time it costs for one or two people to agonize over one-off tasks like setting up templates and importing legacy content. The finance people don’t worry about this because they take the line that the staff are already employed and thus accounted for in the budget. The fact that the staff are overwhelmed by the amount of work, the lack of knowledge, the level of frustration, and the missed deadlines doesn’t count. Yet it should.

There is a real cost to the organization of doing it this way — a cost FAR greater than the measly $3000 saved by not getting the training and the consulting done in the first place. Let’s say it takes the trained person a week to train the untrained person — that’s two people out of the productivity chain for two weeks, instead of them both being out for a few days on a professional training course. And even the trained person may not know what they’re doing as they may not have had time for their learning to sink in and be put into practice.

And then, after all that frustration, FINALLY the manager says it’s all too hard and gets a consultant in at that time. But now that consulting time costs more because the consultant has to fix up lots of errors that should never have been made in the first place, and that takes more time and therefore more money

In my opinion, it’s false economy to cut training and consulting for one-off tasks from the budget.

One comment

  1. Your assessment is spot on Rhonda. To add to this, it is more than likely that the cost of short changing implementation will run into real dollars as well. This is particularly the case for cash ROI areas such as the localization benefits of a CMS. Taking shortcuts on implementation and training means a longer learning curve and therefore a longer period before the realization of both cash ROI and efficiency gains.

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