Estimating Total Cost of Ownership (Life Cycle Cost Analysis)

Analyzing not just development costs but the Total Cost of Ownership (TCO) is a critical component of ensuring value is obtained from any proposed IT project. This is largely due to difficulties in determining where costs will be incurred across software development, software maintenance, and IT infrastructure and support services.

Planning and managing a software development project is complicated. Assessing time-to-market, staffing requirements, risk factors, competitive considerations, IT infrastructure and support allocations all combine to cloud underlying cost issues.

Yet, software development costs are only a fraction of the total ownership cost.  Other factors need to be included in a total cost analysis, such as:

What happens when you include the cost of software maintenance?

How much will implementing the software project incur in support costs or discrete or opportunity costs connected with your network infrastructure?

How does software maintenance needs impact the risk profile of the project?

To answer these and other questions you need a Total Cost of Ownership model.

AN EXAMPLE OF TOTAL COST OF OWNERSHIP MODELING IN ACTION

A government agency decided to implement a software solution to integrate data from individual users of a range of services delivered by disparate departments. The objective was to streamline application processing, and to ensure information from one department was available across the entire agency on individual subjects.

Estimating the initial and future cost was essential to ensuring budgets could be controlled now and into the future. The decision to proceed was based primarily on the ability to demonstrate cost savings as part of a wide ranging cost cutting mandate and demonstration of additional value for taxpayer money.

This required a comprehensive total cost of ownership analysis, including specific consideration of the resources and investment allocations required over a 15 year life cycle. The total cost of ownership software model provided specific resource and staffing recommendations to ensure the project was delivered on time, on budget and to achieve the project deliverables long after development and implementation. The decision to proceed would not have been agreed to without an accurate estimate provided by total cost of ownership software.

WHAT IS TOTAL COST OF OWNERSHIP?

Total Cost of Ownership (TCO) includes the initial costs to implement a project together with the continuing costs to maintain, modify, train staff, house, deploy, provide infrastructure or any other cost associated with the project, including final decommissioning. TCO is an estimate which includes all direct and indirect costs over the useful life of the application which is commonly used in Full Cost Accounting systems. This Total Cost Analysis is also known as Life Cycle Cost Analysis.

HOW GALORATH CAN HELP WITH TOTAL OWNERSHIP COST ANALYSIS

Galorath’s simple-to-use SEER total cost of ownership software provides a solution to the problem of life cycle cost estimating and producing a realistic total ownership cost. SEER project management tools provide the ability to identify and quantify software development, maintenance, IT Infrastructure and IT service costs and resource allocations based on a its knowledge bases and simulation modeling. The SEER knowledge bases are compiled from thousands of real-life projects which have been normalized to provide highly adaptive and relevant financial and project scheduling information which is directly analogous to your proposed project as well as parametrics to account for things that are different than past history.

In addition to providing cost of ownership analysis for IT and Software projects, Galorath’s SEER for Hardware, Electronics & Systems model provides analysis for those domains as well.

WHY THOUSANDS OF PROJECTS RELY ON GALORATH’S SEER FOR MODELING TOTAL COST OF OWNERSHIP

Galorath’s SEER is used around the world by tens of thousands of projects, including IT projects, complex defense development and procurement contracts, heavy engineering projects and many others.

For over a quarter of a century, Galorath’s SEER has delivered state-of-the-art Life Cycle Cost Analysis with:

  • An unrivaled knowledge base of thousands of real-life projects normalized to provide standard benchmarks together with risk sensitivity indication;
  • An intuitive GUI (graphical user interface) providing macro and granular project information and an unparalleled range of parametric estimation tools;
  • Galorath’s 10 Step Software Estimation Process improves project deliverable quality instead of just improving cost estimates;
  • Early detection of error and project issues decreases project risk;
  • Simplified management of critical success factors; and
  • Superlative project documentation tools critical for continued, future project success.
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