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The Total Ownership Cost of IT Systems


It is interesting to see how the much of the industry speaks of IT system cost problems while ignoring a large part of the problem.  Software maintenance costs can be 75+% of software total ownership costs but IT Infrastructure and the cost of IT systems and services can be 60% of the total ownership cost itself.  Even if we use cloud computing most of those IT service costs don’t go away.  Help desk, data conversion, etc. is still a problem, even in the cloud.


When considering software total ownership costs we would be beyond remiss if we did not consider the costs of IT infrastructure and IT services to support the software. Research has shown that IT services outside the software development and maintenance (e.g. hardware cost, help desk, upgrade installation, training, etc.) can account for over 60% of the total ownership costs. Figure 16shows an estimate WBs with IT services to provide help desk support for 2,600 to 2,940 users for 4 years being displayed. Note as shown in Figure 16 Example IT Support Costs For An Application this is $3.3 million beyond just the software maintenance and that is only for one support item. The total cost of this IT Infrastructure / IT Services in the example is over $19 million. More time during development is user interface, usability analysis and testing, and other learning aids can have a significant impact on total ownership costs by reducing help desk support; fewer releases and upgrades can reduce IT Support costs as well.

Table 1  Gartner Projections of IT Spending
Worldwide End-User Spending (Billions of Dollars)

2007 2008 2009
Computing Hardware 382 408 423
Annual Growth (%) 10 7 4
Software 178 196 211
Annual Growth (%) 13 10 8
IT Services 748 819 872
Annual Growth (%) 10 10 7
Telecom 1,843 1,983 2,093
Annual Growth (%) 10 8 6
Total 3,151 3,406 3,600
Annual Growth (%) 11 8 6

Source: Gartner (July 2008)

SAAS Vendor View (Added August 29, 2008)

Also, when discussing IT projects with a major SAAS vendor and consultants last fall, they all indicated that in the SaaS or On Demand development, the applications were typically about 20% of the cost while setting up, installing, and operating the infrastructure was in the range of 50 to 60%. In that case the infrastructure and services provide the data base management system, the data base, the network services, security services, etc.

The applications developer has to set up the data in the data base but the applications (for typical IT projects) have a lot of commonality which lends it self to “on demand services” which can be invoked from the using application to accomplish a significant portion of the IT tasks.

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