TCO Should Include the Cost of Maintaining Skills

In some market segments, it is very difficult to justify making rather than buying software.  The cost of acquiring the necessary expertise to design and then build, coupled with the amount of funding required to maintain it over the anticipated lifetime of the product is just too high.  This inescapable fact keeps the Enterprise Software industry in business, in areas as diverse as ERP, Security, Web Content and Document Management.

Of course, the cost savings of buying in rather than making the solution are eroded by the need to customise the purchased software, and the requirement to maintain the software and those customisations.  The latter – maintaining the solution – is particularly tricky.  I recently met a corporate CIO whose policy had been strict renewal of all software vendor support and maintenance contracts, believing that would ensure their solutions remained supportable – which it does, from a narrow perspective.  The trouble was that in the 5 years that one solution had been in service, his organisation had lost all the expertise they ever had and were therefore at the mercy of organisations and businesses that had maintained their skills.

An important aspect of the Total Cost of Ownership for a solution therefore is the cost of ensuring continuous access for the business to critical skills.  From our perspective as a Consultancy, we know that this can be both difficult and expensive to manage.  The cost of courses, the opportunity cost of sending people to those courses and of giving them the opportunity to learn (and supporting that learning) quickly mounts up.   Whether you decide to incur those costs as a business, or maintain a relationship with someone who does, they will be incurred sooner or later!