2.5 Implementation (project) costs

"What cost this system in the window?" "Well, $12,000." And of we go with just 12,000 bucks to make the software work. Sounds familiar? It's funny how most of the time, people remember that they need some machines, or need some cables, but forget that actually hands do the work within the project, and that the persons attached to the hands are very expensive and are actually costs. So, you on day one: "we need hands, they cost money."

You can't go into to much detail at this moment in time, and you shouldn't have to. But you can setup a nice cost structure that will not be to far from reality for your project. Just think about the stuff that will be bought, and imagine what should be done, globally, with it to get it working. For the server, you need to install it, test it and roll it out. Software should be analyzed, specified, build, installed, tested and rolled out. And so on, and so forth.

If you think about it yourself, and talk to people. Don't go overboard in detail.

Easily forgotten, but part of an total cost of ownership, are the cost for the internal people, the people of the company or department themselves that are part of the project team. If fifty of your colleagues should follow a training  for 1 day, they simply cost money.  Don't make the mistake about thinking "I pay them anyway." If you are comparing e.g. software based upon these calculations, a difficult, not-user-friendly system may be cheaper first, but can cost you double in the end on internal cost (and mostly loosing production, and not generating any profits, like you should).

2.4 Annual or returning costs

You have an aunt that you invited once for dinner, and now she keeps coming back? In this document she is called "annual" or "returning" cost. You thought you paid for something, but things keep on coming, over and over, every year.

E.g. maintenance fees are a good example. You pay every year 20% of price to be able to call a help desk, or to have an engineer on site within the blink of an eye. Maintenance is a good example, but also think about routine jobs that have to take place to keep your system healthy, like regular updates. Most of the time you don't have to pay directly to a vendor, but your own people have to do it, test it and roll it out. Your fellow employees don't work for nothing.

This entry was posted on Sunday, September 2nd, 2007 at 5:00 am and is filed under TCO.