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How important is the cost of software?

May 15, 2017

Over the weekend I read an article that explored the cost differences between two leading BI/Data Analytics products. It got me thinking around how the direct cost of software should be considered in the context of the strategic process of building data analytics capabilities in an organisation...

 

When a business is developing its capability to convert business data into valuable insight, the technology product selection is a critical one.

 

From the perspective of a business leader, the full TCO factors that they should think about are pretty broad, including the cost of staffing, licensing, professional services, training, etc. On the other side of the ROI equation, they should be looking at how new insights will translate to increased revenue, efficiency, customer benefits, etc.

 

However, from an IT department's perspective, unfortunately the decision can often be crudely simplified down to just the direct cost of the software. This ignores the other components of the TCO as well as the difference in benefits that different products can provide.

 

Keep in mind that the software cost for any product option is going to represent a tiny fraction of a business's operational budget. The business value returned will typically dwarf the cost of software.

 

Different software is going to be more or less effective at drawing out the maximum possible benefit for the business it is used in. Good data analytics software will allow business users to consistently create new business insights without IT involvement. If the software fails to enable a piece of analysis to happen for any reason, it undermines business benefit.

 

Business and technology leaders need to take the time to understand the full TCO story as well as determining which software will provide the most effective return on investment. It's very important to avoid the temptation to make a product selection based on direct costs alone.

 

I'd caution anybody thinking about chasing the false economy of cheaper software if it's going to compromise the business benefit side of the equation.

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