By Pavan Gourissetty, product manager, Xerox Content Management, Large Enterprise Operations, Xerox
For years, organizations have invested in complex IT solutions without a true assessment of value and potential return on investment. However, the concept of total cost of ownership (TCO) has gained popularity, and today’s buyers have access to more information than ever before. And in today’s market, the need for cost reduction, and growing consumerization of IT, mean new priorities. Every technology leader is now measured on business efficiency and profitability.
Enterprise Content Management (ECM), which can deliver stellar benefits such as speedier access to information, efficiency, and faster processes can be particularly difficult for an organization to assess. Pricing structures are often as complex as the product offering, with literally thousands of options for customers to consider when pricing a product configuration. As a result, it’s difficult for customers to understand and control the TCO of ECM.
Let’s drill into why TCO is such a critical measure when choosing ECM (or any enterprise software), by looking at some traditional implementation costs, with my own assessment of typical “gotchas” (that often lead to additional resources and costs later to fill the gaps):
- Labor costs: You need to hire talent to do infrastructure setup, training, rollout, and knowledge transfer. There is a pretty good chance of finding the right mix early on, perhaps 80%.
- Training costs: You’ll want to assure everyone can use the solution. The probability of training all users at once, comprehensively and without gaps, is about 70%.
- Roll out: You may roll out to multiple geographies, with training. I estimate an 80% probability of completing the full training, without gaps, in one go.
- Maintenance costs: You’ll want to maintain applications and operating environment. There is an 80% probability of never running into a snag.
So let’s calculate the overall probability of hitting the “jackpot” of a quick, seamless, highly adopted, and solidly maintained solution. By multiplying the numbers above, we arrive at 35.84 percent. It’s clear that as complexity grows, an organization’s ability to successfully roll-out enterprise applications is reduced.
That being said, IT leaders are well served by looking at total cost of ownership, and looking for capabilities that will reduce the traditional, bottomless-cost approach of enterprise software. They must consider these three factors when investing in an ECM solution:
1. Cost: Consider more than just the base price. As shown above, total cost includes implementation, labor, licensing, accessories, and more. It’s often not immediately clear what “extras” are required to deliver a working system, allowing costs to quickly spiral out of control.
2. Keep your options open. Consider how a low-cost, subscription-based model, hosted on-site or in the cloud, offers minimal upfront investment. Additionally, it may be paid as an operating expense rather than capital expense.
Simplicity: To deliver immediate value, a solution needs rapid deployment. Costs are lower when fewer people are needed to implement it, due to a system’s simplicity. Solutions should be adaptive and user-friendly.
3. Customer Choice: Many major vendors have proprietary lock-ins. Consider the impact of being locked in to one vendor. If the cost of maintenance, for example, is driven up, can the contract be broken?
By fully understanding the TCO before signing the contract, IT leaders will avoid running into hidden costs down the road and keep their bottom lines intact.