Most packaged software providers will tell businesses that Return on Investment (ROI) is the most important factor and with good reason. Packaged software will, in general, have a higher initial return on investment. They typically have lower initial investment costs (both in the software itself and maintenance).
There is a big however, though; the TCO (Total Cost of Ownership) of package software will often overpower the ROI. Although it is often the case that packaged software has a smaller up-front investment when compared to custom software, the purchase price is only the tip of the iceberg that can grow to expenditures most companies never anticipate nor adequately prepare for. More often than not, they are blindsided by professional service fees for customization or maintenance fees which are not included in the initial purchase price.
Below is just one example of how quickly costs for packaged software can add up.
Packaged Software = 250k up front + 100k per year for maintenance (including professional services time)
(650k / 5 years, 1.15m / 10 years)
Custom Development Solution = 300k billed as development is occurring (six months to one year of development time + deployment) + ~5k per year for maintenance
(325k / 5 years, 350k / 10 years)
It’s a remarkable difference in the cost alone and one that should cause businesses to consider custom development more often.
There is a big however, though; the TCO (Total Cost of Ownership) of package software will often overpower the ROI. Although it is often the case that packaged software has a smaller up-front investment when compared to custom software, the purchase price is only the tip of the iceberg that can grow to expenditures most companies never anticipate nor adequately prepare for. More often than not, they are blindsided by professional service fees for customization or maintenance fees which are not included in the initial purchase price.
Below is just one example of how quickly costs for packaged software can add up.
Packaged Software = 250k up front + 100k per year for maintenance (including professional services time)
(650k / 5 years, 1.15m / 10 years)
Custom Development Solution = 300k billed as development is occurring (six months to one year of development time + deployment) + ~5k per year for maintenance
(325k / 5 years, 350k / 10 years)
It’s a remarkable difference in the cost alone and one that should cause businesses to consider custom development more often.
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