When evaluating royalty software you need to look at the one, three and five year total cost of ownership.
The total cost of ownership consists of implementation and support costs.
2. User licenses – The cost of a additional user licenses can dramatically affect the total cost of ownership.
Example – Hosted Solution
- 1 Additional User: $600/month = $6,000 a year = $30,000 over 5 years
Example – Stand Alone Software
- 1 Additional User = $1,500 per user + $300 a year per user (technical support) = $1,800 year one = $3,000 over 5 years.
3. Hardware – Do you need to purchase new hardware to run the software? Do you need a file server for multi-user implementation?
4. Implementation – Large companies tend to pay 1x to 2x the cost of the software for on-site implementation support.
5. Technical Support – Many stand-alone solutions require the customer to purchase a support contract. This contract covers technical support and software upgrades. The cost ranges from 15% to 25% of the software cost.
6. Upgrades – Software is usually upgraded every 12 to 24 months. A Software as a Service solution will include the cost of upgrades. Stand-alone implementation may require the publisher to pay for the upgrade and/or implementation support to implement the upgrade if they do not have a support contract.
7. Training – Does your staff need training? Will the training be done on-line or on-site? On-site training costs more; however, the trainer will usually be on-site for an entire day. On-line training costs a lot less (usally less than $200 an hour), and may even cost you nothing.
8. Customization – If you need new functionality in the future how much will the vendor charge you to add it?
9. Backup Services – Most hosted solutions include backup services; however, some charge for it. If you purchase standalone software you may need to purchase a backup solution.