1. Purpose & Instructions
Build vs. Buy Tool
Purpose
This Total Cost of Ownership (TCO) calculator provides enterprises with a framework for comparing the cost of building a new application to that of buying a new software package. The table below lists the various cost categories associated with the lifecycle of an enterprise application. The categories and items in this tool should not be taken as an exhaustive list; there are spaces within each section of the TCO spreadsheet to add additional costs as required.
Cost Categories
Project management • Costs associated with preparatory work and due diligence associated with the software adoption.
• Includes requirements gathering, training, and evaluation.
Software • Software development costs in the case of building.
• The capital expenditure of software licenses and related fees in the case of buying.
Maintenance and support • Cost of upgrading and administering the hardware, application, and database.
• The support staff labor hours and costs, training labor and fees, travel, support contracts and management overhead.
Opportunity costs • Staff time allocated to the project.
• Time lost to schedule delays.
Instructions
1. Go to the worksheet labeled “TCO Calculator.” Fill in the appropriate values for each cost category (cells to be filled in are highlighted in white). Please note that this calculator does not account for the depreciation of capital assets.
2. After filling in the necessary values, go to the Results tab to see a graphical comparison of the two adoption approaches in terms of cumulative cost.
Info-Tech Research Group tools and template documents are provided for the free and unrestricted use of subscribers to Info-Tech Research Group services.
You can use this document either in whole, in part, or as a basis and guide for your own documents. To customize this document with your own corporate
marks and titles, simply replace the Info-Tech Information in the Header and Footer fields of this document.
2. TCO Calculator
Total Cost of IT Ownership (TCO) Calculator
Cumulative Costs
Year 1 Year 2 Year 3 Year 4 Year 5
Build $0 $0 $0 $0 $0
Buy $0 $0 $0 $0 $0
Build Year 1 Year 2 Year 3 Year 4 Year 5 Total ($) % of Total Cost
Project management
Research $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Requirements gathering $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Budget approval $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Input data collection $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Model/methodology development $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
End-user training $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
… $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Total Project Management Costs $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Software
Software analysis & design $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Development – client/server $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Development – Web $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Development – software localization (if applicable) $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Development – integration modules $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Development – data localization $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Development – data mapping $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Development – data migration $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Testing (code, integration, performance, user acceptance) $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Documentation $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Rollout $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
… $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Total Software Costs $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Maintenance & Support
Ongoing maintenance $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Software upgrades $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Auto-update tools $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Help desk $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Issue tracking $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
… $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Total Maintenance & Support Costs $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Opportunity Costs
IT staff time $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
staff time $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Schedule delays $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
… $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Total Opportunity Costs $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Total Costs $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0
Buy Year 1 Year 2 Year 3 Year 4 Year 5 Total ($) % of Total Cost
Project management
Research $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Requirements gathering $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Budget approval $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Input data collection $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Software evaluation $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Software selection $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Gap analysis $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Proof of concept modeling $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
End-user training $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Vendor management $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
… $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Total Project Management Costs $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Software
License fees $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Implementation fees (and/or internal costs) $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Testing (integration, performance, user acceptance) $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Configuration fees $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Integration fees $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Development – integration (if necessary) $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Development – data mapping $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Development – data migration $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Customization fees $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Annual maintenance fees $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
… $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Total Software Costs $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Maintenance & Support
Software upgrades (implementation) $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Helpdesk (beyond vendor-provided support) $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
… $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Total Maintenance & Support Costs $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Opportunity Costs
IT staff time $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
staff time $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Schedule delays $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
… $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Total Opportunity Costs $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 –
Total Costs $ – 0 $ – 0 $ – 0 $ – 0 $ – 0 $ – 0
&LInfo-Tech Research Group&CPage &P&R2006
3. Results
TCO Comparison Graph
&LInfo-Tech Research Group&CPage &P&R2006
3. Results
Year 1 Year 1
Year 2 Year 2
Year 3 Year 3
Year 4 Year 4
Year 5 Year 5
Build
Buy
Time
Cumulative Cost
Build vs. Buy TCO Comparison
0
0
0
0
0
0
0
0
0
0
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more