Total cost of software ownership

A decade ago, commercial software vendors would claim that their products were cheaper than open source alternatives when you considered the total cost of ownership. Free software was free to obtain, but difficult to install, configure, maintain, and support.

A lot has changed in the last decade. Open source software has improved a great deal. It would be interesting to revisit the debate over total cost of ownership. Software vendors are right to point out the indirect costs of free software. But there are indirect costs to commercial software too: transaction costs of purchasing the software, upgrades, maintenance agreements, license management, etc.

Suppose you want to buy WinZip. It’s a mature and inexpensive piece of software, selling for $29.95. What will it cost you and your company to buy it? Obviously at least $29.95. But how much paperwork will you have to fill out? How long will it take someone to process your order? How long will you have to wait? If you have a desktop and laptop computer, will you be licensed for both? Can you install it at home? At minimum you’ll have to read enough fine print to find out. Now suppose you get a new PC. Did you remember to save your WinZip installer before they took away your old PC? Do you have your license key? The more you think about it, the better the free alternative 7-zip looks.

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8 thoughts on “Total cost of software ownership

  1. Funny how one can read the same words and reach a different conclusion…the usual reading of the TCO argument goes that the purchase price becomes subordinate to the lifecycle costs, which substantially similar (eg, procurement, security lifecycle management, reinstalling / migrating, etc) between free / oss software and traditional commercial software.

    You may be in a position where you have authorization to deploy oss / free software without coordination with your administration and IT teams…this is not universally the case.

  2. You may want to note, though, that a compression tool is usually not that relevant to business. They don’t make money with zipping files and it’s not exactly what they need to do well and with maximum efficiency and minimum cost on a daily basis – usually.

    Office applications or things to manage workflows within a company are a slightly different matter. Most users won’t care whether they need to use 7-zip, WinZIP or Explorer’s integrated ZIP support. They will notice if you change MS Office to OpenOffice 🙂

    Another point to note is that many of the questions in your last paragraph aren’t relevant for the average employee just using the software. They certainly won’t (can’t, hopefully) install it on the company computers and they don’t make that decision anyway. Companies often have a legal department dealing with the trickier questions of what is allowed and what not. Also I’ve seen software companies shy away from GPL-licensed stuff entirely (which may be Stallman’s wet dream but ultimately isn’t that good a sign) – it’s sometimes not clear to the layman whether you’re even allowed to use some things in a commercial environment. The nice thing about using for-pay products there is that you can put a cost on it. There may be cheaper alternatives but they may come with an incertainty what they may cost in the future. With software licenses and support contracts you know what it costs and can be resonably sure that there are no other hidden factors.

    Of course, this also largely depends on how well-versed are the people in charge with the topic at hand. But it’s still hard to quantify exact costs for such things in many cases and certainty is definitely a merit in such cases.

    And nearly none of all that applies to the home user, naturally 😉

  3. Johannes: I agree about Open Office. I started to say something about it in my blog post but cut it out.

    I don’t have much experience with Open Office, but I hear regularly from people complaining about it. The best I’ve ever heard anyone say about Open Office is that it’s nearly as good as Microsoft Office. Open Office may be the office suite of choice for starving writers living on Ramen noodles, but I’ve never heard anyone argue that Donald Trump should use it rather than Microsoft Office.

  4. I use OpenOffice Writer and Calc and like them alright, but I picked them because I noticed that I wasn’t using that kind of software often enough to justify the cost of Word and Excel and I didn’t expect that to change. So far, that guess was right. No geek fatigue here yet 🙂

    There is one Writer component that I like better than its Word counterpart (as I remember it; it may be better now) and that is the equation editor.

  5. @John

    I doubt Donald Trump has any need for Microsoft Office. I don’t mean that he is so important and busy that he does not write. I am sure he writes a lot. But why would he use a word processor? I suspect he probably writes emails, and other short notes. Who cares what he uses?

    I write my research articles and lecture notes in LaTeX. Most of the rest is writing in GMail or other web forms.

    When someone sends me an Office document, then I open it with Open Office. And you know what? It does the job.

  6. Gabi: That makes sense. By the way, the Word equation editor was pretty bad when I first tried it, but it has improved a lot. I wrote about the improvements here. When math is really ugly in Word, it’s because the author is not using the equation editor.

  7. OpenOffice.org is easily better than MS Office was 8 years ago. Over the last year that has been more than good enough for me, for home and the occasional work use in a programming job.

    At home I find that I’m more productive on it than with MS Office, as I don’t use it frequently enough to get familiar with the new MS Office ribbon.

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