What does business software really cost?

Posted by tED magazine on Friday, September 23, 2011

By Stacey Pandeloglou

Distributors have come to realize that there is definitely a cost to owning and maintaining business software that goes well beyond the perceived price of the software itself. There is, of course, the cost to actually license the software. Typically this is a one-time event and depending on the type and brand of the software, the cost can be in the thousands, even hundreds of thousands of dollars.

Several factors today are changing all of this including Software as a Service (SaaS) and various "Cloud" offerings.  The cloud is where someone else manages the server, and users access the software via their desktops connected to the internet.  These solutions often do not charge for the license up front, all at once, but instead are paid as a monthly fee.  Also, it is often necessary to purchase the implementation fees even if the software is paid for monthly.  These solutions may not necessarily cost less over time but they do make getting started with a new software application more affordable.

Open source is a game changer in bringing down the cost of software to more affordable levels. In many cases, the open source software may even be free. A good example of this is PostBooks, an open source ERP software offering available from xTuple. This product has been downloaded over 500,000 times and is in use all over the world – with no licensing fees!

Beyond the cost of the software there are fees and expenses that should also be considered in the total cost of ownership – in other words,  how much does it really cost me to run this application? These additional expenses include hardware, maintenance, service and support -- not to mention YOUR time and effort.

Here are some simple questions to ask when evaluating ERP systems.

• Does the software selection require an all new hardware investment?
• Can it run on Linux, Unix or Microsoft?
• Can it run on all mobile devices?
• Will your users need new desktops?
• Can the software integrate to the third-party products that you may have already purchased?
• What is the maintenance charge (as a % of the license fee) and what happens if you stop paying it?

Open source can be considerably more flexible in lots of ways including hardware options. As one provider of open source products states,  “the fact that software can run on a Windows, Mac, Linux server or desktop may seem like a small thing but can actually save you thousands of dollars.” Being able to use the server of your choice, as well as your existing hardware, puts you in control and provides flexibility not possible with many software options.  Open source doesn't necessary mean that there are no costs, but it certainly does mean lower costs and more options. 

The bottom line - open source distribution software can provide the freedom and flexibility for you to make the choices that are right for YOUR business..

For more information on open source software for distributors, please contact me at stacey@dtgworldwide.com.