TCO: How many will" the information system "cost"?

The average cost of implementation of a HRM system, according to^[1] for 2012, is up to $25 thousand: such is the average budget about 60% of projects.

Distribution of budgets of HRM projects

TEC, 2012

About 16% of the HRM projects at the same time have the budget from $25 thousand to $100 thousand, 9% of projects - from $100 thousand to $250 thousand 6% of implementation projects of HRM cost ranging from $250 thousand to $500 thousand, from $500 thousand to $1 million makes the budget of 4% of projects and another 5% of projects cost over $1 million.

According to forecasts of CedarCrestone for 2012-2013, despite problems expenses on HRM systems will continue to grow in world economy: about 50% of large and medium-sized enterprises are going to increase expenses on control automation by personnel in 2013. And the greatest increase will happen in the following regions: Australia, Asia, Canada, Latin America, Middle East and Africa. In the USA and Europe expenses on HR technologies will grow by 59% and 44% respectively.

The forecast of growth of expenses on HR technologies for different types of the companies

CedarCrestone, 2012

At least estimated to answer a question, it is necessary to calculate "total ownership cost" (Total Cost of Ownership – TCO) for each of systems considered an alternative. Crucial elements of this indicator are: the aggregate license value of the implemented system used by it DBMS and the operating system, the cost of hardware, necessary for their functioning, and cost of system support during the expected term of use of the implemented system (5-10 years). These components it is possible to supplement, specify and subdivide them into components, but they are defining.

There are two complexities connected with calculation of TCO. The complexity of such calculation, its ambiguity and uniqueness for each enterprise and a specific situation is well-known. Really, does not exist and there cannot be "a universal table" from the calculated TCO for all attendees at the market of systems, data from which it would be possible to use without processing and completion for the choice of a system, optimal for the enterprise. Different configurations of hardware, different number of users, different approaches to architecture of an information system, etc. which will lead to receiving significantly different indicators of TCO for the different companies and situations can be selected from each case. Therefore the TCO value makes sense only within comparison of systems for the specific enterprise.

The second complexity is practically not covered in different "councils" for subject. It is connected with the fact that developer companies prefer not to advertize the license cost of the products, and some do not even specify specific hardware requirements of the solutions proposed in the market. Normal reply to the request about the license cost of a product sounds approximately so: "We have a flexible system of pricing. We will be able to give you the answer only after inspection of the enterprise". It both truth, and lie at the same time.

As a rule, on products quite complex system of discounts depending on number of the purchased licenses, the used processors or stored in the database of records is provided. It is aggravated also with a possibility of use of alternative approaches to licensing of a product depending on conditions of its use at the customer. For example, the product can be licensed as proceeding from structure of the used modules and client jobs, and from the total number of users of a system.

Nevertheless, the basic prices of licenses all the same exist. Without their existence calculation of final cost and discounts would be simply impossible. It is clear, that to vendors not really to liking comparison of their products, each of which has the unique features and "is incomparable" with others. It is possible to answer it that them the developed HRM systems "without hesitating" compare the people applying for a vacant position who have on orders more uniqueness, than information systems.

In general, it is possible to select two reasons of "classification" by developer companies of cost of licenses and support of software products. The first is characteristic of new market participants with the "crude" systems. Such information systems usually require completion "under the customer" and the vendor cannot really set the price of licenses, without having inspected the enterprise and without having determined the necessary amount of completions. However, partnership with such developers is characterized by a high risk (though the example of development of BAAN Aerospace & Defence for Boeing speaks also about big prospects of some of such projects).

Use by vendor of the adaptive strategy of pricing carrying the name "price discrimination" is the second reason. It is applied by large players of the market and, in this case, inspection of the enterprise aims not so much at a research of business processes, how many determination of solvency of the potential customer. So the final cost of licenses is often determined not so much by technical factors, how many "the purse size" of the customer.

Notes