Build vs Buy

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BuildversusBuyTool1.xls
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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.
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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 -
Business 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 -
Business 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
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