How to properly evaluate the TCO (Total Cost of Ownership) of an application monitoring solution?

 

TCO, What is it?

In our field, TCO is an indispensable tool because it allows buyers to know exactly how much money they will have to pay for a product or service.

It is a concept that helps companies determine the true cost of an investment decision.

Traditionally, the focus has been on price to determine the cost of an acquisition. However, this can be misleading, as this expense is usually only 60-70% of the actual cost.

For the application monitoring, the TCO includes :

• The purchase of the solution or License ;
• Annual maintenance cost ;
• Implementation cost;
• Operating cost (Updates, settings, security patches, electricity, etc.)
• Upstream costs of the project :
• Time spent researching on the internet to understand the topics
• The hourly costs of all the people involved in the reflection on the subject, actors or not
• Training costs

 

The share of each of these costs varies depending on the type of solution chosen (products, SaaS, managed service SaaS). It also depends on the solution’s scope. The more users the solution has, the more time and resources it takes to set up.

 

In details

If we try to evaluate the cost according to the solution by assigning values :

Product:

• Purchase of a license: €€€
• Annual maintenance: €.
• Pre-project cost: €€€
• Implementation (project): €€ (potential hidden costs)
• Operation: €€€ (hidden costs, difficult to evaluate)

 

SaaS solution:

• Purchase of a license : —
• Annual maintenance: € (risk on pricing policy)
• Pre-project cost: €€€
• Implementation (project): €€
• Operating: €€

 

SaaS solution as a managed service:

• Purchase of a license : —
• Annual maintenance: €€ (risk on pricing policy)
• Pre-project cost: €€
• Implementation (project) : €
• Exploitation: –

 

One of the problems with product and SaaS solutions is the presence of hidden costs. These costs are in essence very difficult to evaluate and they can come from different sources: hardware that hosts the solution, security patches or vulnerabilities on dependencies, advanced configuration of the solution.

In the case of application monitoring (DEM), for example, the monitoring of a CRM like Salesforce with a user scenario should be completely changed in case of an interface update by the provider.

As we can see, the SaaS solution as a managed service is interesting because it contains no hidden costs. It is the supplier who takes care of the modifications necessary for the good use of the solution. The buyer can easily project these costs over a year.

The price structure also allows us to follow the company’s evolution and adapt to its growth. The risk on the supplier’s pricing policy is thus limited.