How to consider all costs in crm & database procurement

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Because most organisations will only make a significant investment in a new CRM/database system every few years, they don't always consider how they need to compare the costs of such purchases. And it is vital that when comparing costs you don't just look at the cost of the software - you must look at far more than that. One useful approach to help with that is to use the Total Cost of Ownership (TCO) cost model. This report provides a basic introduction to this.

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How to consider all costs in crm & database procurement

  1. 1. . . . . ivan@itforcharities.co.uk . . http://blog.itforcharities.co.uk @itforcharities . . . . Ivan Wainewright http://blog.itforcharities.co.uk How to Consider All. . Costs in .CRM and . . . . . . . Database Procurement
  2. 2. ..........How to Consider all Costsin CRM and DatabaseProcurementOverviewBecause most organisations will only make a significant investment in a newCRM/database system every few years, they don’t always consider how theyneed to compare the costs of such purchases. And it is vital that whencomparing costs you don’t just look at the cost of the software - you must lookat far more than that. One useful approach to help with that is to use the TotalCost of Ownership (TCO) cost model. This report provides a basicintroduction to this.Why is TCO Important?Firstly, you must remember that the new database software is only oneelement within all your potential costs for a new system, and secondly, that itis not just the initial cost of the system which you need to cost – you shouldcreate a TCO for, say, 5 years.This therefore involves the comparatively simple task of comparing ‘direct’costs such as software, the supplier’s implementation services, additionalhardware etc, but optionally you could also incorporate the moredifficult/complex task of additional cost factors such as internal IT HR supportcosts, electricity, de-commissioning etc. In practise, most charities will findthat even if they just compare the more direct costs, that will still helpsignificantly, and it will probably only be the larger organisations or charitieswho implement large CRM systems who will incorporate the additional costfactors. 2
  3. 3. Costs you Should ConsiderBelow, is a list of ‘direct’ costs which you should definitely be able to calculatewhen comparing database systems (although different suppliers may ofcourse call them by different terms). Although I would expect most/many tobe needed within most CRM projects, you may not need them all or you mayof course need other factors not listed here. Use it as an example and basicmodel – break it down in the best way for you so you can compare andcontrast the costs. By doing this, you can compare different suppliers’ costslike-for-like.The Database Application Software (and associated software)• Core software / application software (including the number of concurrentusers/seats)• Additional modules• Customisation / Bespoke programming• Reporting software• Web software / web servicesImplementation• Functional Specification / Analysis & Design• Installation• System configuration / System build• Implementation• System Integration – including synchronisation with your web site ifappropriate• Supplier’s Project Management• User Acceptance Testing support• Training (SuperUser training, end-user training, training materials)• Go-live support• Data Conversion (estimate or allowance)Annual Support (Maintenance)• Application software Annual cost• Additional software annual costs• Hosting costs (if applicable)Third Party software• E.g. PAF software, banking software, new Office software neededUnderlying Database software• E.g. SQL Server• Client Access LicensesHardware and associated (operating) software• Server(s) 3
  4. 4. .........•. Clients• Communication linksYou might also need/want to add annual maintenance costs for any suchhardware and infrastructure.How to use Your CalculationsPut them all in a spreadsheet, each cost as a row and the differentsuppliers/options as columns. After doing this, you will have two “broad” costs– a first year cost (initial implementation) and annual costs for each yearthereafter. Thus, you can get a 5 year TCO; and thus you may find that whatseems to be cheaper/more expensive in the first year may be moreexpensive/cheaper over the 5 year period!More Comprehensive TCOIn terms of additional cost factors which help create TCO at a morecomprehensive level, you might include the following. Some of these will bethe same cost regardless of whichever supplier you select, or they mightbreak-down into a few groups (e.g. hosted vs non-hosted solutions).• Purchasing process• Operating Costs• Project Management• Internal IT staff• Internal Database/Marketing staff• Back-filling for project staff• Management time• Electricity and air-conditioning requirements• Floor space• Outage costs• Back-up/Recovery cost• Risk cost• Opportunity cost• Additional hardware such as UPS, racksAnd a Final Note on CostsCost is of course a significant factor in the decision of any procurement for acharity, but please bear in mind it is not the be-all-and-end-all! You need toweigh it up against all the other important factors of any databaseimplementation from functionality and usability through to the supplier itselfand how it meets all your needs. 4

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