The Harbour Pilot

The Price and Cost of Open Source Software

There is price and cost, and there is free and not so free. Price is the amount of money that you pay to the vendor of the product for the right to use the product. Sometimes support is bundled into that price. Cost though is the price PLUS

1. vendor qualification - the time to research the vendor
2. product criteria establishment – determining the decision criteria for selection
3. product acceptance - testing to ensure criteria are met
4. product decision and selection
5. time to convert all of your documents and other files,
6. cost and time to re-train people including the temporary drop in efficiency,
7. the potential risk that the vendor will drop the software, and leave you holding the bag, and lastly,
8. support – either vendor, 3rd party, or internal gurus and help desk staff

All of these costs together make up what is sometimes referred to as the Total Cost of Ownership (TCO).
For those keen on this idea, take a look at this from 2003.

There is also a good discussion of the general issues surrounding switching your operation from Microsoft Office to open Office Compatibility and Conversion

Cost Issues for Small and Medium Sized Operations

So, this discussion is to address the costs of Open Source solutions, since we already know the price – its free. Having listed most of the sources of cost, we need to assess the implications for small and medium sized businesses, since the list above is more challenging for large operations.

Case 1 :

A small businesses might only have 2 or 3 systems to deal with, primarily desktop or laptop PCs. There may be no LAN (local area network) at all. There may not be a large inventory of current documents that might need conversion. There may be a few template documents that are used for sales and quotation purposes, some form letters and some policy guides. There may be some historical general communication files. There may be some accounting spreadsheets and perhaps some marketing and sales tools that also use spreadsheets. Perhaps the operation has a standard presentation format with graphics and logos that are used to standardise look and feel. There are only 3 people in the operation that regularly use the productivity suite that is in use.
In such a case, items 2 through 5 are of little importance, since the requirements are fairly generic. It would be nice to know that the vendor is stable, that the product will foreseeably continue to provide the product, and that some basic support is available.

Case 2 :

A medium sized business of 50 people in total, has an in-house LAN, 14 systems plus a server. They have in addition to the productivity suite installed on 12 of the machines, an accounting software package with 3 systems multi-accessing, a line-of-business application (maybe Cad or logistics or Material Planning) on four machines, and project management on two machines. In addition, the operation maintains a hosted website that provides for an on-line store complete with cataloguing and payment capability. There is an inventory of operating policies and guides, nearly 100 digital forms that are in current use, and a library of 200 spreadsheet tools split between accounting, operations and management.
The possibility exists to replace the operating systems for the LAN server and 11 of the systems to Open Source – probably a stable Linux distribution. The productivity suite can be replaced with Open Office. The line of business applications and project management all have cross platform version compatibility, and will run on Linux. The accounting systems however, is bound to Microsoft operating systems, and must continue with Windows. There are significant savings to be realised through the Open Source substitution, but the costs will be much higher (of course, the savings will be too). The vendor issues are even more important. The product qualifying steps are important, but since there are no essential differences between the product alternatives, they are not critical. However, items 5 and 8 are suddenly vital – re-training, and support.

Case 3:

Take the same operation, add 50 people and 15 systems, make the website internal and self managed, and change the line of business software and the accounting package to Open Source alternatives – suddenly you have major issues with product qualification, parallel operation and testing. You are also likely to have significant libraries of digital files that will have to be converted, including technical specification documents, process manuals, quality assurance documentation, training systems, human resources documents…
This is a horse of a different colour. The costs savings – very large. The timeline for the project – probably 12 to 18 months, the budget for conversion – possibly $100,000, and the cost savings – very dramatic. Still, not to be taken lightly.

The next several posts will address these cost elements,