TCO Comparison
Here is an example breakdown of the sort of costs you might expect
comparing a typical proprietary ERP and database solution with a
comparable open source solution.
You should note that no account is taken of the costs involved
in staffing your IT department or providing database administration.
These costs can vary widely depending upon the level of training, support
and development you intend to undertake.
They largely depend upon the extent to which you intend to modify or
customise your implementation.
Database Administration costs also vary widely with the database being used,
even among proprietary databases.
| Costs and Fees |
Proprietary ERP |
Open Source ERP |
| License: 15 users and server |
$50,000 |
$20,000 |
| Database |
$10,000 |
Included |
|
Additional component licenses |
$10,000 |
Included |
|
Implementation |
$90,000
60 days @ $1,500 |
$30,000
20 days @ $1,500 |
| Total upfront cost |
$160,000 |
$50,000 |
| Total recurring cost |
$12,600/year
18% of license fees |
$20,000/year |
|
Upgrade to next
major release |
$30,000
60% of original license fee |
Included |
| 5-year TCO |
$253,000 |
$130,000 |
When implementing a proprietary solution you generally do not have
access to source code, and therefore the costs of customisation must be
entirely contained within the implementation phase.
Modifications to proprietary ERP systems can only be undertaken by
the source code owners or their ISVs, and the scope of cutomisation which can
be accomplished by your own staff is strictly limited.
If you intend to undertake extensive customisation this cost is
not reflected in these figures.
An open source solution provides you with the opportunity and therefore
also the temptation to extensively modify the application.
Though there are no initial barriers to such an undertaking apart from the
staff costs, it is unwise to be indiscriminate about it.
Each modification you create which is not adoped into the distribution
will cause you additional pain whenever an upgraded version of the package
is released.
Your incentives to make well crafted and general purpose improvements are
therefore significant, and the skills required and costs involved are not
trivial.
The comparison therefore assumes that the ERP selected is broadly
applicable to your business with minimal customisation.
Despite these cautionary words please appreciate that the costs of
customisation and database administration within the open source community
are likely to be less than those you would encounter as users of a
proprietary system.
As an open source user you will be able to benefit from the expertise
of other users who share their knowledge and skills.
