Inverhuron Business Information Services Inc

Email: info@ibisolutions.net
Tel: +1.519.894.1464

Total Cost of Ownership

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.

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 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.

TCO Comparison Example for an ERP

Costs and Fees Proprietary Open Source
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 (18% of license fees) $20,000/year
Upgrade to next major release $30,000 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 customisation 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 adopted 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.