So how much is this application going to cost me?

001-Mark_Smalley-13Aug14 v01 1200x1200whiteConsidering how much money is spent on applications – about half of an enterprise’s total IT budget – it’s surprising how little information there seems to be about the cost breakdown across the whole application lifecycle. This first question that comes to mind is how long the lifecycle is. This depends of course, and is probably between 3 months and 30 years. On the one hand you can imagine an application just being used for a specific marketing campaign. And on the other end of the scale the core systems of a life insurer may have been around for decades. But on average people say about 12 years.

If you take the average lifespan on 12 years, it’s generally accepted that the initial development takes up about 20% of the total costs. So 80% is spent after the application has gone live. Spent on what? In a nutshell it’s about keeping it both up-and-running and up-to-date. The split between these costs is 30% on operational support and 70% on maintenance and renewal. The maintenance and renewal part can be subdivided into technical change for instance to comply with new versions of a database or operating system, and changes to the functionality. The functional changes benefit the users directly, while the technical changes just ensure continuity or efficiency of service. The functional changes take up 60% and the technical changes 40%.

These figures will vary from application to application but they give a decent idea of how costs are spent. But what can you do to manage these costs? First start off by capturing the costs in a structured way, for instance by relating them to the various Application Lifecycle Management processes. Make sure that you compare the costs of various applications, understanding the similarities and differences, and exploring possibilities to benefit from sharing best practices. Finally, monitor the effect of ‘improvements’ to the processes so that you know what works and what doesn’t. More specific guidance can be found in frameworks such as ASL® 2. The Application Services Library gives a comprehensive overview of all of the processes that are needed for strategy, maintenance, renewal and support of applications. These processes can also be used as the basis of a cost breakdown.

– Mark Smalley

The IT Paradigmologist
ASL BiSL Foundation


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