Madrid, Jun 13, 2023 – Once upon a time, in a less complex and advanced era, owning software was no problem at all: the owner would hand over a package of tapes or disksto the IT team, who would patiently install them sequentially on the company’s mainframe.
A small team of engineers would operate and maintain this main computer, which was housed in a special room that required a good coat to enter. Sounds like prehistoric times, doesn’t it?
Of course, progress is unstoppable and more sophisticated software products began to be marketed, requiring a different infrastructure and much larger spaces to house an army of servers and engineers. Everything is moving at such a frenetic pace that the term “fast software” has been coined.
In this high-speed context, it is worth slowing down and analyzing the total cost of ownership (TCO) of any type of enterprise software, including Customer Communications Management (CCM) software. The TCO metric allows calculating the money spent on any asset over its life cycle, which includes the acquisition, maintenance, and operation of that asset.
In fact, it is not easy to estimatethe TCO of any business investment, especially software. Companies must make safe investments and consider not only upfront expenses, but also operational and software decommissioning costs. In addition, TCO can include incremental savings and revenue streams generated by capital investments.
In view of the above, it is clear that calculating TCO, may require in some casesa complex analysis in which the two main cost categories for traditional software must be borne in mind.
Main cost categories fortraditional software
Hardware-related costs: servers and energy
Servers are expensive, but they are only the tip of the iceberg when it comes to the cost of modern IT products. They need to be provisioned to function properly within the company’s infrastructure, and then maintained and replaced from time to time.
Servers needabout 50% of total energy costs ofcorporate offices to be up and running.In turn, in a kind of vicious circle, they generate substantial amounts of heat. Cooling costs account for another 30% of the eight-figure energy bill that large companies typically pay.
But why is energy expenditure so high? Because of the need to establish redundancies. Ensuring system uptime means dealing with unforeseen events, whether they are peaks in demand or downtime caused by a power failure or other major event.
Redundancies are not complicated, but they are expensive. Solving a system failure is theoretically simple: itjust requires building another identical and independent data center in a different location. But of course, the costs of this duplication are stratospheric. Add to that the €15Mthat large companies spend each year on over-provisioning to cover peak demand, and the recent >250% increase in electricity prices, and bill amounts quickly rocket.
There is already at least apartial solution to the hardware cost problem. Companies can rent server space through IaaS (Infrastructure as a Service) providers such as AWS or Microsoft Azure, which offer a somewhat more cost-effective option. However, it is not worth getting that excited about this solution, as recent increases in rental rates indicate that this alternative will not be viable in the long term.
Risk-related costs: technology and resources
The need for CCM software solutions to always be operational to meet customer requests is what drives up risk-related costs: If the solution does not work quickly and permanently, this will have a strong impact on the customer relationship and thus on the company’s business.
Consider the typical example of a policyholder who calls his insurance company in anguish because he has had a major accident and needs assistance and to file a claim as soon as possible. The risk of losing that customer is high if the company cannot send the digital forms soon because their customer communications platform is down due to a server overload.It is a risk that insurers simply cannot afford to take.
In today’s world, technology is everywhere, and it also plays a key role in customer communication. Without technology, there is no effective communication. Therefore, to manage these risks and mitigate these types of failures, the technological and human resource costs involved must be considered.
In an environment where hackers are rampant, it is necessary to invest heavily in cybersecurity technologies and monitoring software to ensure that all servers are up and running and not compromised.
But humans must always monitor technology, so companies also need skilled employees to keep an eye on software and take actionif necessary. In the case of multinationals, they must set updedicated teams that provide 24/7 coverage, monitor physical and digital security, equipment operation and performance, and troubleshoot incidents. Quite a regiment.
In addition, companies need to pamper these teams, as well-trained people with specialized technical knowledge are highly sought after in today’s market. The war for IT talent is fierce. This means that companies end up incurring more personnel costs than they initially thought.
End-to-end solution: moving from products to software services (SaaS)
If the cost of ownership is tied to a product, then the solution is to stop buying products and contract software services instead. The advantages are undeniable:
- Hosting and management costs, as well as all variable operating costs, disappear from the equation and are replaced by a fixed annual access fee.
- The valuable concept of cost predictability, so necessary for companies and their budget projections, is introduced.
- The total cost of ownership of the solution is reduced, fixed,and unambiguously identified within the annual operating budget.
These types of SaaS solutions help focus on exceeding business objectives, without having to worry about how much of next year’s budget might be affected and grow just to get the same results.
About DocPath
DocPath is a leading enterprise document software company that offers its international customers the technology that allows them to complement their ERP and implement advanced Document Output Management, Customer Communications Management and document software pooling processes.
Founded in 1993, DocPath is based in Europe, USA and Latin America and is present with its Solutions in companies around the world. Among its customers there are prestigious banks and top-tier corporations, facilitating the difficult and complex task of designing, generating and distributing their business-critical documents. DocPath keeps a strong commitment to R+D+i, an area to which it allocates a large part of its revenues, and in which lies one of the keys to its success.
For more information, visit: www.docpath.com.
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