Agile Software
Financial Risks in Software Projects: Ignoring TCO
When choosing a vendor to develop your software, you must consider all costs involved in the engagement — not just the operational expenses of the project. We’re talking about infrastructure maintenance, software licenses, corrective maintenance, and more. These expenses make up the Total Cost of Ownership (TCO) of the software.
In practice, the higher your investment in software development quality, the lower your future expenses. Still, most people ignore TCO in the early stages of a project and end up losing money while trying to save!
TCO (Total Cost of Ownership) represents all expenses associated with acquiring a product or service. In software projects, this includes development, licensing, deployment, hosting, maintenance, support, training, future upgrades, day-to-day operations — and even potential unexpected costs.
Development costs seem like the easiest to estimate — they’re right there in your vendor’s quote. But looking at development cost in isolation is a trap: how the software is developed will define your long-term needs.
Depending on the technologies used, you might have to pay licensing fees and rely on vendors to keep those services active. That means, in addition to direct expenses, you become vulnerable to vendor-related costs, such as price hikes or lack of support.
Rolling out new software might require operational changes, network upgrades, or new infrastructure. You need to account for all of this before development begins to ensure the investment is viable — and to prepare for possible hiccups.
A well-performing system needs to handle many simultaneous users. Your dev team should guide you toward scalable hosting options that match server availability to user demand, helping you avoid unnecessary hosting costs.
Well-written, maintainable code makes it easier to fix bugs and implement new features down the line. Also, having a dedicated team for support and maintenance helps boost performance while cutting back on wasted time and resources.
In short, cutting corners to save money early on — by compromising software quality or ignoring long-term considerations — can be a costly mistake. You could end up with software built on obscure technology, complex architecture, and poorly written code riddled with bugs. Fixing it later will require more time, more people, and more money.
So when you’re planning software for your business, take the full picture into account before choosing your development partner! Remember: a quality project might cost more upfront, but it significantly reduces your mid- and long-term expenses.
During the planning phase, be sure to crunch the numbers and choose professionals capable of delivering high-performance, scalable, and maintainable software. After all, investing in quality is the only way to reduce your project’s TCO — and boost the results of your operation!
By Joana Kerr
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