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NSF Wants To Know How Much Software Really Costs
eldavojohn writes "It's no secret that the actual cost of software is very complicated. Sure, the companies that write software are spending money on it, but when that software is released, it doesn't stop costing money. You can probably think of a number of relatively tiny things that add up — especially if you're a system administrator — like the man-hours spent patching software to avoid a nasty infection spreading quickly. The bigger debt is that old piece of software you paid a bunch of money for back in 1998 that you're critically dependent on, but it has no support and hasn't been updated in years due to any number of reasons. Well, the National Science Foundation paid Gartner almost half a million dollars to find out what it truly costs to bring an organization to a fully supported environment. According to Gartner, this hidden liability or 'IT debt' is at $500 billion worldwide right now, and in five years it will be at $1 trillion. Along similar lines, a company called Cast that makes software quality tools reported that your average business application comes with a million in IT debt (PDF). And if that's not misapplied enough for you, they estimate that the debt is $2.82 per line of code in the application and also that it's on average higher in the government sector."
It could cost $5,- per game and people would still make big profits. Illegal copying drives the price up, however.
-- Cheers!
I know companies that don't bother figuring out the 'hidden' cost of keeping their workstations or servers up to date. Then one day they realize they need to upgrade 30+ system all at once for some new piece of software they want. When they can't budget/manage/understand something as straightforward as hardware maintenance and upkeep, how are they going to understand something less physical like software 'debt' or whatever they are labeling it now.
I will shred my adversaries. Pull their eyes out just enough to turn them towards their mewing, mutilated faces. Illyria
Learning on unauthorised copies enables companies to hire a person with the needed skills. The company then buys the software that the sole person could not afford. So unauthorised copies increase sales at the corporate level.
/The argument may not work for games software sales.
The NSF wants to know something about the computer industry and they ask Gartner? Gartner, the company that advocated OS/2 and I-CASE?
Hehe. We had one of those IT department brainstorming sessions once (I was in research at the time) and they were talking about this shiny new platform that they were going to roll out, I simply asked what the cost was. They threw out some figures about how they priced it an it would cost X dollars to implement over Y years. So, I asked "does that include the cost of decommission?" and got blank stares all around... The notion that you estimate the cost of getting out of abandoning / migrating away from a product never occurred to them! Products tend to not be all that flexible, they change over time, and business needs and processes often diverge from the product or a better product comes along -- we have fairly good ideas on what the platform turn-over is going to look like, how open various platforms are, etc. We can estimate the CoD with some accuracy. So why don't we? We're still buying into products that are readily identified as "dead-ends" and screwed when they are no longer supported, needs change, etc.
Software cost = programmer's salary ... ... ... ... ... ... ... ...
+ the cost of the computer the programmer used to write the code
+ the cost of the electricity to power said computer
+ the cost of the software the programmer used to write the code (which may be $0)
+ the salary of the QA staff that test the code
+ the salary of the documentation staff that write the documentation for the code
+ the salary of the HR staff that hired the programmer, QA staff, documentation staff, etc. and ensures they receive their paychecks
+ the rent/mortgage payment for the office where the programmer, QA staff, documentation staff, and HR staff work
etc.
Obviously software cost depends on what you measure it in. For example Linux kernel is estimated to cost near 1.4 billion US dollars (at the bottom), but IF you measure this in chickens.... it could cost 35,008,752.2 chickens.
In ounces of gold it would be around 1,040,041.6 ounces. In DOW it would cost approximately 127,186
It is also possible to estimate its cost in terms of Libraries of Congress, man years and many such wonderful things, however note that many Keynesians say that gold has no value but what is 'speculated' to be value while they do not see the same thing about their cherished and printed fiat, so then we could argue that Linux kernel is worth nothing if 1,040,041 ounces of gold priced at current levels in USD are worth nothing.
It's all a matter of point of view.
You can't handle the truth.
I wonder why /. does not have a section on economics. Isn't it long overdue to have one?
So many stories really belong in economics.
We could discuss what things are worth.
We could point out stories that appear on front pages of various portals and news sites and discuss what really is going on behind the title on them, just like the title I linked to:
Stocks Rise on Renewed Hope for Fed Action
- which sounds as if it is a positive for the economy that stocks rise on 'Hope for Fed Action', when in reality, those who understand can tell you that "Fed Action" means more money printing/borrowing, which implies more inflation and debt, so rising stocks (and rising gold) in this situation means that there is an expectation of yet more inflation, so stocks will go up in nominal terms, but all US holdings will lose more purchasing power.
Isn't /. 'news for nerds' and isn't economy yet another 'nerdy' subject?
You can't handle the truth.
Oh you have to work to keep something up? No shit, never heard of that before. I mean our building we are in, we spend nothing on that. Well except for janitorial staff. Oh and lightbulb replacements. And roof maintenance. And new furniture. And HVAC maintenance. And elevator maintenance....
Seriously, when you buy something the total cost is never just the up front price. You don't plunk down cash and then never again have to spend any time or money for the thing to work perfectly. In some cases it may be direct monetary costs at certain points. The roof at work is a good example, we had to have it largely replaced a couple years ago. Not because of a problem, but because the building is like 40 years old. Had to pay tens of thousands of dollars to do that, which was budgeted. Some of it is indirect, just regular maintenance you have to pay someone for. Our custodial staff is a good example. While some of what they do, like say wash windows, is just aesthetic, much of what they do is necessary upkeep to keep the building in good condition. There isn't a precise dollar figure on each job they do, it is just a general cost that is their salaries. Some stuff has just a time cost, more or less. Like yesterday I dusted off my MIDI keyboard. Needed to be done both because the dust is annoying and because excess dust can work in to the electronics and cause damage.
Why would software be any different? Yes, you have to spend time and money above just the initial cost. You have to patch it, some software has yearly support contract cost (like say RHEL), you have to have support staff to make it work and help people with it, and so on.
I fail to see how this is a "debt" of any sort. It is a "cost" like any other. The more software you use, the more cost ther'll be not just purchase cost but also support cost. This is surprising to nobody who understands how this shit works. This is also why the price tag on software is often not a big deal. Doesn't matter is a package costs $50,000 whereas another costs $50. If the $50,000 ones saves $100,000 in support and other costs (like lost productivity) it is worth its price easily.
To me this sounds like the kind of thing a dumb manager would say: "You mean that price we paid for our software 6 years ago isn't the only thing it cost! Holy shit we have software debt!"
Wait a minute. I'm a manager, and I've been reading a lot of case studies and watching a lot of webcasts about The Cloud. Based on all of this glorious marketing literature, I, as a manager, have absolutely no reason to doubt the safety of any data put in The Cloud.
The case studies all use words like "secure", "MD5", "RSS feeds" and "encryption" to describe the security of The Cloud. I don't know about you, but that sounds damn secure to me! Some Clouds even use SSL and HTTP. That's rock solid in my book.
And don't forget that you have to use Web Services to access The Cloud. Nothing is more secure than SOA and Web Services, with the exception of perhaps SaaS. But I think that Cloud Services 2.0 will combine the tiers into an MVC-compliant stack that uses SaaS to increase the security and partitioning of the data.
My main concern isn't with the security of The Cloud, but rather with getting my Indian team to learn all about it so we can deploy some first-generation The Cloud applications and Web Services to provide the ultimate platform upon which we can layer our business intelligence and reporting, because there are still a few verticals that we need to leverage before we can move to The Cloud 2.0.
Don't forget about the risk and about the cost of opportunity. There is always a risk associated with any endeavor (well, supposed to be, until the gov't 'insures' something against risk and crashes the economy) and there is cost of opportunity - money could be spent on other things that really could provide more benefit for the sunk costs.
You can't handle the truth.
"Its okay, this project/software is using 'internal resources'"
"Say, Jim, would you mind working a few extra hours for the next 14 weekends in a row? I know you're salary, but we'll make it up to you once this project is done..."
And that, my friends, is how you completely ignore hidden costs and justify even the most lingering of projects.
At least at my company, anyway.
If they really want to know what software costs these days they need to be calculating those prices in Rupees, not Dollars
Fascism trolls keeping me up every night. When I starts a preachin', he HITS ME WITH HIS REICH!
If the costs ended there, that'd be great. But they don't.
Someone has to do the requirements gathering draft up a specification. So you need a systems analyst. Then someone needs to take that specification and turn it into a real systems design. So you need a systems architect. Then someone needs to start writing code, so you need some developers. Someone needs to test all this code, so you need some testers. Someone needs to integrate all this into the existing environment and get it up and running; so you need some systems integrators. Then integration testing must happen, so you need some more testers. And, over all of this, you need at least a project manager or two to do timelines and communicate with management. Someone has to assure the quality of this system, so you need a quality assurance guy. Someone needs to maintain the system while it's running and even during development, so you need some systems administrators. Then management gets wind that all this is way too inefficient, so they hire some "Six Sigma blackbelts" to figure ways to improve the whole process by minimizing errors. They also might hire some management consultants to bring the whole team out on a retreat and give them motivational pep talks.
And after all of that, someone comes along and says "hey, you made it do this, but it also needs to do that." Everyone groans and the timeline slips.
Lather. Rinse. Repeat.
And all you wanted to do was write some damned code!
My blog
tsa (15680) said "It could cost $5,- per game". Do you know anyone looking for an experienced TAK fortification architect/ballistic synergist?
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
The solution is obvious. Ban newlines.
Could impact "software metrics" though. "Three months and you guys have produced only one LOC? You're all fired. We're sending the job to a guy in India who guarantees 20 LOCs per day from each programmer."
Warning: this article may contain humor, sarcasm, parody, and perhaps even irony. Read at your own risk.
That would be nice and is how business used to be...but now its more about investor profits...then the rest of that stuff. Society has created an unsustainable monster of necessary yearly increases in revenue. Its no longer about generating a nice profit and making a decent living. I really think its a mind set that is beginning to come back to bite society in the ass though. Look at any main street in any small town and its pretty evident that we're in trouble. In the town I live the corner grocery store shut down when they just couldn't compete with the conglomo grocery store moved in less than a mile down the road, then the drug store that had been in business for over 8 years closed down when CVS and Walgreens decided to both move in right next door to each other in the same area as the big grocery store. Supporting businesses around them like the bakery/donut shop, appliance store, mom and pop book store, pet store, etc have all been replaced by big corporations down the road. The argument has been that it created jobs, but most of the jobs are paying far lower than the small stores and services paid that were vacated due to their demise. Business is supposedly booming the new "central" part of town sure has lots of familiar stores and restaurants but the funny part is the per capita income of the town has dropped significantly over the past decade or so since this change started. Do I think Wal-Mart needs to die? NO...but I do think in many instances the "convenience" the corporate world brings does more harm than good over the long term. Sadly I think its too late to really do anything about it.
your cost is the salary divided by the work done.
These kinds of studies often lead to stopping work because it's "too expensive" which leads to your staff sitting doing nothing. It's absurd.
I've seen many small projects which would have 1 to 2 percent improvement canceled because they were not "cost effective" and then the programmers sat there doing nothing for 2 months. You should always let your programmers work on little side projects that they are enthusiastic about as long as they make the big deadlines that you want.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
Which all pales in comparison to....
+ the cost of managements bonuses.
May the Maths Be with you!
Gartner's been saying this stuff for 20 years. In practice, the news that software has ongoing costs was used to exterminate any solution except Microsoft from large organizations.
In order to do that, non-IT departments had to be forbidden to install or choose any software at all, or they would have shown an annoying tendency to pick software that worked better for their needs. So IT had to remove all admin privileges and get Purchasing to not permit any purchase orders for software not OK'd by IT.
The larger the organization, the better the argument works. The proportional costs actually drop through advantages of scale; but the absolute cost starts to sound appalling when multiplied by 10,000, particularly when a single, generic, (Garter-quoted) number like $1000/application/year/PC (developed by dividing the whole support budget by the number of apps) is used for all apps, including handy little graphics utilities like XnView.
In theory, a department could prove by business case that some second (third...) solution to the same basic software category within the organization was justified by some benefit. In practice, this was made almost impossible to prove and was limited to graphics jobs being allowed Macs.
It was used to prevent Firefox, for instance; though free, the same "administration costs" were applied to the decision. Pleas that customers could upgrade and manage it themselves by clicking the "upgrade" button were scoffed at; one or two anecdotes of users that got themselves into a mess were multiplied by 1000 PCs to claim that vast costs would be incurred.
In short, this argument was used to take the "Personal" out of corporate PCs. Someone I know discovered there were only a few things he COULD change on his desktop; couldn't even delete the icons for Approved Corporate Software he didn't use. But he could, and did, change one icon to read "Their Computer".
You forgot:
Corporate taxes.
The salaries for the accountants, the sales/marketing guys, managers, and executives.
Advertisements (email, radio, tv, magazines).
Normal office equipment (Phones, Email, firewall, desks, chairs, pens, paper).
Website for support/advertising/patches.
IT support staff to keep the network, email, firewalls, anti-virus, and patches going.
Network equipment (Switches, routers, firewall, internet connection).
401K matching, partial subsidized office perks (gym membership, etc).
Interest paid on the money fronted by investors/loans.
Most likely a conference room for company meetings, sales pitches, etc.
Sales/Marketing expenses (trips, meetings, persuasion/entertainment monies).
Legal Fees (Trademarks, Contracts, lawsuits).
Possibly head hunter/placement fees associated with hiring your programmers, QA, HR, Financial staff.
Probably a ton more as well.