One of the most important things you can do when picking out new construction management software (or hardware) for your business is to evaluate how much it’s going to cost—not just up front, but over time as well.
This is called “total cost of ownership” (TCO) and while it’s a tough calculation to make, it is absolutely critical to your business’ bottom line. After all, even free construction software has its costs. When it comes time to make an investment in new technology for your business, if you aren’t doing a complete TCO analysis, you’re putting yourself at major risk.
How do you measure TCO? There are six key elements, which we break down in greater detail below:
- License and/or subscription fees
- Design, installation, and configuration
- Maintenance and administration
- Training and support
- Efficiency and productivity gains
What will you need to purchase in order to implement the solution? Are you buying software as a service (SaaS) or something that you’ll need a server for? If you’re buying SaaS, will you need additional bandwidth or networking capacity? Will you need to replace or upgrade any of your employees’ hardware?
These are all questions that you should be able to answer with relative ease—and your vendor will be able to give you the specific infrastructure requirements of their product.
2. Licensing and subscription fees
There are a lot of different pricing models for software, and each has its advantages and disadvantages.
- Per-seat licensing fee: This is for when you’re purchasing software to be installed locally. Per-seat licensing fees are a popular option because you know exactly what the software will cost you. The downside is that if you add employees, the cost can begin to skyrocket. Often the licensing fee repeats on an annual basis to cover support and upgrades.
- Subscription fees: Most SaaS solutions charge either a monthly or annual fee, also based on number of users—although usually there is a cap on how much you will be charged, so you have some flexibility there. There are often different tiers of service, with many extra features you may need in the more expensive tiers.
- One-and-done licensing: This is a model that is rapidly going out of style, in which you pay once for the license and you have the software for the life of the product, limited to one user per license. The disadvantage to this model is that the licenses can be extremely expensive—sometimes in the thousands of dollars—which means that you may not be able to afford to purchase as many licenses as you need. That’s not to mention the fact that upgrades and version changes also require additional purchases.
When looking at the licensing and subscription fees, you should also examine support and upgrades—are they included, or will you have to pay extra for those?
3. Design, installation, and configuration
If you’re having a custom piece of software designed for your business, how much will the design cost? How much will changes during the design phase cost? Nearly all software is going to have installation costs of some sort.
You also need to keep in mind that configuration can be a significant cost, even for SaaS, and a critical component of configuration is testing to ensure that the software works with your existing systems and workflows.
You may also need to build and test integrations with existing systems. Testing can take a significant amount of time from your employees (just ask anyone who has lived through an SAP implementation!) which will, in the short term, impact productivity.
4. Maintenance and administration
You’re going to have maintenance and administration costs—there’s no way around that. There are a number of questions to ask to determine how much those costs will be.
Who is going to provide the maintenance services? Will it be the vendor applying patches and upgrades, or will you need an employee trained to do that? Will an employee need to be assigned to maintain the data within the system or control access?
Do you have an employee available with the skills, inclination, and time to maintain and administer the system?
What is the cost if you choose to have these tasks done externally?
5. Training and support
If you don’t train your employees on how to use the software, you won’t see the efficiency and productivity gains you’re hoping for.
Does the vendor provide some sort of training for employees? Is it self-service or is there a trainer available? Is the documentation a scanty FAQ page that isn’t kept up to date? That last one, by the way, is a massive red flag—if the vendor isn’t documenting their product, how can you sure that it does what their salesperson is telling you that it does?
Ongoing training is also quite important, as you will have new employees join your organization who will need to be trained—is the training offered only for a period of time, after which it becomes self-service? Will that work for your employees? Keeping their skill levels with technology in mind is really important.
Support is also important. At some point it is pretty much guaranteed that one of your employees will do something unintentional in the system and you’ll require vendor support. Is that included in your licensing fees or is it an additional charge? Is there only a limited amount of support included and what are the costs if you exceed that amount?
Unless you have (well-trained) in-house support for the technology, you run the risk of having your business come to a standstill without vendor support.
6. Efficiency and productivity gains
These two criteria are a lot softer and more difficult to evaluate than the others, but they’re likely the entire reason behind your decision to look for new tools for your employees.
Will the tool actually create the efficiency you’re hoping for? Or will it create additional work that will reduce employee productivity?
This is where knowing what the workflows are is very important. This is also why your employees need to be involved in the decision-making process, as they are key stakeholders in whatever is chosen. You need to know if the tool is going to cause them to have to do double the work because an integration isn’t available or doesn’t work correctly, or if it’s missing a critical feature that is required.
You’ll also need to have the discernment to sift through the feedback: are the concerns truly issues that will impact productivity or are your employees expressing a resistance to change?
If the latter, you will need to develop a change management process that helps to ease employee worries on that front. In times of changes intended to boost efficiency and productivity, employees are often concerned about their job security, so they may need reassurance.
What other factors should you consider before purchasing technology?
All in all, there are a lot of factors that go into identifying the true cost of software or hardware for your business. But by considering all the key elements outlined above, you’ll be able to uncover any hidden or unexpected costs before you’ve committed to anything, and that’s a win no matter how you look at it.
Are there any factors we overlooked? What do you consider important when evaluating whether to make a big technology investment for your company? Please, let us know in the comments below.