July 11, 2017
July 11, 2017
Contributor: Susan Moore
Develop the discipline of application cost management by using four modelling tools.
If you work for a medium to large enterprise, chances are there are hundreds, if not thousands, of applications in your organization. Software is vital, but it’s expensive. Not just to subscribe to, develop or license in the beginning — it keeps costing money over the whole of its life.
Most organizations spend a major share of the IT budget on applications. With the challenges and opportunities of digital business demanding more software, IT organizations need to develop a much better understanding of the costs associated with running software over the entire life of a system.
Andy Kyte, vice president and Gartner Fellow, said it isn’t enough to know the big numbers.
“The CFO is not likely to be impressed by an application leader who says that they know that they spend $85 million running all the applications, but they don't know how that is distributed between individual applications," Kyte said. “How can one person possibly understand cost allocation across a portfolio so big and complex?”
Application leaders already feel rushed off their feet with all the work that they have to manage, and many of them believe that the task of trying to develop cost granularity for a large estate of applications will be the straw that breaks the camel's back.
“Such a defeatist attitude serves nobody well,” Kyte said. “It’s true that managing software costs requires time, resources and tools. Rather than seeing the problem of understanding cost distribution as impossible, the problem needs to be broken down into manageable improvement steps.”
Instead of trying to understand the costs of 1,000 applications, start by modelling the costs of the 50 largest and most expensive applications. There’s no harm in using a simple spreadsheet. There are four models that can be applied to software costs to maximize value for money.
No one role or individual can take ownership of all application cost activities. Effective cost management is the responsibility of all management and technical staff, but without common models, there can be no sharing of data and best practices.
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Recommended resources for Gartner clients*:
A Primer on Application Cost of Ownership
*Note that some documents may not be available to all Gartner clients.