September is when many businesses start looking at next year’s budget. If new software, a website rebuild or a custom system is on the list, it’s worth thinking beyond the headline figure on the quote. Software costs rarely stop at the quote.
Software costs have a habit of adding up to more over a system’s lifetime than anyone expected. Not usually because suppliers are hiding anything, but because the ongoing costs are spread out, paid by different people and easy to overlook when you’re comparing proposals.
Here’s what to include so your budget reflects your real software costs.
Think in years, not in launch dates
The most useful shift is to budget over a realistic lifetime rather than for the launch alone. For most business systems, looking three to five years ahead gives a fairer comparison. A subscription that looks cheap per month can add up. A custom build that looks expensive upfront might have low running costs. You can only compare them fairly over the same period.
This is sometimes called total cost of ownership. The name is dull. The idea is very useful.
The costs to include
Which of these apply depends on whether you’re buying, building or doing a bit of both.
Costs for off-the-shelf software
- Per-user pricing. Many tools charge per person. Budget for your team as it’ll be, not as it is, if you’re planning to grow.
- Plan upgrades. The feature you need may only be on a higher tier. Check which tier you’ll realistically need within a year.
- Add-ons and extra usage. Extra contacts, messages, storage or integrations are often charged separately.
- Price rises. Subscription prices can change. It’s sensible to allow for some increase over the period.
- Setup and configuration. Getting the tool configured properly, whether in-house or with help, is a real cost.
Costs for custom software and websites
- Hosting. Servers, databases and storage, which can grow as usage grows.
- Maintenance and security updates. The underlying frameworks and components need keeping current.
- Support. Someone to fix problems and answer questions, usually on a monthly arrangement.
- Improvements. Once people use a system, they’ll want changes. Budget for a steady stream of small enhancements.
- Third-party services. Email sending, maps, payments, SMS and other services that custom systems often rely on have their own fees.
The cheapest option at launch and the cheapest option over five years are often different things.
The internal costs everyone forgets
Some of the biggest costs never appear on an invoice.
- Staff time during the project. Workshops, testing, feedback and decisions all take people away from their normal work.
- Training. Initial sessions plus training for new starters later.
- Data migration. Cleaning and moving data takes time, whoever does it.
- Running two systems. During a switchover, you’ll often pay for old and new at once.
- A dip in productivity. People are slower for a few weeks while they learn. Plan around busy periods.
Don’t forget the upside
Budgeting isn’t only about costs. Estimate what the new system should save or earn: hours of admin removed, fewer errors, faster invoicing, more enquiries followed up. Be conservative and specific. “Two hours a week less retyping for the office manager” is more credible than “improved efficiency”.
Comparing realistic costs against realistic benefits gives you a much better basis for a decision than a single quote figure.
A simple budgeting exercise
For each system you’re considering, make a list with three columns: one-off costs, yearly running costs and internal time. Fill in everything you can, and mark estimates as estimates. Multiply the running costs by the number of years you expect to use the system and add the one-offs. Then do the same for your current setup, including the time people spend on workarounds.
Seeing both sets of software costs side by side often settles the argument quickly, one way or the other.
Questions for any supplier
- What will this cost us each year after launch, including hosting, support and licences?
- Which costs rise as we add users, customers or data?
- What’s typically needed in the first year after launch that isn’t in this quote?
- How much notice do you give before price changes?
Planning your next year
If you’re setting a technology budget and want a realistic view of what a project will cost to run, not just to build, we’re happy to help you work it out. Our digital transformation service is designed to give structure to exactly this kind of planning, and for bespoke builds, see custom development.
