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Financial Insights Into Costs For New Digital Applications

When I initially wrote my blog “Making Financial Sense of PaaS” it was to crowdsource my estimates comparing building and operating a new mobile application for a year using various platform architectures. The platform choices ranged from n-tier on-premise using licensed software to using a hosted PaaS. The blog resulted in some excellent conversation and feedback leading me to produce “Making Financial Sense of PaaS – Part Deux”, which illustrated the estimates for businesses that efficiently operate their data center resources.

These blogs have been very well-received by the community. Some have written in appreciation for raising the issue into public discussion. However, for me, the real surprising factors was the costs for a single mobile application. Most estimates I have done focused on the development and deployment costs, but few times have I been asked to show the operations costs over time. This analysis provided me with real insight into what businesses transforming into the digital world should account for in new application development. Additionally, it begs the question what does it cost to operate each individual application currently running in your business?

One respondent to the blogs that works with businesses to understand their data center costs wrote me, “there is extreme denial, waste and very few understand their actual cost. I would say less than 5% of the companies we’ve worked with can ‘accurately’ describe their current state (all assets service, with financials tied to assets) and I would say the number is closer to 1% which understand their cost and have also have a sufficient understanding of the markets products/services to accurately normalize and compare.” Also, in one of his first addresses since taking over as Federal CIO, Tony Scott had this to say about legacy apps, “Be very deliberate about killing off the stuff that’s not going to survive the move to the cloud. We’re great at launching new things but getting rid of the old stuff is part and parcel of that journey.”

Clearly, a major component of digital transformation should be a review of the current application portfolio and an understanding for how each additional application will further add to the overhead for running IT as a whole. These two perspectives address these costs for a single application in two communities, those that allocate costs on a project-by-project basis and those that manage resources effectively across the business. Ultimately, these are just the start of an important conversation for businesses evaluating their digital transformation journey.

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