Platform vs best breed - don't guess. Calculate it!
Often enough companies are faced with the decision of using a custom solution that really fits the purpose or building something on an existing platform that has a few drawbacks.
Often enough, these drawbacks result in manual labor to make up for the shortcomings of the platform. These added manual steps amount to a workload per year or a risk with a likelihood to occur or both. This in turn translates to an average cost per year. The question is now, what is the cost of the additional system per year looking at license, support, security, single sign on configuration and maintenance. In the past with on prem installations the case was often clear. The cost of an additional system was in most cases so high, that a platform was in most cases the preferred choice.
With cloud based saas solutions the costs for adding a solution have come done considerably.
Let’s assume a simple case: We have a custom solution that helps us reduce process efforts by 30 min each working day compared to using a suboptimal process on an existing platform.
- The custom Saas solution has a cost consisting of:
- Project costs (incl. training)
- License costs
- Support an integration cost
- Let's estimate that at an average of 20K p.a. over five years
Let’s assume the employee’s salaryies are at 80K€ with 50% on top for taxes, pension, company overhead resulting in a cost of 120K€ / 230 working days /8 hour = 65€ / hour.
With roughly 250 working days we need to cover, and 30 min time spent, the employ has extra efforts of round 125 hours per year = 8125€ of cost p.a. Not enough to justify an additional platform.
Looking at the numbers, we see that the employe or multiple employees in that salary range need to save around 310 hours of work p.a. to justify an additional system that costs 20K€ p.a.
Given the fact that we expect a real benefit from the added complexity of introducing a new system and considering the risk of inaccuracy in estimations I would not start thinking about introducing a new system at that cost without saving at least saving 400h of work p.a. At that pay grade.
Given the fact that we expect a real benefit from the added complexity of introducing a new system and considering the risk of inaccuracy in estimations I would not start thinking about introducing a new system at that cost without saving at least saving 400h of work p.a. At that pay grade.
But that gives us a good rule of thumb to go by 400h of time saving at 80K€ annual salary to justify in average 20K€ system cost p.a.. Easy to multiply and adjust to different scenarios before going into any more detailed calculation.
Want help in considering your specific choices? Reach out
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