The True Costs of Software

Computerworld - How much does "free" software really cost? That question remains at the heart of decisions made by CIOs and other technology leaders trying to decide on the software and associated hardware that will lead them into the future.
Advocates of Linux and other open-source products sometimes argue that because the software is distributed free of charge, it's self-evident that it's more financially attractive than proprietary products from companies like Microsoft, IBM, SAP or Oracle. IBM, which is increasingly pushing its support of Linux, suggests that a consensus is emerging that the total cost of ownership (TCO) of Linux is significantly lower than similar costs for competing proprietary operating systems (although it doesn't appear to extend this argument to other open-source software that competes with its own revenue-producing software).
Journalistic accounts of the spread of open-source also tend to assume that the price difference is a critical competitive advantage. "Because it is free," declared a recent Business Week cover story, "Linux is undercutting Microsoft much the way Microsoft has gutted its rivals with lower prices for the past two decades." Yet anyone who looks into the problem of measuring the TCO of software quickly recognizes how murky this field can be. "Free," it turns out, doesn't necessarily mean cheaper.
To assess the merits of these various claims, I recently reviewed a large sample of publicly available articles that purported to address the TCO of different server operating systems. The first fact to emerge was that most of the 84 different documents I reviewed couldn't even be considered studies -- they didn't capture sufficient data on the full range of costs needed to evaluate TCO, and they often based their conclusions on the analysis of results from only a single company's experiences. Yet the handful of studies that were more comprehensive revealed that the issues surrounding software TCO are more complex than is typically portrayed.
To begin with, it appears that the price of software itself -- whether it's free or not -- is so low relative to the TCO that it may have little impact on the outcome of IT investment decisions for many purchasers. In most cases, the price of software proved to be less than 10% of the TCO.
Where costs do become significant for all types of software is in the level of staffing needed. By staffing, I mean the training, maintenance, support, administration and other personnel costs necessary to run the software package efficiently. These costs can add up to as much as 50% to 70% of