You’ve done your homework and begun to evaluate the right Digital Asset Management (DAM) solution for your company. But in order to get funding, you need to figure out how much the project is going to cost.
Estimating the true cost of the project, or the Total Cost of Ownership (TCO),mayseem like a daunting task, but it’s critical for justifying the DAM project, predicting IT spend and ROI—and ultimately selecting the best financial solution for your organization.
So, what exactly is TCO and how can you get started? TCO is a financial estimate that is used to determine the direct and indirect costs of a product or system. First, let's look at what's typically included in the "Direct Costs."
Direct costs include software licensing fees, professional services, support and maintenance, and required hardware to support the digital asset management solution. Vendors typically do a good job of estimating the initial direct cost, but by nature they are short-term focused. After all, they need to make sure you secure the necessary funding to purchase the software and hardware. It’s therefore incumbent on the purchaser to accurately estimate the full impact of direct costs over the life of the system (TCO) by accounting for future growth needs of your business.
Two areas that require additional attention when estimating digital asset management costs over the life of the system are:
- Professional services fees: professional services can cost anywhere from 1 to 3 times the cost of the licensing agreement. Off-the-shelf products and SaaS solutions with minimum customization generally have lower professional services costs. Be sure to estimate the right amount of professional services to cover your implementation.
- Vendor licensing models: the type of licensing model you select can have a substantial impact on direct costs over the life of the project. Understanding the future growth needs of your company—and how your company is going to use the system over the life of the project (3-5 years) will help you determine how the software licensing model will affect TCO.
For example, a cost per seat model will work well if you anticipate only a few people using the DAM solution. However, if you think the system will be adopted widely across your organization, it may not make sense in the long run. A hosted Software as a Service (SaaS)model is a good choice if you have limited internal expertise or small groups of users in multiple locations. But a SaaS model is not ideal for a business that has large or growing storage needs.
The key data to collect and review in order to determine the best DAM licensing model for your business are:
- Number of CPU Processors (servers)
- Number of Seats (based on number of concurrent users)
- Number of queries by users (users’ usage)
- Volume of data (index size)
- Amount of storage required
- Bandwidth required
- Redundancy Business Continuity Planning (BCP)
- Support (tiers of support from basic to premium based on response time and service level)
- Add-Ons (future modules to add functionality and features)
- Growth (future needs, scalability)
Remember, there’s always room for negotiation—most vendors have flexibility to negotiate their software licensing and support costs. Do the math, then make sure you fully understand how the licensing model will impact TCO.
Evaluating TCO does not stop with the initial implementation or direct costs, as there are many indirect costs associated with a digital asset management project as well. It can be damn difficult to estimate all the indirect costs, especially:
- Warranty Period Support Services
- Post-implementation support (New development, features and functionality)
- Staff to maintain and support new system (types of skills needed)
- Infrastructure (rack space, network equipment, bandwidth)
- Business Continuity Planning (Redundancy)
A key question to consider is who is going to manage this new digital asset management solution? You may need to hire additional staff to support and maintain the new DAM system. According to the DAM Foundation’s salary survey the mean reported salary for Digital Asset Managers is $82,198.
Estimating all the direct and indirect costs related to the project will give you a clear picture of the true TCO. Armed with this knowledge and information, you will be able to compare vendor costs on an equal playing field and ultimately determine which vendor offers the best financial fit for your company.
Now that you understand how to estimate the TCO, you can make the right DAM choice!