While the “price” of software is usually an amount that is quoted by a salesperson, its “cost” can easily prove to be an entirely different amount.
This is because the “cost” of average or poor software is the price paid + the cost of extra staff required to operate and maintain it + the cost of additional software and customization required to make up for missing functionality + its negative impact on revenue, good will and customer retention + its cost to support + its cost to replace. So, let’s assume that, for every dollar paid for average software, the annual operating costs are $0.25 for additional staff + $0.20 to purchase business-critical add-ons and customization + $0.35 for loss of revenue, good will and customers + $0.20 to support the primary product and required add-ons. Add to this, $0.60 in lost write-offs to replace this software after 2 years (based upon a 5-year amortization period) + $1.50 to purchase a replacement.
This means that $1.00 average software would actually cost $0.80 annually to operate. Take this to a purchase price of $100K, and the cost necessitated by replacement at two years would be $410K. At $1M, the actual cost upon such replacement would be a very pricey $4.1M.
Now, let’s assume that the price of very good software is 50% more. In this case, the “cost” formula would the price paid - the cost reduction of fewer staff required to operate and maintain it – the cost elimination of customization to existing systems - its positive impact on revenue, good will and customer retention + its cost to support.
So, let’s assume that, for every dollar paid for very good software, the annual savings are $0.30 in amortized cost (based upon 5 years) - $0.25 in staff costs - $0.20 in eliminated customization - $1.00 in increased revenue, good will and customers + $0.15 per year for support.
In this example, paying $1.50 for very good software results in the equivalent of free software, free customization, free support and a profit of $1.60 per dollar spent. Take this to a purchase price of $100K and the annual profit would be $160K. At a purchase price of $1M, the annual profit would be $1.6M. Furthermore, assuming a 5-year amortization and 15-year life (which is historically accurate for Advantage 360 software), the total profit at a purchase price of $100K would be $2.7M. At a purchase price of $1M, the total profit would be an astounding $27M. So, cost really does matter!
These examples do not necessarily represent the comparative price range of Advantage 360 software, which is always very competitive. Instead, they are meant to point out the exceptional hidden value of its over 70,000 features and functions and the design experience of its over 200 success stories world-wide, as compare to ordinary software that is more focused on price than it is on the ultimate cost to its users.
After several years and two failures with previous software vendors in our quest for a truly convergent billing system for our wireline, wireless, data and internet business services, Advantage360’s software offered all the functionality and capability that we sought. With the threat of liberalization of the Telecoms market and the emergence of new competitive forces quickly approaching, Advantage360’s staff adeptly stepped up to the challenge and helped us meet our critical deadlines for migrating off our legacy billing system. Thanks to Avantage360 we are better poised to be more creative and flexible in our product offerings which is vital for our remaining a viable entity in what will be an extremely competitive Telecoms marketplace. We are very pleased to have forged a relationship with them. ~ CIO, Antigua Public Utilities Authority
