Total Cost   of   Ownership     
          Reduce Software and Labour Costs  




Open-Source TCO x2 Cheaper


While open-source vendors like to play up the savings they offer on IT software costs, what you’re really likely to be interested in is the Total Cost of Ownership (TCO). With a move to open-source your TCO could be reduced by about 50%.



Software Costs


As software costs typically comprise about 20% of total IT costs, and as for a large organisation moving to open-source effectively reduces the software costs to zero, the savings on your TCO is likely to a useful, but modest, 20%, all other factors being equal.



Developer Productivity


However, all other factors are not necessarily equal. As we’ll discuss in more detail in the subsequent articles on productivity, the way in which BI has developed over several decades is intrinsically inefficient. By changing the way in which developers are deployed and by having access to a BI suite that supports a more agile way of working horizontally across the stack, substantial savings in developer labour costs are achievable.


On the assumption that:


*  For a Big-4 vendor BI suite, the TCO breaks down as labour (70%), software (20%), and hardware (10%),


*  About one third of labour costs are unrelated to BI suite productivity,


*  About 50% of the BI suite productivity-related costs can be saved by changing the way in which developers are deployed (a conservative estimate based on measurements of productivity across a range of tasks), and


*  Pentaho is well suited to this new way of working (horizontal partitioning),


then the reduction in the TCO on moving from a Big-4 vendor BI suite to Pentaho is about 43%.



Broader Business Benefits


Beyond the savings in the IT TCO, there are also the knock-on benefits to the organisation as a whole from developing and deploying IT solutions more quickly. The impact of a faster turnaround is difficult to gauge, but it’s not unreasonable that the net benefit to the organisation as a whole would be equivalent to a reduction in the IT TCO of about 7%, so that the effective reduction in the TCO on moving from a Big-4 vendor BI suite to Pentaho would be around 50%.



Costs of Transitioning


But bear in mind that these savings that can only be realised once the transition to Pentaho has been completed. During that transition additional costs will be incurred due to the overheads involved in maintaining two sets of hardware, software, and developers. So, the most promising use cases for Pentaho are new developments (for existing applications you need to work out the pay back period – offsetting the cost of redevelopment against the reduction in licence costs and the increase in developer productivity).


In general, if you’re putting forward a case to make a transition from OBIEE to Pentaho, you’re best to illustrate your comparative projections over a ten year period. Over these timescales, the benefits of transitioning are likely to be compelling, particularly if your organisation’s use of IT is growing steadily.