For years, I have been reading about the costs of implementation of enterprise information systems. The numbers that are thrown around in the press and over cocktails are outrageous. It is not uncommon to hear the term “over $100 M” with regard to a project, especially in relationship to one particular vendor. I even remember in my vendor days that it would be common to hear that a particular contract was “a $30M deal.”
I now realize just how silly it is to discuss these projects in this way. It proves that Figures Lie and Liars Figure. Based on my own purposes, I can spin this story any way I want. If I want to seem like a bargain-hunter, value-driven CIO—I can give you a number that sounds pretty reasonable. If I want to puff out my chest and brag about the richness of my department, I can give you a number 10 or 20 times higher.
All of the below statements are correct, with a few numbers changed to protect the guilty.
If you want to make it sound reasonable:
• “The vendor software will cost 5 Million dollars”. (The check we write to the vendor for their own software license)
• “All required software for our project will cost 7 Million” (Add on any required third party software)
• “We will pay the vendor a million a year” (Annual Maintenance only)
• “It is less than $10 per patient day” (Maintenance only divided by patient days)
Maybe a little more:
• “The upfront costs to the vendor are 11 M” (Now we have software and implementation services)
• “The start-up costs are 15 M” (Add in the initial hardware buy)
• “Probably $17M in year 1” (Add in third-party consultants)
Now, let’s go crazy:
• “Total cost of ownership is $40 million” (We have added all the license fee, hardware and maintenance for the first 5 years along with consulting fees.)
• “TCO is $60 million” (OK, now add on all the salaries of the individuals in IT plus the salary of the end users who help with the build.)
• “Total cost calculation is $93 million” (Tag on the cost of training the employees, a full hard ware refresh in year 3, building a new office building that is required to house the IT department, decreased productivity in the first 15 ½ days on the system as well, travel to user groups for the next 10 years, as well as the t-shirts for the go-live team.)
So, I get it. These systems and projects are expensive. I also know that there are some differences and some vendors are just more expensive. It is the all-elusive value for the price or true incremental price of a particular system that is so very difficult to determine. Our current system is really automation of the paper. Being able to find the chart and to read the nurse documentation because it is all electronic is really the extent of the value. How much should we pay for just being able to find the chart vs. higher level care functions?
I don’t really know what the magic number will be when our project is done, but I guarantee that if you give me a number, I can tell you that my project cost exactly that!