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Understanding Applications Administration Costs in the IT Spend

September 2, 2008
by Travis Gathright
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The knowledge, skill, and ability necessary to administer applications often scale quite well as transaction volumes increase. While volume may drive hardware costs, complexity of the supported application or set of applications drives a major portion of IT staffing spend.

Costs remain fixed through certain thresholds of systems sophistication. The costs should be more precisely considered stepped costs. The same level of staff costs will be necessary to properly support a system that handles a single system transaction as it will be necessary for some very high number of system transactions. The nature of these costs is an important component behind the economies of scale enabled by computerization, and an important factor when deciding on an IT acquisition strategy (Single Source, Best of Breed, internal development, some mix of the aforementioned, or something I just don’t know about yet). The level of configurability, flexibility, number of interfaces, or other factors contributing to complexity will drive up applications support costs much more quickly than an increase in the amount of users committing transactions on the system.

The required sophistication of systems increases as organizations move to greater efficiency and gain a healthy appetite for new and better information systems tools. Organizations must plan to ensure the knowledge, skill, and ability is available to support systems as systems handle increasingly sophisticated clinical and business requirements.