Exam 13: Understanding Software: a Primer for Managers

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Managers should recognize that there are a whole host of costs that are associated with creating and supporting an organization's information systems. These include a lot more than the programming costs for custom software as well as purchase, configuration, and licensing costs for packaged software.
Firms need to constantly engage in a host of activities to support the system that may also include the following:
$\bullet$ providing training and end user support
$\bullet$ collecting and relaying comments for system improvements
$\bullet$ auditing systems to ensure compliance (i.e., that the system operates within the firm's legal constraints and industry obligations)
$\bullet$ providing regular backup of critical data
$\bullet$ planning for redundancy and disaster recovery in case of an outage
$\bullet$ vigilantly managing the moving target of computer security issues
Firms spend 70 to 80 percent of their information systems (IS) budgets just to keep their systems running. The price tag and complexity of these tasks can push some managers to think of technology as being a cost sink rather than a strategic resource. These tasks are often collectively referred to as the total cost of ownership (TCO) of an information system. Understanding TCO is critical when making technology investment decisions. TCO is also a major driving force behind the massive tech industry changes.