Evaluate the total cost of owning software in four different scenarios
This section will help you:
Mitigate downstream contracting issues (e.g. vendor lock-in)
You may encounter these frictions as you do the work of strategic analysis. These are challenges the Recommended actions are designed to solve, or that may arise as you take those actions.
Products are typically paid for and managed by a single department with its own budget. However, a good software procurement, development process, and ongoing maintenance will draw on several different business units. Furthermore, modular software should (at minimum) be interoperable with systems across the city.
Hesitancy to procure solutions that do not offer conventional support
Customer service and support is a main feature of service contracts. The lack of conventional support channels is a common concern associated with open source software. In the previous step, you evaluated the extent to which the community is actively maintaining open source software. If it is not active, you can maintain in-house, or contract a vendor for maintenance. That will require a shift in your staffing and budgeting. Organizations like the Foundation for Public Code can help—they exist to help steward and maintain open source software.
Lack of familiarity with technical possibility
Civil servants are not well informed about the state of the art (what is technically possible and impossible, what it takes to build and maintain software, and how data, privacy and ownership should be managed). Up front capacity building and market analysis should fill this gap, but you can also hire independent experts to support your strategic analysis.
At the end of this page you will choose one of the following approaches:
1. Performing a Total Cost of Ownership (Licensing) analysis
Software ownership can take many different forms, and each will have its own cost distribution. If your market research (from the previous step) revealed one or more commercially available software solutions or open source software solutions, you will prepare a Total Cost of Ownership (TCO) analysis for each viable software option.
Perform a TCO (Licensing) analysis
2. Performing a Total Cost of Ownership (Building) analysis
If your research did not reveal commercially available solutions, consider building custom software. This can be built in-house (if you have staff with sufficient development capabilities, or budget to hire), or you can contract a vendor to develop custom software. In order to weigh these options, you should perform a TCO (Building) analysis.
Perform a TCO (Building) analysis
Consider the value of building (and sharing) software
Your TCO (Licensing) and/or (Building) analyses show the financial costs of various sourcing strategies. There are also non-financial costs and benefits associated with each. Think of the long term impact that each strategy will have on your organization.
This project is an investment in your organization’s future.
Compare options based on a broad set of variables
Specifically, consider the long-term value and outcomes associated with each strategy.
Shifting from Capital Expenses to Operating Expenses
Peer jurisdictions (two cities in the same province, for example) often share a similar set of challenges. Co-procurement is an effective strategy for sharing the cost of obtaining and maintaining open source software that fills a common need, whether (building in-house or contracting a vendor to build and maintain custom software).
Co-procurement aligns with open source software
Sharing a single software license is impossible under proprietary licensing models, but—because open source software is free to use, adapt, and redistribute—governments are fully within their rights to collectively procure development or customization services from a technology service provider and share it amongst themselves.
Co-procurement increases value for everyone involved.
Consult platforms for match-making between jurisdictions that share needs. Reach out to peers and communicate within your networks. The Foundation for Public Code provides co-procurement support as well—reach out to us with any questions!
Total Lifetime Cost of Licensing and Total Lifetime Cost of Building analyses
Strategic analysis of alternatives for addressing the problem statement, based on direct and indirect, present and future costs
Identification of downstream contract issues that might arise from specific vendors or general business models
Best Practices for TCO Costing [Total Cost of Ownership]
Technology Procurement: Shaping Future Public Value
It’s time to choose a path!
You should now have a clear sense of where your software will come from, based on your needs, your development capacity, and the maturity of the market. At this point, you should be able to choose a path and write your RFP accordingly.