I had an interesting conversation with a fellow County employee today about the importance of figuring out total cost of ownership and return on investment.

Neither of these topics are particularly interesting in and of themselves, but in the current economic times they make all the difference in whether a government project will be funded.

First, there is the question of total cost of ownership. What does it take to get to this number? Many people would stop at the cost of licensing—especially if they have an old server lying around and the software in question is open source. After all, open source is free… right?

The notion of free software sounds great, but there is more to it than that as any proponent of open source software will tell you. Software takes support. Paid employees provide that support. So when figuring out cost of ownership, every manager should take a moment to figure out the cost of support.

Automation through technology is a wonderful thing, but while technology may drive down the costs of tasks that were formerly completed by people, the implementation and support of that technology will usually mean an increase in IT costs. Factoring IT costs into the cost of ownership is critical to knowing just how much you’ll spend over the life of the technology implemented.

Total costs for a typical open source IT project include infrastructure, implementation and support. Infrastructure is the hard costs of the servers, storage and power used by the software. Implementation is the people time it takes to get the solution in place—it sometimes takes years to pay off that initial cost if the software is difficult to implement or complex. Support is the time it takes to maintain a piece of software. Support starts out high, decreases as software becomes familiar to its users, and then increases as time passes and the software gets closer to retirement.

So, if you think that six year old piece of hardware slated for retirement is going to save you money… you might want to think again. That server is going to cost more to support. It will crash more; it will have more security issues; it will use more power. Just like our health care system, older things cost more to maintain and keep alive. Though there is something to be said for not having to spend the time in purchasing a new server—and no, my health metaphor doesn’t extend this far.

Another option to consider would be a software as a service solution (SaaS). SaaS solutions have the advantage of a larger customer base. The more customers to which you provide a service, the lower the cost. This is why a server at Amazon Web Services can cost so little per hour of use. Lots of server admins are using that service and driving down the costs of storage and power, which Amazon can pass on to us. SaaS can take the same savings a level deeper and provide a lower cost for providing a service that could be internally provided because of the scale of service.

What about return on investment? The project I was discussing with my colleague today was a chat server that ostensibly would reduce the call volume for his department. That same software would increase the options for citizens to use his service. It might have the reverse affect of increasing traffic because people would be more wiling to chat with an “operator” than to call them. In this latter scenario, it might mean increased costs for the investment—a negative ROI.

Would that negative ROI be acceptable if the public was happy with the increased service? Tough call.

In the end, I think this project shows a lot of promise. It really would have the potential for reducing call volume and increasing the number of citizens served by the same number of government employees. It is that sort of innovation that we need at times like these. We also need to be mindful of the total cost of innovation and what we are getting in return.