Stefan Schoenmaker | 29 September 2022

Making the total cost of ownership of your IT landscape visible

The total cost of your IT landscape in the Hospitality Industry consists of initial costs and ongoing costs. 

Total cost = ⅀ Cx

C1: Initial costs

C2: Ongoing costs

This article discusses three types of IT landscapes. In the following table we share a breakdown of cost components per IT landscape. By calculating those costs you can get a rough idea of your Total Cost of Ownership (TCO). 

Table 1 - Breakdown of cost components per IT landscape

In-house

Usually, this IT landscape relates to the non-availability of a suitable market solution. Software can be built by the organisation itself, by a third party or it can be acquired and customised.

Initial costs involve:

  • IT personnel 
    You need to build a team with all sorts of expertise. For instance, software architects, software engineers, DevOps engineers, quality assurance employees, designers, product owners and project managers.
  • Solution development and implementation
    Usually, a hybrid approach is followed. Parts of software will be acquired or built by third parties. Other parts of the software will be built by the team itself. Much time will be spent on engineering, customising, and implementation. Strong project management is needed to continuously align business and IT.
  • Training
    Specific skills are needed. Team members have to enroll in specific training.
  • Hardware & infrastructure
    All hardware & infrastructure needs to be purchased, implemented, and managed.

To find and hire IT personnel a hefty cost will arise. Furthermore, you need to attract talent and skill sets. Otherwise, you quickly lose a competitive advantage compared to your competitors. Keep in mind that time to go live can take a couple of years. There is a serious risk that ‘new’ software is directly outdated from the moment it is used.

Ongoing costs involve:

  • HR/recruitment 
    Attracting talent will be a day-to-day routine. Hiring HR employees and/or external recruitment will have a serious impact on your costs. Investing in new talent also may involve allocating precious time to your current employees for mentoring freshers.
  • Employer branding
    For attracting and retaining employees, you need to distinguish your company from rivals. You need to offer competitive perks and benefits. Moreover, you will have to run paid branding campaigns.
  • Labour costs
    Besides salary and bonuses, there are plenty of other things to keep in mind. For instance: paternity/maternity, medical insurance, accident insurance, training programs, and pension fund.
  • Fixes/patches
    After a while, your software environment becomes more complex. On a regular basis, you have to execute fixes.
  • Downtime
    There is plenty of evidence that in-house software is not intensively tested before going live. This results in more downtime.
  • Performance tuning
    Standards evolve. You need to keep working on performance tuning.
  • Rewrite customisation
    Requirements will change. As a result, customisation needs to be rewritten.
  • Rewrite integrations
    Prefered partners and existing integrations will change over time.
  • Upgrade applications
    To be able to work with the latest standards, you need to upgrade your applications from time to time.
  • IT/hardware
    Replacing hardware needs to be executed with respect to optimal performance requirements like processing speeds for software, storage demands for high volumes of important or sensitive data, and many requests from users.
  • Maintain network, security, and database
    Continuously manage, implement and improve your network infrastructure and storage costs. Moreover, your team has to run security audits and have to comply with GDPR standards.
  • Depreciation
    General loss of value.

Ongoing costs relate to customisation of software and applying all sorts of maintenance and improvements. Software features proactively need to be developed. Otherwise, your IT landscape will no longer be functional or useful in the long term or no longer meets the wishes and requirements of the current mindset. Especially for the longer run, Key-person risk arises when your business relies too heavily on one or a small handful of individuals. This may happen when your ERP software environment is very complex. It also may happen when niche skills are hard to find.

Software-as-a-Service (SaaS)

SaaS is readily available. It is easy to install and use.

Initial costs involve:

  • Licensing cost
    For set-up and specific tooling you have to pay additional licensing costs.
  • Implementation fee
    SaaS is never truly a plug-and-play solution. SaaS still requires large and experienced IT teams for successful implementation.
  • Gap-development
    Getting your SaaS to perform the functions you need may require your IT team to implement workarounds and you need to force the product to do something it wasn’t designed to do.
  • Training
    Specific skills are needed. Team members have to enrol for specific training.
  • Data Migration
    Planning and executing data migration.

Ongoing costs involve:

  • Subscription fee per user
    Monthly or yearly subscription fee per user per tool.
  • HR/recruitment
    Especially ERP SaaS solutions require experienced IT staff.
  • Labour costs
    Besides salary and bonuses there are plenty of other things to keep in mind. For instance: paternity/maternity, medical insurance, accident insurance, training programs, and pension fund.
  • Fixes/patches
    After a while, your software environment becomes complex by “standard” interfaces with multiple standalone software solutions. On a regular basis you have to execute fixes.
  • Downtime
    Usually, different tools and modules can end up in errors in modularity. This results in additional downtime.
  • Performance tuning
    Due to upgrades of different tools, you need to keep monitoring performance.
  • Rewrite customisation
    Requirements will change. As a result customisation needs to be rewritten.
  • Rewrite integrations
    You need to manage and monitor integrations.
  • Upgrade applications
    To be able to be working with the latest standards, you need to upgrade your applications from time to time.
  • Training & support
    Open communities and continuous support are cost-free. Since you built your own IT landscape, you will face more challenges that need additional training and support.
  • Maintain security
    Running security audits and looking for leaks between different software applications.
  • Manage systems & users
    An admin has to manage systems and users.
  • Inactive licences
    As your company grows, you register more users. However, after an employee leaves the company, you have to pay for this inactive licence.

A big advantage of SaaS solutions is that it usually has been developed for the mass market. The cost of development is shared among multiple users and usually is cheaper. However, there are hidden initial costs. Firstly, enterprise SaaS is never truly a plug-and-play solution. SaaS still requires large and experienced IT teams for successful implementation. Secondly, getting your SaaS to perform the functions you need may require your IT team to implement workarounds and you need to force the product to do something it wasn’t designed to do. Moreover, you will pay for all sorts of unnecessary features and/or have to purchase extra software since a mass market solution doesn’t fit your exact requirements. Your IT landscape may end up being composed of a large number of different tools and systems. The reason for this is that a module or tool is acquired for each separate problem or business activity. Often these separately acquired modules and tools do not fit properly. As a consequence, at every turn, an extra tool must be purchased. This will lead to hefty costs in the future. Furthermore, SaaS solutions are not always compatible with the software you already use. This can slow down operations and efficiency.

Maxxton Software

A PMS solution can be a good fit since modules and features are specifically developed for the hospitality industry. Most PMS vendors do not target the large vacation & short-term rental industry. Mid and large vacation & short-term rental industry companies are advised to hire an experienced external consultant to run a gap analysis since the IT environment will be complex. Are solutions future-proof in times of acquisitions, growth, and investments? Do they have a large developer team that can work on your future requirements? Do they charge hefty additional fees for future customisations and enhancements?
Maxxton offers a complete solution. This way you do not spend time on keeping an overview of all your software licences, fixing bugs between systems, and negotiating with IT providers for better prices.

Initial costs involve:

  • Implementation fee
    Cost for implementation phase including training, advise on best practices, and supporting the data migration.
  • Gap-development
    Client-specific services or functions that need to be developed.

Ongoing costs involve:

  • Cost per booking
    A fixed price per booking including maintenance, support, and updates.
  • Configuration
    Your software team has to own and maintain configurations.
  • Enhancements
    New and optional modules can be added after go-live.
  • Consultancy
    Project-based dedicated business or software consultant.

Maxxton believes that a transparent cost structure will work out best for all parties involved. That is why Maxxton recommends a design phase to assess all existing and future (operational) requirements. We keep your application future-proof and secure and offer a transparent system status. In return, we only ask for a fixed price per confirmed reservation.

Tip of the iceberg

This article discusses the costs of your IT landscape. However, one of the most important things to consider is that your business will have to work with the software, rather than the software being configured to suit the way your business works/operates. That is why we always strive to outperform and keep our software the best in class. With Maxxton Software we offer specific advantages:

  • Connectivity
    Many (API) connections have been established. A connections team is available to assist you with customised connections. In this way, you can work on your best-of-breed IT infrastructure.
  • Compatibility
    Maxxton strives to run all relevant features and modules in the industry. The 100+ developers create compatible software and can help with building connections and integrations.
  • Future-proofing
    In partnership with the most important stakeholders in the industry and via 10+ scrum teams new software will be developed.
  • Continuous improvements
    Scrum teams monitor the performance of the software and run patch fixes, upgrades, (security) audits, and prevent downtime.
  • Access to labour & required skill sets
    After more than 22 years in the business, Maxxton established important relationships with relevant universities (of applied sciences). Maxxton employees are invited for guest lectures. A dedicated recruitment team is always on the hunt for new talent.
  • Best fit to business
    Don’t reinvent the wheel. Maxxton builds intuitive and easy-to-use software. Maxxton software will help you to run your business with operational excellence and enable growth.
  • Scalability
    Maxxton has a proven track record of fast and reliable connections to your new locations and accommodations.
  • Expertise
    At Maxxton with 22 years of experience you will find 100+ software developers. In addition, experienced business consultants and a dedicated customer success team will help you to keep setting the standard in the industry.
  • AI
    Automation, smart decision making, and enhanced customer experience while reducing errors and increasing accuracy and precision.

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    Author
    Stefan Schoenmaker | 29 September 2022
    Stefan has been involved at Maxxton since 2014. As Marketing Director he takes care of the general external Maxxton communication, marketing strategy and marketing activities.
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