The technology landscape has shifted massively within the digital experience space, especially within the past two years.
We are now seeing more and more brands making a move from monolithic platforms to composable DXP solutions.
Moving towards more modern technologies is often seen as too expensive or upfront costs too high.
We’ve seen too many clients who will back away from what initially seems like a more expensive solution due to a higher licence cost than their legacy platform or the complexities and resource requirements for migrating data from the old platform to the new.
The first thing we ask these clients is, “Have you calculated the total cost of ownership for your legacy platform and the new composable tech?” 8/10 times the answer is no, and those that have often underestimated or ignored all direct and indirect costs incurred by their technology platforms.
In this blog, we will look at what needs to be considered and measured when calculating the lifetime costs of enterprise DXP solutions and how to weigh up the ROI of staying on a legacy platform vs moving to a more modern technology stack.
There will be initial costs when you consider moving from a legacy platform to a modern solution.
Software – Off-the-shelf solutions will generally have up-front cost-plus user licenses.
Hardware – The cost of servers and storage to run the software and other costs like backup and disaster recovery. This does not apply to cloud-based software – Sitecore XM Cloud.
Implementation – The cost of setting up, configuring, and testing solutions to be used in production.
Data migration – The cost of moving data from the old to the new system, including data format changes.
User licenses come in two flavours for off-the-shelf solutions: named users and simultaneous users. For the cloud, licenses are usually named.
Training – The cost of upskilling your teams on how to use or build the new tech.
System integration costs – No system operates in isolation; it’s essential to map out which other platforms or systems must be integrated into the technology.
These are the costs incurred to run either a legacy or new solution; this is where you will often find that your legacy systems will likely incur higher operational costs than more modern technologies.
Maintenance & support – Usually sold as annual contracts with off-the-shelf software. Ensures you get all patches and upgrades. Typically costs around 20% to 25% of the total purchase price annually. With custom software, maintenance & support are ongoing costs and are often much greater than the initial build cost over the product’s lifetime. This usually only applies to cloud based solutions like XM Cloud.
Patches – The cost of applying security and bug-fix patches.
User licenses – As the number of users grows in the company, new licenses must be purchased for off-the-shelf solutions. If the number of users decreases, there are no refunds. For cloud software, licenses are typically priced monthly, although they usually require an annual contract. Note that if the number of users increases, this cost increases. If the number of users decreases, this cost may fall, but often only when the contract is renewed.
Ongoing Training – New users come from company growth and employee turnover. Also, when cloud vendors push enhancements, some training may be required. Enhancements. This applies to custom software where the company must pay developers to provide new functionality as needed, e.g., when the business environment changes or new regulations come into effect. Remember to include documentation and project management costs. It can also apply to customised off-the-shelf software.
User & admin support – This is the cost of the helpdesk, system admins, and a few analysts/developers supporting the system. Remember that you need to use the fully loaded team member cost and factor in the costs of managing them.
Disaster recovery & high availability – This ranges from backups to hot failovers and includes regular testing. Hot failover is very expensive to implement for off-the-shelf or custom software. With cloud products it is often part of the standard offering.
Depreciation – Writing off the capital cost of the solution and the hardware it runs on. It does not apply to cloud software because it is usually an operational expense.
Upgrades – Off-the-shelf software usually has upgrades over the life of the software. These projects can be large, expensive, time-consuming and a real risk to the business. Sometimes also applies to custom software, where a new version is created. This does not apply to cloud software because most vendors continually upgrade their software.
Security – The costs of keeping an application secure, especially if the application is visible outside of the firewall. It does not apply to cloud software because the cloud vendor pays for it.
These are the costs incurred when retiring software. Many companies must remember that retired systems can still incur considerable costs, e.g. if you have grown out of one cloud product and moved to another.
It was not worth the expense of migrating transactional data, but it had to be available for several years for compliance reasons.
In many of these situations, it is worth keeping the old system in an archived/read-only mode for several years, and costs are associated with that.
Data export – You want to be able to export existing data in a suitable format. Some vendors make it easy to get data into their systems, but there needs to be more incentive to make it easy to get that data out again, so it can be expensive.
Archived systems – You want to keep off-the-shelf or custom software available for reference. You need to keep it running on servers in the data centre, with their associated costs. For cloud software, you want the system to be available for reference, preferably read-only. You want to pay a minimal amount for using the system, but unless this was part of the original agreement, you could be forced to spend a lot more.
Inactive licenses – You may need to keep all user licenses on the system to preserve audit trails, but you don’t want to pay full user costs for an archived system.
When making the business case to move towards a more modern technology stack, you need to calculate all the costs incurred above, look at your current legacy system and any new solution(s) you are considering.
Doing this will map out the total cost of ownership over the solution’s lifetime, allowing you to estimate and weigh up the ROI for each option you are considering.
When you do this, we guarantee you will see much more significant differences in ROI than expected, especially regarding cloud-based composable solutions.
Calculating the ROI should give you a clear and solid business case for why you should be moving towards a more modern technology stack.
Sagittarius is an award-winning digital agency that helps brands create high-converting digital experiences. Established in the UK with over 40 years of experience, we’re a multinational team of innovators, visionaries, strategists, and problem solvers who will optimise your web experience and use data-led decisions to power up your CRO, content, and UX. We take a marketing-first approach to our development, baking in performance and measurement to deliver impressive ROI on your technology investment. We specialise in Sitecore as a complete or composable DXP platform and have our own Sitecore Optimisation Consultancy and training academy to empower your people.
