Here’s a spreadsheet I built for a European broadcaster which compared five supplier proposals for building new VOD apps on three platforms: HbbTV and two games consoles (well, one console but both the current and previous versions of it). It includes cost calculations for Year 1 – broken down into CAPEX, OPEX, licence fees, training, hosting, support, operations and professional services – and a 4-year Total Cost of Ownership model based on audience growth and concomitant increases in hosting, support and maintenance fees.
You’re welcome to download it and give me your feedback. Supplier Evaluation, Comparing Cost Models & Total Cost of Ownership
- For this spreadsheet, CAPEX is defined as one-off costs relating to purchasing vendor software licences, initial analysis (the discovery and scoping phases), initial set-up, producing technical and functional specifications, anticipated systems integration (variable post-implementation sysint work is accounted for as OPEX under “Professional Services”), user acceptance testing, staff training and first-round deployment. It does NOT include hardware / manpower / storage / BAU costs already being incurred by the broadcaster;
- OPEX is defined as variable costs once the phase one implementation has been completed. Operational expenditure therefore includes hosting, support, operations and professional services.
- I’ve removed the names of the suppliers, of course, but I have left in some of their notes (again, removing any brand names and idiosyncratic language, see Section 1, Total Cost of Ownership sheet) which show how they calculated individual elements of the cost proposal. Personally, I prefer this kind of detail but I can understand why some vendors (perhaps because of ambiguity in the customer requirements documents) choose, in this RFP phase, to provide a more rounded figure. A more precise cost can always be derived after any (paid) initial analysis work has been completed.
- In this case, two of the five vendors provided a flat-rate hosting / support / operational cost. The other three, however, costed their proposal based on the number of users (split into five bands) in any given month. I’m agnostic about this. On the one hand, flat rates make it easier to forecast spend. On the other, variable hosting costs are attractive because clients pay only for actual usage.
- Rows 61-63 in the Total Cost of Ownership sheet allow for growth in usage. Rows 64-66 update hosting costs accordingly.
- The client suggested in their RFP that vendors should price for 100 hours of professional services support a year. Clearly, hourly rates are variable for different roles, levels of seniority etc. I’ve therefore split support staff into two bands (more expensive and less expensive – see the Hourly Rates sheet). You can adjust how many of those 100 hours can be assigned to which band in rows 41 and 46 of the Total Cost of Ownership sheet.
- Finally, these costs were provided in Euros but the sheet doesn’t include any currencies.
Do let me know what you think of it – and especially if you spot any errors!