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Considering the benefits of ROI of open source applications

Can you offer some ways to model ROI of open source applications in a rather general way in a pitch to my non-IT boss (savings in license fees vs. additional services fees)? Are there any ROI studies I can point to? Can you offer some examples of ROI for real-life projects?

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For a basic ROI calculation, you'll need to figure out the cost of the recommendation and the benefit (savings minus cost). The ROI is calculated as the benefit divided by the cost. ROI calculations can get very complex, but your best bet is to keep it simple and use only those numbers that can be verified.

ROI = (savings - cost) / cost

Consider the following potential costs, and count the ones that are likely to apply: license fees; support contracts; outsourcing installation; and training and mentoring.

Consider the following common savings, and again, count the ones that are likely to apply: license fees you won't have to pay; support contracts you won't have to pay; outsourcing installation (compare the costs); and lower hardware costs that result in server consolidation.

These lists will get you started, but you'll need to consider factors that may be unique to your environment. For any recommendation, be sure to use historical budgetary data. Not everyone pays the same for software, and you want your pitch to be accurate.

For an example of how to calculate the ROI of desktop migration recommendations, see my ROI guide.

This was first published in September 2005

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