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Evaluating open source ROI

What's the best way to evaluate the ROI of a potential open source migration?

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Return on investment (ROI), also called the cost-benefit ratio, is the benefits gained divided by the costs to acquire the investment. You can think of ROI as "for every dollar spent, I get back X percent."

Benefit = the total amount of savings (proprietary price - open source price)
ROI = benefit / cost

To calculate the ROI of a particular migration, you need a few cost numbers. Whenever possible, use historical budgetary data for the best accuracy. Not everyone pays the same for software, so if you use the actual value your organization pays, your calculation will be more credible.

You need to find out two figures: the cost of the status quo replacement system and the cost of deployment of your open source alternative. Calculate the cost of the status quo system as everything your organization will pay if you don't go with open source. The cost of the open source deployment should not be $0. It's neither believable nor true. Be sure to include support contracts from a third party and outsourcing costs for deployment or staff training, even if you pay nothing for the actual software.

This was first published in September 2005

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