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April 5, 2011

The Shifting Economics of Software ROI

Nicole Hemsoth

Some of the hottest questions in the world of software development since the rise of the clouds has been centered on pricing, licensing and of course, tying these two concepts together to evaluate true ROI on development projects. 

While some make the argument that there is a long road to sustainable pricing models for cloud-based software development projects, others contend that when developing on a cloud platform the costs are actually more transparent.

Among those who feel that cloud development projects can see a boost in ROI capability count Richard Campbell, technical director for DevProConnections and co-founder of Strangeloop Networks. He weighed on the changing landscape for software developers as they evaluate the ROI on their products with Windows Azure as a leaping-off point.

In Campbell’s view, while the process behind determining software ROI might have once been simple in theory (when scalable cloud-based platforms weren’t the delivery mechanism) there are a number of other costs that are difficult to assess since so many of the development resources are shared or difficult to quantify.

Campbell explained this in detail in an article today, stating:

“It’s always been possible to compute the cost of software—not just the cost of the developers who built it, but the operational costs as well. That includes the price of the computers, networking equipment, and Internet connections, plus the personnel involved in maintaining all that equipment and software.” 

However, after that point it gets rather difficult to see how the incremental costs for any application really pan out, especially since they are often sharing the manpower and equipment resources.

When using a platform like Azure, for instance, arriving at a base point to make ROI assessments is simplified because each month there is one single bill that includes the disparate elements that would otherwise be scattered about a development project. He argues that by seeing the per-hour, per instance, per gigayte storage and transfer rates software development ROI figures are given an added boost f clarity.

Campbell further explains that “ROI is not just the time it takes to cover the cost of initial development; it can also point to the cost-benefit of features, including performance tuning….Things are a little trickier when you evaluate internal applications as often it’s easier to assess the cost of downtime to poor performance than actual income value.”

While it should be noted that Campbell is a Microsoft Regional Director and MVP that speaks out about the company’s products via his .NET Rocks hosting gig and other engagements, his points are worth repeating since this same ROI argument can apply to any development project on the cloud.

Full story at DevProConnections