The TCO of Web Analytics Solutions, Part 1

Last week, I was talking with one of my partners — who also co-owns a boat with me — about the TCO (define) of a Web analytics operation. Many of our clients are unhappy with their Web channel analyses. They tend to blame their software. As we examine their operations, we usually find they didn’t fully understand what they were getting into when they bought their “solutions.” As a result, they’re paying more and getting less than they expected.

My partner pointed out that owning Web analytics software is a lot like owning a boat. Neither is overly expensive to acquire. But the TCO is much higher than the sticker price. You can buy a boat for a relatively reasonable amount, but keeping it afloat is another matter entirely. There are fuel costs, dock fees, maintenance, and off-season storage. Not to mention the fact most of your friends think your boat automatically comes stocked with beer. The total cost of owning a boat for just a few years can often be double what you originally paid.

With boats, the TCO problem is well known. There are even jokes about it. One of my favorites says the best day of a man’s life is when he gets his first boat, and the second best is when he gets rid of it. But with Web analysis software, the problem is less recognized. Behind each solution there are extra costs. They aren’t exactly hidden, but unless you know about them you’ll be financially blindsided down the road.

How do you calculate the TCO when buying a Web analytics solution? It’s not too difficult. There are two parts to your added costs: technological, and internal and external services. Technology costs come in a variety of categories, and though they’re not usually as severe as services, they still can wreak havoc with your budget.

Here are the four major issues you’ll encounter with technology:

  • Site traffic. Most ASP (define) analytic services are priced based on site traffic. Do a forecast model of your traffic growth over time. Make sure the forecasted traffic costs are taken into account.

  • Software/service licensing. Seat licenses aren’t a major cost driver with analytics software purchases; however, your TCO may skyrocket with CPM (define) charges. Essentially, these are costs that accrue per site page view.
  • Data extracts and CRM (define) conduits. Some vendors provide a maximum number of reports you can download for free during a given period. Beyond that, you’ll be charged. Another popular pricing model charges per data extract. If you’d like to have data FTP’d to your server every night and integrated into your marketing (CRM) database, costs may increase.
  • Excel licenses. Microsoft Excel licenses are a sneaky way for costs rise. Though Web analytics software produces data, you and your employees need Excel to manipulate it. Analytics software vendors often provide Excel licenses, but rarely do they provide enough of them. If you have many employees who want to look at data, you could end up paying additional money for each additional user license. That can add up.
  • Hardware and software infrastructure. When installing software packages, you may need to upgrade workstations, servers, and so on. By looking for a solution that’s compatible with your existing infrastructure, you’ll help control your TCO.

Next: how internal and external services can affect your TCO and a handy list of ways to anticipate your TCO when buying a Web analytics software solution.

If you’ve had a success (or horror) story with your Web analysis TCO, email me the issues you encountered. I may include your story in a future column.

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