Explore effective methods to reduce costs and maximize database value, from public cloud solutions to open source software
Amid global macroeconomic uncertainty, companies are searching for ways to reduce operating costs. Optimizing the total cost of ownership (TCO) is a high priority for all business leaders.
One approach that companies are adopting to reduce TCO is the transition from proprietary software to open source software. By using systems like PostgreSQL, organizations can achieve more than just a reduction in software operating expenditure; they can also streamline migrations, automate administrative tasks, enhance operational efficiency, and deliver greater value.
What is Total Cost of Ownership?
Total cost of ownership (TCO) is the combination of people, hardware, and software costs of running an asset. This metric is key for forecasting the long-term cost of investing in a new asset and quantifying the likely return on investment.
Below are three approaches to reduce TCO.
1. Public Cloud Adoption and Other Software Cost Optimizations
Here are a few practical steps to reduce your software costs:
- Cloud services
In some cases, public cloud may offer cost efficiencies, particularly when coupled with “pay as you go” usage or services where version upgrades are included. - Validate your usage
Regularly review your need for your vendor products/tools. Check the terms and ensure you are not overpaying for services or support levels you do not need. - Standardize platforms
Consolidate tools that serve the same purpose. - Maintain your systems
By running up-to-date software, you may avoid costs associated with addressing vulnerabilities or compatibility issues. - Renegotiate with vendors
Consider volume licensing/contract consolidation. - Open source software
Many companies look for alternatives to legacy commercial software providers. PostgreSQL is leading the charge in the database space and for years has been the developers’ favorite.
Employing Postgres experts with a broad portfolio of enterprise-grade tooling can help companies safely and efficiently deploy, operate, and securely manage their databases. They can take advantage of one of the most advanced open source databases available, even for their most critical applications.
2. Flexibility with Relational Database Management Systems
Keeping an open mind on where you run your workloads can help you financially. For example, it may be more advantageous to run some workloads on existing amortized hardware on-premise rather than port to the public cloud. Meanwhile, you can adopt public clouds for new workloads and take advantage of “pre-built” CSP capabilities. You avoid significant capex outlay in the build-out of required infrastructure and reduce people costs in engineering and deployment.
Public cloud adoption is as much an operating model change as a reduction in required on-premise rack space and power consumption. Cloud adoption can facilitate the delegation of some of the most laborious IT management and maintenance tasks to your CSP of choice, allowing you to focus on building revenue-generating business applications.
3. Increased Efficiency and Automation to Reduce Operating Costs
When processes become more efficient, they require fewer resources and less time, and errors or redundancies are reduced. All these can contribute to a reduction in costs.
Automating repetitive tasks such as database provisioning and configuration is one proven way to reduce costs. Not only are manual database builds laborious and time-consuming, they are also prone to error.
For customers who prefer to self-manage their environments, some services can help you build highly automated Database as a Service offerings, deploying a variety of different approaches. These include industry-standard orchestration tools and more modern and configuration-driven Kubernetes operator solutions. They help streamline the deployment and management process while introducing greater repeatability and reliability for application end-consumers. Coupling this with Infrastructure as Code (IAC) options can significantly enhance your developer experience.
Reducing Total Cost of Ownership: Moving Forward
Many organizations choose to migrate from traditional relational database management systems to open source platforms like Postgres to gain better data flexibility, increased ability to update applications quickly, and better scalability.
Migrating to EDB Postgres can reduce operating costs by up to 80% while also alleviating proprietary vendor lock-in. It also provides excellent agility, with technical teams that can tap into a community of worldwide developers. EDB Postgres provides enterprise features, quality, performance, and reliability while significantly reducing infrastructure software costs.
For over 20 years, EDB has been migrating databases to Postgres – the most loved and wanted database in the world, according to Stack Overflow's annual developer survey. With EDB’s native Oracle compatibility, you can migrate all your applications to Postgres seamlessly.
It’s a financial estimate that incorporates all costs linked to buying, deploying, using, and retiring a product or service.
Imagine you are acquiring a new computer system. The TCO includes the purchase price of the hardware, expenses such as installation, software licensing, initial training of employees, maintenance fees, costs for software updates, additional training sessions as software evolves, and potential downtime during repairs and upgrades.
A basic calculation for TCO is the sum of the initial cost, maintenance cost, and potential remaining costs of the asset, minus the asset’s salvage value.
- Define the scope and objectives of the asset. Understand its intended use, ownership duration, and any specific performance requirements.
- Identify costs and their categories. A basic categorization can be acquisition, operating, or personnel costs.
- Gather data and quantify costs. Forecast maintenance needs, calculate expected energy consumption, and assess planned upgrades.
- Calculate the present TCO by finding the sum of the asset’s initial cost, maintenance cost, and potential remaining costs minus the asset’s salvage value.
- Analyze and interpret the TCO data, make informed decisions, and implement cost-control strategies.
Both are financial metrics but serve different purposes. TCO focuses on the combined costs of owning and operating an asset from start to finish, while ROI focuses on the returns made relative to the initial investment in that asset.
It’s a comprehensive financial assessment that helps organizations make more informed financial decisions. By calculating TCO, they can better understand the long-term effects and value of their investments, manage their budgets wisely, negotiate better terms with vendors, and better prepare for and anticipate potential financial burdens.
This is a contractual agreement between vendor and buyer that details the comprehensive costs linked to an asset. Such agreements provide transparency and facilitate informed decision-making, leading to more strategic vendor-buyer relationships.
A big pitfall is hidden costs or indirect expenses such as depreciation or warranty charges. Another challenge is inaccurate data collection like using outdated or incomplete information. Defining the scope can also be tricky, as TCO analysis can be subjective and vary across organizations. Changing business environments can also make it difficult to predict future costs, and the complexity of some systems might even require specialized software or expert analysis.
Companies should be aware of recruitment and hiring costs, training and development expenses, employee turnover, maintenance and operational costs, and compliance and regulatory fees.
First, engage stakeholders such as your finance team, operations team, and end-users to inform you of expenses that may not be apparent. Next, historical data on similar assets or projects should be analyzed, and past expenditure patterns should be sought out. Making a comprehensive checklist of common hidden costs can also help; include future liabilities such as compliance fees, depreciation, and disposal costs. Finally, implement a continuous review process. Revisit assumptions and industry benchmarks, as these can change over time.
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