One of the most important tasks when considering a new lab system is to calculate the total cost of ownership (TCO). This can be challenging with LIMS software because there are many options to choose from – each with significant differences in cost and function. For example:
- Should you rely exclusively on your own on-premises servers? Or would you prefer to save on CapEx costs by going with a cloud-hosted system or software as a service (SaaS) option?
- Does it make sense for your lab to install a LIMS with one or more add-on modules, or to get an all-in-one system that includes Electronic Lab Notebook (ELN), Scientific Data Management System (SDMS), or other capabilities?
- Does your lab need a LIMS designed specifically for an industry with unique needs, like bio/pharma, food & beverage, oil & gas, biobanking, diagnostics, non-pharma quality control, or forensics?
The many variants between these potential options highlight the importance of calculating the TCO. Factoring in all the costs involved for each option under consideration is your best bet for getting something as close to an “apples-to-apples” comparison as possible.
Defining LIMS TCO
Before we dive into the different factors that impact your potential system’s TCO, let’s look at how the calculation is typically handled for LIMS software.
- First, you’ll need to determine every external cost (what you pay to vendors) as well as any internal costs (other expenses your company pays to install the system and keep it running).
- Second, use a consistent timeframe for each system under consideration. In the case of LIMS software, TCO is typically calculated as the cost of the system over the next six years.
- Third, consider your operation’s growth potential. What costs could you incur if your lab plans to add staff or equipment? How much will it cost for your LIMS to grow with you?
- Finally, to make a fully informed financial decision about a system purchase, it’s also critical to calculate your return on investment (ROI) at the same time. (We’ll talk more about how to determine ROI for a LIMS in a future article.)
What costs make up TCO?
Here’s a quick rundown of all the possible external and internal expenses that could impact the TCO of your LIMS:
System software
This includes the operating software itself, plus all the licenses you’ll need to access it.
Add-on modules
If you don’t choose an all-in-one solution, you may need to consider adding ELN, SDMS, analytics, or other capabilities.
System configuration
How much work will need to be completed by the vendor, and how much downtime could result? What additional work, if applicable, will need to be completed by your own team and/or utilizing other resources? These costs are typically included in the initial build of the system, deployment to each site the system will serve, and “go-live”, which is the day you begin official usage.
System customization work
Although these tasks are frequently completed by the vendor, they may involve your internal resources as well. Customizations include any changes made to the core system code via programming; these differ specifically from configurational changes that involve settings or creation of Master Data. (The LabVantage LIMS platform helps avoid time- and cost-intensive customization work through countless configuration options.)
Training
Worker training is both a startup and an operational cost. In addition to training your existing team when you first install the system, you’ll also need to train new hires on an as-needed basis. In addition, experienced staff may require additional training when individuals are promoted internally to positions with greater system access, to stay current with capabilities provided by new add-ons or upgrades, to revise processes in response to market shifts or changes in regulations, or simply to refresh their skills.
Validation
These costs include any validation assistance you may need from the vendor or other third parties, plus any related documentation.
Hardware costs
Depending on the type of LIMS you install, this could encompass the cost of the actual servers and the network, plus any computers, mobile devices, or other equipment the system requires.
Maintenance expenses
These fall into several categories:
- System maintenance contract — This is usually an annual fee calculated as a percentage of the software purchased, and typically covers vendor provision of system updates and bug fixes.
- Hardware maintenance —Keeping all the servers, databases, and network architecture needed to support the system up and running. Any or all of these services might be provided within your company or by the system vendor. It may also include charges from one or more IT departments within your organization.
- Facility costs —Maintenance of the physical locations that house your servers and other hardware, if applicable.
- Subscriptions — Ongoing costs for any cloud-provided services or SaaS contracts.
Getting the total picture
It’s not just worth the effort to calculate TCO; it’s absolutely critical for your operation to do so. You’ll benefit in the short and the long term because knowing the TCO of each option is the best way to determine which one will be most efficient and cost-effective over time. And while some costs will be more difficult to determine than others, calculating TCO frequently reveals which systems will actually cost you significantly more than the “sticker price” suggests.
For more on this topic, check out our earlier article comparing the TCO of cloud hosting verses an on-premises LIMS, or contact us to discuss your project.
