The Cost of SharePoint = License Fee x9 (It's a Microsoft Figure)


(With thanks to Alex Manchester for getting the actual slide)

In response to my post about making SharePoint not look like SharePoint, Mike asked where the figure I quoted came from. He said:

I would also like to see you cite your source for the statistic you quoted. The problem with statistics is that anyone can toss them out but unless you fully understand the context they are meaningless. Just because a company does spend extra on SharePoint customizations doesn’t mean that it was needed in order to make the solution work. Many companies find value in small things (such as branding) that others may think was a waste of money. This should not reflect negatively on the tool or be used to scare people away from implementing it.

My Comments
1. Honestly, I didn’t know it where it came from – I had read it last year, seen it in a couple of reports, but never followed up on it. Here’s what I found.

2. It’s a Microsoft number. A ComputerWorld article about SharePoint from April 2010 has these two paragraphs:

Microsoft may tout SharePoint’s myriad features, but if you don’t find what you need out of the box, a third-party solution might be your best bet, says Byrne. Microsoft recognizes the value of its partner network: For every dollar customers spend on Microsoft enterprise licensing fees, they spend $8 with consultants and channel vendors customizing Microsoft’s tools or integrating other products.

Ultimately, Microsoft sees itself as a platform company, providing generic capabilities, says Birger Steen, a Microsoft vice president in charge of sales to small and midsize businesses.

Alan from Real Story Group also discusses the number in a November 2010 blog post (saying it’s “$6 to $9”).

3. I have seen this “platform plus add-ons” among my clients. Take “SharePoint workflow,” as an example. One client had spent three-and-half-weeks trying to build a (simple) workflow using SharePoint Designer, and could not get it to work properly. I recommended they take a look at K2 or Nintex. The client downloaded Nintex, and had the workflow running within half-a-day. Net result: an extra licensing fee to cover limitations in the base platform.

4. Social networking is another area where firms, even with SharePoint 2010, are looking at add-ons. Microsoft has improved the social networking capabilities in SharePoint 2010 a lot from SharePoint 2007 … but compared to best-of-breed offerings, they are a ways behind. The recommendation in many cases? Buy NewsGator Social Sites. It’s a great product – no doubt about it – but it’s another licensing fee.

5. Even apparently simple things out-of-the-box in SharePoint 2007 or 2010 – the discussion list in a team site for example – are too plain for what Microsoft could have done (more to come on this later), and there are third-party products to buy to fix this. A discussion list being too basic? In 2011? We’ve only been doing this for … 20 years.

6. I don’t have a problem with firms spending more money to make the technology do what they want it to do, as long as they knew in advance that it was likely to happen. I accept that’s not just a Microsoft issue, but Microsoft has a large role to play in appropriately setting expectations about what will work and what won’t work. I do have a problem if firms are told by a Microsoft Business Partner / systems integrator that “she’ll be right mate” out-of-the-box, and then when it doesn’t work, they are told they have to spend a lot more on a third-party add-on. Yeah, I buy the line about gaining greater maturity with the platform over time, and that you should do your due diligence and all that, BUT 9x original cost is far too high, in my opinion.

7. People just starting down the SharePoint 2010 route: you have been warned (by Microsoft).

8. I’ve already said a lot of this in my SharePoint Roadmap for Collaboration book from 2009; see chapter 3 called “Evaluating SharePoint for Collaboration,” and the discussion on third-party add-ons.

9 thoughts on “The Cost of SharePoint = License Fee x9 (It's a Microsoft Figure)

  1. Nice follow-up. 🙂 Point #6 to me is the most important one. Organizations that plan to implement any software package needs to have a good understanding of the overall costs before starting the project. Consulting companies that don’t tell their customers the truth up front will get a reputation that will come back to hurt them.
    I find the title of the post a bit sensational though. You are stating that it is fact it will cost a business 9x the license amount to implement SharePoint. This really isn’t true and you know it. In fact to draw attention to your post you specifically selected the higest number you could find stated anywhere. Many companies will spend significantly less than that… while others may choose to spend more.
    Out of the box SharePoint 2010 offers a wealth of functionality for the price. It is also a great platform to build custom solutions. It really is up to an orgnaization to decide if the ROI is there for them.

  2. Thanks again – I think we agree on a lot of the points here, and we have a difference of opinion on the slant on others. All good. We should do coffee sometime.
    Apologies for the apparent sensationalism – which wasn’t my intent. I was merely using the Microsoft figure from the ComputerWorld article, but you are correct in implying that I could have said x6, x7, or x8 and been within the parameters quoted by Microsoft.

  3. Michael, I think you are still misusing that figure. The 6x – 9x is a general figure and you can’t just take it out of the context and assume it’s true with (every) SharePoint installation or every Microsoft product. To start with, Microsoft provides very different kinds of product families. A SharePoint project is very different when compared to a BizTalk, Office version upgrade or SQL Server project.
    And there are various ways to buy and use SharePoint, starting from BPOS / Office 365 cloud service and ending using SharePoint for collaboration, internet publishing, document management and as a platform for software development.
    In most cases the figure you quoted includes payments outside the original client, for example software, hardware and professional services bought by Microsoft partners from other partners

  4. Look at the slide at the top of the blog post. It’s from Microsoft. It’s about SharePoint. It says, “$6 to $9 on services for every $1 spent on licenses.” I’m NOT talking about BizTalk, Office upgrades, or SQL Server – only about SharePoint.
    Microsoft has already averaged the figure across thousands and thousands of installations of SharePoint – so yes, in some cases it will be $3 for every $1, and in others $16 for every $1.
    How am I mis-using the figure? I don’t understand your rebuttal?

  5. Michael, you are absolutely right. The figure really varies a lot on case-by-case basis. If you take a corporation with 10 employees and 10 SharePoint CALs + 2 servers, the figure paid to partner can be more than fifty times the license fee paid to Microsoft.
    The average really is $6-$69 to partners per a 1$ for Microsoft. They use the same figure for all their products and they mention the same general figure for the SharePoint in partner slide above. I think they shouldn’t do that, but that’s just my opinion of course.

  6. For sure this is an average figure and it should be treated as such, there’s a hefty dose of ‘depends’ and many, many different requirements involved in each project. But my experience indicates that $6-9 (Martin White has mentioned $5 as a rule of thumb too) per $1 in licensing is definitely in the right ball park as an average.
    A client we worked with recently easily scoped out a necessary budget of $400-500k based on $75k in SharePoint licensing costs.
    Another project I worked on recently with MOSS 2007 – a great looking design but fairly basic in functionality – easily cost $200k in resourcing and development. That’s *without* licensing.
    If you guys above are working on SharePoint specifically, I would be pretty interested to hear the average spend vs licensing of your clients. Despite your statements above, I bet the estimations are not far off.
    Whatever way you frame it, an organisation of several hundred and upwards that wants to start customising and integrating a SharePoint installation (and they pretty much all do want to customise and integrate, so the 80% figure also stated there is also anecdotally accurate) is going to have to pay serious money to do it.
    None of this is to say SharePoint is good or bad, or right or wrong for any company. But as said it’s a useful point of reference.

  7. Hey Michael, I work for Jive Software, and focus on working with our customers that use Jive and SharePoint together.
    First of all, thanks for highlighting each of these areas as you substantiate the x9 claim. This post will help a lot of the customers I work with articulate areas where SharePoint development are high. Second, here’s recent piece of research from Doculabs that can help flesh out your 4th bullet around social networking. Their research mirrors what I see working in organizations that deploy a social business platform alongside their SharePoint implementations.
    Doculabs concludes that although it’s tempting to customize SharePoint–even by including social Web Parts and widgets–the costs of attempting to make SharePoint social are prohibitive.
    The reason is fundamentally simple: SharePoint is designed to manage documents, not engage people. Because of this, no amount of customization (even when you add 3rd party Web Parts and widgets) can deliver the experience users have come to expect from a social application.
    Thanks again for the thoughtful post.

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