One of the concepts frequently bandied about in legal IT circles is the total cost of ownership (or TCO) of technology - in other words, not what the apparent list or retail price is today but what the total cost will be over five years, taking into account such things as annual support contracts, as well as any other hidden extras you may need to factor into your calculations.

Unfortunately, law firms frequently base purchasing decisions on inadequate research, with only partial data on which to calculate such things as cost of ownership. This latter point was brought home strongly last week in a new study published by David Riggall of the consultancy Rose & Bridge Associates.


Earlier this year, Mr Riggall conducted a survey of the ten largest suppliers of digital dictation software to discover their unit pricing (the cost per individual seat) for firms of different sizes, compared it with their annual maintenance charges and then calculated what the total cost of ownership would be over five years (the calculations focus entirely on digital dictation software - not any accompanying hardware or training).


For example, supplier B was found to have a flat pricing structure of £349 per seat and £70 per annum for support. For five users over five years, this adds up to a TCO of £3,495. For 25 users over the same period, the figure is £17,475, for 75 users £52,425 and for 150 users £104,850. All very logical, except that when you start comparing these figures with prices quoted by other suppliers, their relative merits start to change dramatically.


For example, supplier D (Mr Riggall protects the anonymity of the companies in his report) quotes a list price of £835 per seat and £50 per annum for support for small firms, giving a TCO for a five-user firm over five years of £5,425. However, this same supplier also offers substantial discounts for larger numbers. Costs range from £278 per seat for 25 users and just £117 per seat for firms with 150 users, with the result that the TCO for 25 users is £13,200 (already less than supplier B's TCO) while for 150 users it is £55,050 - nearly half the price quoted by supplier B.


The survey also reveals firms must not ignore annual support costs. For example, supplier I has a flat rate of £125 per seat but an annual support rate of £96. For five users over five years, this produces a relatively modest TCO of £3,025; yet for 150 users this would be a colossal £90,750, the second-highest TCO recorded in the survey.


The message is clear from this report: do your homework on pricing in depth because what might at first appear to be a bargain, could prove a very costly mistake over a period of years. More information about the survey can be found at: www.randb.freeserve.co.uk


Charles Christian is an independent adviser to the Law Society's Software Solutions guide