Costs and returns / Cost-model guide
Modernization TCO and ROI: separate cash from capacity
Count transition costs and keep time savings separate from cash.
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Download article in MarkdownA modernization business case needs a clear comparison: what it costs to keep operating as you do today, and what it costs to make and run the proposed change. Use the same period, transaction volumes, and service requirements for both options. Keep cash savings separate from staff capacity released.
Compare the whole operating cost
Total cost of ownership includes initial delivery and the costs that continue after launch. List software subscriptions, hosting, integrations, monitoring, support, AI usage where relevant, internal administration, training, and transition overlap. Record which costs vary with volume or usage.
AWS's directional business-case guidance compares the existing estate with a proposed state over a defined term and includes migration costs. The same comparison discipline is useful beyond infrastructure: apply it to the workflow and systems your SME actually needs.
Do not mix a minimal current setup with a fully supported future service and label the difference a technology penalty. Compare equivalent requirements or explain what additional capability the higher cost buys.
Build an assumptions register
| Cost or benefit | Evidence to request | Treatment in the model |
|---|---|---|
| Implementation | Defined scope, exclusions, and dated quote | One-time cash cost |
| Transition | Parallel subscriptions, training, and temporary support | One-time or time-limited cash cost |
| Ongoing operation | Plans, usage assumptions, support, and maintenance | Recurring cash cost |
| Internal project time | Hours by role and agreed valuation | Separate internal capacity cost |
| Released staff time | Measured task time and expected adoption | Capacity benefit unless spending falls |
| Avoided expenditure | Identified contract, overtime, or other spend | Cash benefit only when the spend is removed |
| Additional sales | Evidence, margin, and delivery costs | Incremental contribution with uncertainty |
Work through a cash-only example
The following figures are invented US-dollar planning inputs. They are not Devekko prices, platform rates, or predicted client results. The comparison starts at launch, with the initial investment counted at the beginning. Assume equal transaction volumes and no growth benefit.
| Planning input | Keep current systems | Modernize |
|---|---|---|
| Initial implementation | $0 | $24,000 |
| Training and transition | $0 | $6,000 |
| Ongoing monthly cash cost | $3,000 | $2,000 |
| Twelve-month cash total | $36,000 | $54,000 |
| Thirty-six-month cash total | $108,000 | $102,000 |
The proposed change saves $1,000 per month after launch but requires $30,000 upfront. First-year cash cost is $18,000 higher. Simple cash payback is 30 months: $30,000 divided by $1,000. Over 36 months, operating savings total $36,000, leaving a $6,000 net cash benefit after the initial investment.
Using a stated simple project convention, 36-month ROI is net cash benefit divided by initial investment: $6,000 / $30,000 = 20%. This undiscounted illustration excludes tax, financing, inflation, and residual value. A real investment appraisal should use the assumptions and method agreed with your finance team.
Treat capacity as a separate benefit
Suppose the same invented project releases 40 staff hours each month, valued internally at $40 per hour. That is $1,600 of monthly capacity. It is useful for planning, but it does not reduce payroll unless spending actually changes.
Identify what the team will do with that time: absorb more volume, reduce a backlog, or complete work previously deferred. Do not count both the full value of those hours and all the revenue they help generate without checking for overlap.
Test the assumptions that can change the decision
In the cash example, if the new monthly operating cost is $2,500, the saving falls to $500 and simple payback becomes 60 months. That single change moves payback beyond the three-year comparison period.
Also test delayed adoption, a migration overrun, continued legacy subscriptions, and higher support needs. Name the evidence that would narrow each uncertainty before committing to a wider rollout.
Use the modernization roadmap to select the first bounded phase. After launch, compare actual invoices and operating measures with the original assumptions rather than preserving a forecast that the evidence no longer supports.
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