Cost of Entry vs. Cost of Ownership

Jason's post about blogs, and his comment about the Internet being the place for inexpensive advertising, brought back some really interesting memories from the early to mid 1990s while I was at Coca-Cola.

First a few definitions. 

The Cost of Entry is typically considered to be the out of pocket costs in purchasing a product.  So, if a product costs $599, most people would consider the Cost of Entry to be $599.  This is typically thought to be the hard dollar costs for a product.  I'd argue that the Cost of Entry is much more because some of the other costs to get into a product are your time to fill out a purchase order, the time for purchasing to process the product, and other items.

The Cost of Ownership is typically considered to be all of the costs of purchasing a product.  This is the Cost of Entry plus all of the other costs for using a product over the lifetime of that product.  Typically, no one pays any attention to the Cost of Ownership.  Gartner brought out a topic on this while I was at Coca-Cola about the Total Cost of Ownership for was extremely ridiculed ofer this.  The problem is that the concept holds true.  There is more to owning a product that buying it.  I like what Scott McNealy says on the subject "A Free Puppy is not Free."

What does this mean to you?  Well, look at the discussion of Internet Marketing and Podcasting in particular.  Well, it costs the ASP.NET Podcast a certain amount of money to host the show with www.libsyn.com.  Its not much money.  I figure it takes me several hours per show (5-10) to get the content, create the show notes, handle the encoding, edit out the dead space, and get it online.  So, there is time involved.  Well, I won't make up money that I spend on the ASP.NET Podcast, but if I'm working for someone else, obviously, that money needs to be made up for.  This is one of the problems with the technology.  In many other industries, labor accounts for about 50% of the cost of something.  In IT, labor costs make up 90% of the costs of a service like this, which is a service, not a product.  With the tremendous differences, you can see why it this is hard to get people to understand and spend money on things. 

Wally