The Value to Cost Ratio
It is surprising how often leaders focus on cost and ignore the value side of the equation.
An example is the use of platform services in a cloud provider. It costs money to use any of the managed services (think about RDS vs self hosted Databases in AWS, as an example). The opposition to managed services is surprising. ‘It will cost us $XX more than what we could get with EC2!’
What is missing in this picture is the value calculus. You cannot look at just the cost of something: you have to look at the value to cost ratio in making decisions. If you were to host your own DB on ec2, well, you need a DBA. And the DBA will need to do patching. And then you need to think about HA. And then Disaster recovery. Possibly reduction in availability.
With RDS, you pay extra, but all this is taken care for you. A Core v Context exercise is essential here: If something is contextual, then someone else can do it at a lower total cost of ownership. Freeing up your team to focus on core will move you faster to the target state. We forget often to factor in the value side of the story.
This often comes up in the context of self hosted vs managed services for tooling (Jira, Github Enterprise, Splunk are examples). From a simplistic cost perspective, it might be cheaper to self host. However, you have to factor in the cost of patching, backups, upgrades… and most importantly: Is this core to your mission? are you spending your time on the right things? I almost always choose managed services.
