You Build It You Run It can deliver enormous value. It can accelerate time to market for digital services and features, increase quality, and improve reliability. In the right circumstances, it’s proven to create significant revenue growth. But how much will it cost to realise the value of You Build It You Run It?

Obviously, the answer to that question will change based on a number of factors. 

The cost associated with implementing any operating model will likely be influenced by:

• The size and structure of your team
• The number of services you envision running in the operating model
• Whether you’re transitioning an existing service to a different operating model or creating a new service
• How much the service is used
• How the service was originally designed and implemented 

That said, while it’s difficult to provide an answer with any kind of dollar-value specificity, we can make a meaningful conceptual comparison of the type of costs associated with implementing different operating models. 

Each model—whether Ops Run It or You Build It You Run It—has associated costs that fluctuate at different stages of the implementation lifecycle. 

For example, some things take more effort to set up; once configured though, they will deliver greater value over a longer period of time. In contrast, things that are quick and cost-effective to implement in the short term may not deliver substantial value in perpetuity.

When you understand these costs and how they fluctuate over time, you’ll be in a better position to assess which operating model suits your objectives. 

Plus, with this information, any business case for a certain operating model can be evaluated in terms of all the relevant financial variables.

That said, it’s worth acknowledging that cost should never be the only consideration in selecting an operating model for a service. It’s best to consider the operational needs of the service, including feature demand and financial exposure on failure, which you can read more about in this article: two things to consider when selecting an operating model for a digital service. Selecting an operating model without consideration of these needs may mean the model you select is not fit for purpose.

Still, for many, cost is an important consideration, so let’s get into the different costs that apply to each operating model.

Common types of cost in operating models.

There are three main cost types I’ll use in comparing Ops Run It with You Build it You Run It. They are:

1. Setup cost.

This is the one-off cost associated with setting up the operational model for a new service. Or, if you’re moving an existing service into a different operating model, the cost associated with that transition process.

In practical terms, you can expect that:

• A high setup cost indicates that you will need to invest a larger amount upfront, in the initial stages of implementing the operating model. This is a one-off cost.

2. Run cost.

The run cost involves the ongoing business-as-usual costs associated with keeping a service operational. This includes things like change management, deployments, and procedures or protocols for incident response.

In practical terms, you can expect that:

• A high run cost means it will be more expensive to maintain the service for the entire time it’s operational. This is an ongoing cost.

3. Opportunity cost.

This is a critical consideration. And one that is frequently—and wrongly—overlooked when assessing an operating model. 

In its simplest form, opportunity cost refers to the cost of delay between someone having the idea of a new product feature, and the actual launch of that feature. All the time spent navigating that workflow is time the feature is not earning revenue.  

Opportunity cost also includes any prospective revenue that is lost due to operational issues with the service. 

Consider opportunity cost in the context of: ‘how many opportunities do I cost myself because I can’t deliver the feature quickly enough, or because the service was down and unavailable for customers?’

For a practical example of opportunity cost, let’s consider a retail business. Often, there’s a requirement to launch new features or services before peak events, like Christmas or the Black Friday sales. Hypothetically, let’s say this retailer wants to launch a ‘click and collect’ service prior to a peak sales event. If the development team is unable to build this service in time (or equally, unable to deploy it to production because of batched release cycles), then the opportunity cost would be the lost revenue the retailer should have made through that ‘click and collect’ service.

With that in mind, we can expect that:

• The higher the opportunity cost, the more prospective revenue left on the table. A high opportunity cost is not desirable. 
• Conversely, the lower the opportunity cost, the more revenue you’re capitalising on, because you’re earning all the money associated with every opportunity you identify. A low opportunity cost is desirable.

With these cost types in mind, let’s compare how they apply within the Ops Run It and You Build It You Run It operating models.

Ops Run It vs You Build It You Run It: a cost comparison.

The data in the below graph is based on my experience working with on-call product teams in many different organisations from around the world. 

The graph intends to highlight the difference in expected cost types when implementing an operating model for a single software service. These ratios would likely change when economies of scale are a factor.

In this graph, yellow represents Ops Run It, while blue represents  You Build It You Run It.

The graph shows that:

• Ops Run It has low setup costs. However, its run costs can be high, and its opportunity costs are very high. It is worth reiterating that both run costs and opportunity costs will recur for the entire duration of any service’s operation. 
• The majority of You Build It You Run It costs are incurred as one-off setup costs. Its ongoing run costs and opportunity costs are much lower. 

What informs the projections in the graphic above? What are the contributing factors in the comparatively higher setup cost for You Build It You Run It? Why does Ops Run It cost so much in missed opportunities? Let’s take a look:

 

A detailed cost analysis of You Build It You Run It.

Setup cost in You Build It You Run It.

• Frequency: one off
• Impact: capex cost
• Cost estimate: high

When you set up a software service in You Build It You Run It, there’s a requirement to configure a high amount of automation. Because these tasks are automated, they represent a one off cost. Thanks to this automation, a higher initial investment in set up results in drastically reduced run costs over time. The trick here is to do just the right amount; ensuring that you can launch and make your service available without unnecessarily over-investing in setup. For help in finding that perfect balance, get in contact for a conversation.  

Generally speaking, setup cost can include activities like:

• Purchasing licenses for things like telemetry licenses, licensing for SAAS products the service may integrate with, and licensing for additional services that may be consumed in the cloud. Visibility of these considerations will come from the design of the service being built
• Configuring deployment pipelines
• Installing telemetry so the team can visualise prospective incidents 
• Setting up live access permissions, so relevant stakeholders have access to the appropriate tier of environment (for example, live versus staging or production)
• Training the team in day-to-day operating practices
• Documenting runbooks
• Providing training for incident response and post-incident reviews
• Developing playbacks and walkthroughs, so anyone in the team can pick up and respond to an incident
• Setting up a new change management process

Run costs in You Build It You Run It.

• Frequency: ongoing per each of the actions listed below
• Impact: capex cost
• Cost estimate: low to medium

Now that we’ve automated a lot of tasks—which are repeatable and reliable—your run costs are largely involved with maintenance. In contrast, Ops Run It involves continued manual effort for run tasks; as those costs accrue, there will come a time where the run cost associated with maintaining a service in Ops Run It eclipses the initial investment (or continued investment) in You Build It You Run It.

In You Build It You Run It, a larger investment is made into setup with the knowledge that your run costs will be reduced in perpetuity, reducing total cost of ownership (TCO).

In You Build It You Run It, run costs can largely be attributed to resourcing the product team’s time for business-as-usual maintenance work, such as:

• Deploying code changes
• Performing deployments
• Rolling back on any failed deployments
• Applying data fixes
• Making configuration changes
• Adding infrastructure capacity
• Monitoring operating conditions
• Updating telemetry tools
• Doing on-call standby during working hours
• Doing on-call standby outside of working hours
• Responding to callouts and managing incidents, both in and out of hours

Opportunity costs in You Build It You Run It.

• Frequency: ongoing per product feature you intend to launch
• Impact: lost revenue and operational costs incurred
• Cost estimate: low 

Remember, a lower opportunity cost is a positive outcome. This is because it means there’s very little delay enforced between the idea of a product feature and its launch to market. 

In You Build It You Run It, there is very little time spent waiting for change management approval, because deployments are far more frequent and represent a lower risk. When you can release frequently with ease, that’s exactly what product teams do. They may get a set of features or a new service delivered for customers as a minimum viable product (MVP) and iterate through daily deployments. All that time, the team is gaining insights into the service, learning from the way customers interact with the service, and importantly, delivering value—both for your customers and your organisation.

This frees you up to continually respond to customer needs and deliver value faster than your competitors. For more detail on why You Build It You Run It allows value creation at pace, see how to launch new product features to market every day.

A detailed cost analysis of Ops Run It.

Setup cost in Ops Run It.

• Frequency: one-off
• Impact: capex cost
• Cost estimate: medium 

In an Ops Run It model, the building and operational responsibilities are split between multiple teams. As a result of this distribution, there are far fewer things to set up. Setup activities typically involve the application support team:

• Purchasing licenses for things like telemetry licenses, licensing for SAAS products the service may integrate with, and licensing for additional services that may be consumed in the cloud. Visibility of these considerations will come from the design of the service being built
• Installing telemetry
• Agreeing to a handover plan with the delivery team
• Reviewing operational acceptance criteria with the delivery team

Run costs in Ops Run It.

• Frequency: ongoing per each of the actions listed below
• Impact: opex cost
• Cost estimate: medium to high

In Ops Run It, run costs pertain to the ongoing manual effort associated with supporting the service. As mentioned above, these costs are medium to high for the entire duration the service is in operation. With this ongoing level of investment, there will typically come a time where Ops Run It eclipses You Build It You Run It in terms of total cost of ownership.

Run costs in Ops Run It typically involve:

• Requesting change approvals from the change management team 
• Performing deployments
• Rolling back any failed deployments
• Applying data fixes
• Making configuration changes
• Adding infrastructure capacity
• Monitoring operating conditions
• Updating telemetry tools
• Doing on-call standby, both in and out of working hours
• Responding to callouts and managing incidents, both in and out of working hours

Opportunity costs in Ops Run It.

• Frequency: ongoing per product feature you intend to launch
• Impact: lost revenue and operational costs incurred
• Cost estimate: high

Remember, a high opportunity cost is a negative outcome. This means a high amount of potential revenue is being lost.

In an Ops Run It model, teams are much more inclined to ‘batch’ the work and deploy it to production only once everything is available. This is typically due to the difficulty involved with making deployments, because everything is manual, time consuming, involves multiple handoffs and approvals processes, and—because you’re deploying more features concurrently—there is greater risk associated with the deployment.

All the time spent waiting on batched deployments is time where services and features fail to generate revenue, and fail to capitalise on potential opportunities.

So, which operating model should you choose?

Inevitably, it depends on the utility of the service in question. It’s a common mistake to take a blanket approach to operating models. In other words, you shouldn’t go ‘all in’ on either You Build It You Run It or Ops Run It for every service. You can read more about this mistaken approach here. 

In assessing your service for an operating model, cost is certainly a consideration. However, there are other more critical factors that should inform your selection. 

If you’re eager to learn more about the costs associated with operating models—or you’d like to know more about a specific transition or project you need to implement in your organisation—get in touch today to arrange a conversation.