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Sunk costs and software.

sunkcosts by Jeremiah Olsen / Oct 24, 2014

One of the hardest decisions to make and internalize is that of sunk costs. Sunk cost decisions arise often when speaking about software systems.

What is a sunk cost?

In simple terms, a sunk cost is money or resources you have spent. Therefore, any decision you make currently should not be based on any money or resources you have spent because that money is spent whether you make that decision or not.

When switching software, many will cite the fact that they have already spent money, sometimes a large amount of money, on a software system as a reason to not buy a better system. If the new system saves money over the old system then switching to the new system is the best decision, regardless of how much money you have previously spent. This may seem counter-intuitive at first, but mathematics prove this point. Check out another definition here.

A sunk cost is gone. Face it, gone like yesterday's news.

The money you have spent in the past must be counted as sunk. The best decision moving forward, in software or otherwise, is the best decision available.

Considering this fact, the most important information to discover when considering new software is how much money the new software will save you over your old software. Look at all the facts, what it will save you, what features you will get, and make the best decision possible, forgetting any money you have already spent.