Part I The decision: does it make sense?
Chapter 4: What software really costs
A vendor’s proposal is only the tip of the iceberg: below the surface are operations, maintenance, further development, licenses, hosting, data migration, and your people’s time. Count the costs over the full 5 years, not just the development price. As a first rule of thumb, plan 10–20% of the purchase price per year for operations and maintenance, and that is before any new features.
The tip of the iceberg: what the proposal does not show
The contract price is what you see. Below the surface are items missing from the proposal, because you pay for them elsewhere or later:
- migrating and cleaning data from the old system,
- integration with other systems, third-party licenses, cloud, and hosting,
- security testing and user training,
- the time of the product owner and key users,
- parallel running of the old and new systems,
- operations, maintenance, and further development after launch,
- handing the system over to another vendor when the time comes.
After launch, you will spend more than on development
Maintenance consumes 40–80% of all software costs, and roughly 60% of it is enhancements, not bug fixes Glass, 2002. A budget that ends on launch day therefore covers only part of the real spending.
For a first estimate of operations and maintenance, plan 10–20% of the purchase price per year. Czech government systems offer a rough benchmark: the basic registers cost almost CZK 1.8 billion to acquire, and their operation averages CZK 220 million a year, about 12%, or around 17% including further development and renewal NKÚ, audit conclusion KZ 23/05. The new travel document system of the Ministry of Foreign Affairs (MZV) has support at about 8% of its price per year NKÚ, audit conclusion KZ 24/26. The often-quoted range of 15–25% a year comes only from vendor blogs. What matters, though, is the content, not the percentage itself: a support proposal well below 10% that does not describe what it includes is probably leaving something out, such as backups, updates, or restore tests.
Split the money after launch into three envelopes:
- operations and support: hosting, monitoring, incident handling,
- maintenance: updates of libraries and platforms, security patches, paying down technical debt,
- further development: new features and changes driven by the business or legislation.
If you merge them, new features can use up the maintenance money and the system starts to age (chapter 22).
The rate per person-day is not the project price
Software development is priced in person-days: one person-day is one day of work by one person (8 hours). The commercial market has no public price list. Government data can serve as a rough guide: twice a year, the Ministry of the Interior (MV) publishes an overview of the prices public authorities actually pay for IT work.
| Role | Lower quartile | Median | Upper quartile |
|---|---|---|---|
| Analyst | 10,000 | 12,088 | 14,144 |
| Architect | 12,000 | 13,600 | 15,000 |
| Programmer | 8,000 | 10,000 | 14,736 |
| Developer | 8,000 | 9,920 | 12,608 |
| Tester | 7,960 | 9,220 | 12,422 |
| Manager | 11,348 | 12,800 | 13,600 |
| Consultant | 10,150 | 13,000 | 16,572 |
Prices from contracts January 1–June 30, 2026 (885 contracts, 1,292 prices). Source: the Ministry of the Interior’s overview of typical ICT rates (Přehled obvyklých cen ICT prací), edition of July 3, 2026.
Compare with an in-house employee
| Role CZ-ISCO | Gross salary | Cost to employer | Cost per day | Vendor for 18 PD |
|---|---|---|---|---|
| Analyst 2511 | 91,532 | 122,470 | 6,804 | 217,584 |
| Architect 2511 | 91,532 | 122,470 | 6,804 | 244,800 |
| Programmer 2514 | 87,817 | 117,499 | 6,528 | 180,000 |
| Developer 2512 | 101,103 | 135,276 | 7,515 | 178,560 |
| Tester 2519 | 83,431 | 111,631 | 6,202 | 165,960 |
| Manager 1330 | 147,726 | 197,657 | 10,981 | 230,400 |
| Consultant 2511 | 91,532 | 122,470 | 6,804 | 234,000 |
Gross salary: 2025 median in the private wage sector (employers that pay a wage, not a public-sector salary). Cost to the employer: salary × 1.338 (social insurance 24.8% and health insurance 9% in 2026). Cost per day: divided by 18 days worked. Vendor: median rate per person-day from the previous table × 18, excl. VAT. Salaries are a year older than the rates; the median for ICT specialists rose 7% year on year in 2025.
Why 18 days: in 2025, ICT specialists worked an average of 147.5 hours a month, which is about 18 eight-hour days. The rest of the paid time went to vacation, public holidays, and sick leave ISPV, private wage sector 2025. A vendor bills only the person-days worked; an employee is paid for the other days as well. The contribution rates apply to 2026 MPSV, 2026 Act No. 592/1992 Coll.. In the occupational classification, analyst, architect, and consultant fall into the same group 2511 (systems analysts), and project manager into 1330 (ICT managers, which also includes heads of IT departments) ESCO v1.2.1.
At the median, a month of work from a vendor costs 1.2–2 times as much as an in-house employee. The vendor’s rate, however, also covers the risk of having no work for its people, company overhead, recruitment and onboarding, cover for sick leave or departures, and know-how from other projects. An in-house employee, on the other hand, costs more than the salary: recruitment, equipment, licenses, the manager’s time, and periods when there is no work for them.
Medians are around CZK 9,000–14,000 per person-day MV, overview of ICT rates, July 2026. A programmer’s median hourly rate is thus roughly CZK 1,250 excl. VAT (CZK 10,000 per person-day divided by 8 hours). The differences between ministries are huge, though: a programmer cost a median of CZK 5,900 at the Ministry of Agriculture (MZe) and CZK 18,000 at MZV. Often, however, only a handful of contracts are involved MV, ministry benchmarking, July 2026. A lower day rate can mean a more expensive project if more person-days are needed. Compare the total price for the delivery, the breakdown by role, and the seniority of the people.
80% of the price under “programming”
A well-prepared proposal lists separately analysis, user interface design, architecture, testing, security, project management, deployment, documentation, data migration, training, and post-launch support. When most of the price is a single “development” item (as a rough guide, around 80% or more), you will pay for the rest later as additional work or technical debt.
Enter ranges into the calculator, not a single number: calculate a variant with 10% and with 20% maintenance. Calculate existing software you pay licenses for in the same way: implementation, licenses for all users over 5 years with announced price increases, customizations by a partner, and internal administration. With existing software, you have no rights to the code. With custom development, you can have the code and a license to it, but only with the right contract (chapter 11).
Your people’s time costs money
During development, the product owner needs 50–100% FTE, key users 5–10%, and 30–50% during testing (rough values, details in chapter 16). On an eight-month project, internal costs run into hundreds of thousands of CZK. Include them in the budget and free people from other work. A project that key people only have time for “in the evenings” is like a building site the site manager visits once a month.
Also plan for rising prices. License prices change over a system’s lifecycle (Power Apps Premium goes up from USD 20 to USD 22 from 2027 Microsoft, 2027 price increase), and with custom development, rates go up. A calculation with zero growth is optimistic.
The old system nobody switched off (MZV, NKÚ 2025)
MZV acquired a new travel document system for CZK 126.7 million; it has been in operation since October 2023. In 2022, however, it signed a new contract to support the old system, and spending on it rose from an average of CZK 1.2 million to CZK 15.3 million a year. Total annual costs in this area rose 22× to CZK 25.9 million. The Supreme Audit Office (NKÚ) found that up to CZK 39.8 million had been spent uneconomically and noted a dependency on the vendor NKÚ, audit conclusion KZ 24/26. The lesson: running the old and new systems in parallel means additional costs. A plan for switching off the old system therefore belongs in the project.
Source: NKÚ, audit conclusion KZ 24/26
| How it goes wrong | How to do it right |
|---|---|
| How it goes wrongThe contract price gets approved. | How to do it rightCosts over 5 years in three envelopes get approved. |
| How it goes wrong“The system is finished, we don’t need maintenance.” | How to do it rightAn annual operations and maintenance budget of 10–20% of the price, further development separately. |
| How it goes wrongRates per person-day are compared. | How to do it rightThe total price, the person-day breakdown by role, and seniority are compared. |
| How it goes wrongData migration will “get done somehow.” | How to do it rightMigration is a separate item, estimated on a data sample. |
| How it goes wrongThe product owner’s time is not counted. | How to do it rightInternal time is in the budget, and people are freed up for the project. |
| How it goes wrongThe new system launches and the old one is to run “a little longer.” It ends up being years. | How to do it rightA plan for switching off the old system is part of the project. |
- Economy is assessed over the whole lifecycle, not just the purchase price MF, guideline CHJ No. 3, 2026. More on the 3E (effectiveness, economy, efficiency) and the new act in chapter 5.
- For the estimated value of a contract under Section 16 of the Public Procurement Act (ZZVZ), the MV overview of typical ICT rates is the standard basis.
- Costs over 5 years also determine the procurement regime: a small-scale public contract (VZMR) for services goes up to CZK 3 million excl. VAT; from January 1, 2026, the above-threshold regime starts at CZK 3,491,000 (central government) and CZK 5,386,000 (local governments) ZZVZ and Government Regulation No. 541/2025 Coll..
- Put support and further development that you could foresee out to tender together with the development. Awarding them later in a negotiated procedure without prior publication (JŘBU) on the grounds that only the original vendor knows the system is a big risk (chapter 12).