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sons: IX. COST COMPARISON OF OPTIONS There are so many variables affecting cost, it is impossible to com- pare precisely the cost for each option over time. The estimates in this section are, therefore, mostly qualitative. They are based on the wide experience of several committee members in commercial networking.~4 Cost comparisons among the three options are difficult for two rea- There are an unlimited number of scenarios that can be considered for the growth of DOD's data communication networks in the next fifteen to twenty years, involving questions such as (a) How many different implementations will there be? (b) What economies of scale can be achieved? (c) How much software will be shared be- tween different implementations? (~) How much wild the standards change for greater effectiveness or to accommodate higher-layer standards? and (e) What will happen to manpower costs in this high-skill area? - Tt is difficult to isolate the costs attributabJe to deveJoping, implementing, and maintaining the protocols at issue. This is especially true if we assume DOD continues to use its own unique protocols. For both in-house and contractor efforts, the costs associated with TOP are folded into many other efforts. If DOD moves to commercial protocols, the marginal costs may be more visible. ]4The committee has had some access to a study recently conducted by the Defense Communication Agency that compares the costs of commercially maintained versus government-maintained operating systems for the Honeywell computers used in WINCES. Although the WWMCCS example has many fewer dimensions and systems than are covered by this analysis, the committee urges the DOD to review this study as a good example of potential savings from commercially vended software. (WW~CCS-ADP-System Software Economic Analysis. J. Stephens and others, Joint Data Systems Support Center, Defense Communications Agency, Technical Report, in draft.) -47-

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A major motivation expressed by the DOD for using commercial protocols is that the commercial protocols are significantly cheaper. If this is the case, then many in the DOD would like to know the savings over the next ten to twenty years if DOD adopts TP-4. This is not a question we will try to answer in this report, but the concept of opportunity costs is significant. If DOD can successfully move to commercial standards, then it will eventually be able to use DOD's scarce management and tech- nical resources to strengthen its efforts in other areas of information communications and processing that are more unique to the DOD. Given the finite pool of such resources available to the DOD, the value of tnis transfer may be significantly greater than the dollars saved by adopting the international standards. The following assumptions have been used in trying to estimate the cost factors if DOD moves toward adopting TP-4 using either Option ~ or 2: No major subsystem of the DON (which includes MILNET, DODITS, WWMCCS, and so forth) would use both protocols at the same time except possibly for a brief transition period. In only a few selected cases would a capability be required to handle both protocols. These cases could include select hosts that use both, special servers (most likely mail servers) that could provide functions between several communities of interest using both protocols, or translating gateways between networks. Within the DON both sets of protocols would be used for a period of five to ten years starting eighteen months after the DOD approves the use of TP-4 in a new system. In virtually all cases, the phase-over from TOP to TP-4 in a subsystem of the DON would be performed at a time when there is a major upgrade of subsystem elements that include TOP as a part. In other words, the transition is not merely a substitution of transport or internet software except in cases where the hard- ware currently being used is from a vendor who has started to offer TP-4 as a commercial product. Where this is not the case, the transition includes the substitution of new hardware whose vendor provides TP-4 commercially. COST FACTORS AND MODEL Four major factors must be considered in evaluating the costs of the three options: 2. How much lower will be the cost of commercial, standard-product protocols compared to those developed and acquired by the DOD? If DOD decides to adopt TP-4, how quickly can it start using it in new systems, and how quickly will it phase TOP out of older systems? -48-

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3) What will be the one-time cost of management and test before DOD is prepared to start using TP-4? 4) What will be the marginal costs of maintaining the two standards over the 5- to lO year transition period? Savings Using Commercial Software Commercial software providing TP-4 will tend to be cheaper than DOD- provided TOP because commercial one-time and recurring costs (especially the former) can be apportioned over a larger consumer base, and the com- mercial supplier will tend to be more efficient. As in most cases where one compares the cost of one product provided by two vendors, there will be situations where a DOD vendor providing TOP can do it more cheaply than a commercial vendor providing TP-4. These occurrences will be rare but they illustrate the difficulty of developing detailed quantitative models that compare the costs. Factors redating to competing suppliers go far beyond the transport protocols themselves and distort such models. The first argument relating to the size of the consumer base has many factors. For the time period under consideration, DOD represents about 3 percent of the commercial U.S. computer base. It would follow that DOD should pay much less in development and support costs for the commercial products. But there are other factors. The number of commercial sup- pliers is larger than the number of DOD suppliers by a factor of 5-10. The DOD's need for transport and internet protocols will be greater than the average commercial user in the time period under consideration. If commercial vendors break out the costs of developing these protocol fea- tures earlier than planned, DOD will pick up a larger share of the tab. This could be by a factor of 2 or more. A good deal of the one-time de- velopment and production costs of TOP have already been spent by the DOD or partly written off by DOD vendors. This factor would be extremely dif- ficult to estimate, but we do not think it is very significant since the major costs in implementation relate to processes down-the-line from get- ting a C-language version. These down-the-line processes must be repeated in great part as families of hardware and software are upgraded with sys- tem and technology improvements to meet DOD directives for standard TOP products. There are also factors that cut in the other direction; if the DOD is only 3 percent of the U.S. commercial user market, it is an even smaller fraction of the international user market. This latter market is growing, its need for ISO protocols will be relatively higher than the U.S. market, and market share for U.S. manufacturers, including foreign subsidiaries, is large and holding its own. The situation is equally complex when it comes to comparing the effi- ciency of commercial vendors with DOD vendors when it relates to develop- ing, installing, and maintaining transport and internet protocols. The elements that favor increased efficiency of the commercial supplier include the following: The commercial marketpJ ace is much larger, less regulated, and is forced, therefore, to seek greater efficiency and innovation. -49-

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Transport and internet protocols represent functions that inter- act very closely with operating systems, the largest portion of which are commercial. The major sources of expertise for deal- ing with these operating systems are in the commercial market- place, primarily with the vendors who supply the hardware as well as with vendors who specialize in related products. The commercial sector is in tne business of managing the inter- play between operating systems, protocols, related software and hardware products, new technology and architecture, and the relationship between all these and the market. If DOD adopts TP-4, it will be delegating many of these management functions to a marketplace that will generally make better and faster deci- sions. For every dollar that the DOD might invest in TOP, how much would it cost to gain comparable capability with TP-4 procured as vendor standard products? The many factors involved make a precise estimate impossible. We believe, however, that TP-4 can be procured at substantial savings and with virtually no economic risk if the market develops as we believe it will, with many vendors offering it as a commercial product by mid-1986. On the average, we judge the savings to be 30 to SO percent including initial installation, field support, and maintenance. How Soon Will TP-4 Be Used? The sooner that DOD decides to use TP-4, the greater will be DOD's savings. These savings can offset the adverse cost factors discussed in the next two sections: the cost to decide to use TP-4 and the added cost for the period when two standards (TCP and TP-4) are in use. Currently, TOP is generally used in MILNET, MINET, and ARPANET. As previously stated in the assumptions, even if DOD decides to move aggres- sive~y toward TP-4, there are no evident, strong economic or operational reasons for converting these users to the new standards until a major up- grade of the users' communications and processing subsystems is planned. Also in the next twelve to eighteen months new uses of these nets are planned that will expand existing subnets and these new users would use TCP in order to be interoperable with the current users in their community of interest. In some cases the planning for new subnets for new communities of users is well along. DODITS is a primary example. Some of these subsets should very likely proceed with TCP, but others appear to be prime targets for TP-4 if DOD is to move in the direction of adopting TP-4. The WWMCCS and its WIN are probably good examples of the Jatter. Planning and imple- mentation for all of these subsystems must move ahead, however, and if DOD does not make a firm commitment to TP-4 by mid-1985, the number of systems that will move ahead with TCP will probably constitute almost half of the growth of the DON in the next five years. In other words, delay of a ae- cision to move to TP-4 until 1986 would mean that most of the DON subnets -50-

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that will exist in the late 19%0s will be based on TOP, whereas a decision for TP-4 a year earlier could significantly reduce this number. Cost of Decision to Use TP-4 The costs of the decision to use TP-4 include the one-time management and test costs that DOD decides are needed before a TP-4 commitment and policy can be approved. Under Option ~ these costs are small. Under Option 2 they are significantly higher, although the amount will depend on the extent and duration of the testing needed. Under Option 3 there will be no management and test costs. Marginal Costs of Maintaining Two Standards If DOD moves toward the gradual introduction of TP-4, both standards will have to be maintained for five to ten years. The additional costs of maintaining two standards include the following: Management costs of dealing with two standards. Costs for developing and maintaining capabilities for limited i ntercommun i cat i on between systems us i ng the ~ i fferent transport and internet protocols. These include costs for gateways, dual- capability hosts, and special servers such as mail. Parallel validation capability. The DOD is implementing a vali- dation capability for DOD TCP. This is similar to the currently operational NBS facility for TP-4 testing. If DOD selects Option 1, there is a question whether this DOD f acility should be com- pleted for TCP (because the number of new implementations of TCP would be small several years from now). If DOD selects Option 2, the facility is probably desirable. Costs for maintaining research and development (R&D) programs to improve the standards. A part of the DARPA and DCA research and development programs in information technology is directed at system issues related to TCP. This includes work on internet issues, gateways, and higher-level protocols. The committee has not reviewed the research program for details and cost; however, a commitment to move toward ISO standards should affect the program. Costs would increase to the extent that the program would be involved with interactions with both protocols. There would be some decreased requirements for R&D in light of poten- tial dependence on commercial R&D to improve the standards. In the next several years, however, the committee concludes that dual standards would, on balance, somewhat increase R&D costs because of the DOD's unique operational requirements. These costs are roughly the same for Options ~ and 2 and depend on how DOD manages the transition. Under an austere transition, which does not provide extensive interoperability between TP-4 and TCP-based systems and -51-

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minimizes costs in other areas, the overall costs could be low in compari- son with potential savings. Evaluation of Options by Cost In terms of the previously discussed factors, savings can develop in two ways: by using TP-4 instead of TOP in new systems and by replacement of TOP With TP-4 in existing systems when this can be done smoothly and efficiently. The earlier that TP-4 is introduced, the greater these savi ngs. In contrast costs wild be incurred in two ways: in one-time planning to use TP-4 and in continuing costs of operating two standards. The following is a summary of the cost evaluation of the three options in the near term: Option 3 is least expensive. It achieves no commercial savings but has no costs for one-time planning and maintenance of dual standards. - Option ~ is at most only slightly more expensive than Option 3 since one-time planning costs (which are much lower than for Option 2) and main- tenance costs can be significantly offset with commercial savings in the following several years. Option 2 is most expensive since it does not realize significant off" setting commercial savings. In the longer term (beyond the next several years) commercial savings for Options ~ and 2 should overtake costs of transition, and both these options should cost the same. There is a concern on the part of some members of the committee whether the higher near-term costs of Option 2 are adequately offset by the Option's long-term savings to warrant the transition. -52 -