Sunday, September 14, 2008
One of my hot buttons these days is the value--or lack thereof--in enterprise software vendor maintenance and support fees. With SAP and Oracle now charging 22% of the software license cost annually, customers are in essence paying again for the software in less than five years. What exactly are customers getting for their money?
Ray Wang hits the same button with a post last week, where he points out that many vendors take up to 85% of the money as profit, leaving 15% for actual support services.
He then provides a top 10 list of what he sees customers wishing their vendors would provide to justify their maintenance fees. I'll just comment on his top four.
Read Ray's entire post for the complete list--they are all good points. If vendors would deliver on these wishes, I think there would be a lot more value and a lot less dissatisfaction with vendor support programs. I also believe that these points are a roadmap for mid-tier vendors to compete on maintenance and support against SAP and Oracle.
- Ray lists "Service level agreements for response times and quality of resolution" as number 4. Many of the support agreements I've reviewed do include a response time promise. But when was the last time you saw a vendor held accountable for meeting that promise? And, what reporting is done on "quality of resolution?" I would really like to see vendors dinged once in awhile for failure to meet their service level agreements.
- For number 3, Ray lists, "Transparency in how much of the maintenance and support dollar is reinvested versus how much is going to profit." To this I would add, how much is going toward development of "next generation" products, apart from the product the customer is paying support for? Much of the initial license fee pays for the enormous amount of work that vendors spend in marketing and sales. Vendors count on maintenance and support fees to fund much of their new development.
- Number 2 is "Choice in support options and packages (i.e. tiered maintenance options)." I've touched on this one previously. Some vendors do offer tiered programs--but even the base level program is too rich, in my opinion. For a customer that doesn't plan on upgrading, why can't that customer buy a bare bones support package--for example, one that only provides bug fixes. Many customers on older systems would even opt out of help desk support, if they could.
- Ray's top wish is "Option for third party maintenance." I fully agree. If I buy a Lexus, I don't need to go to my Lexus dealer to get support. I can get authorized third-party maintenance from a variety of independent service centers. Why should it be any different for enterprise software?
On the other hand, if things don't change, I do believe we will reach a tipping point. Whether that will means a rise in the third-party support model, or a serious turn to open source, or some sort of antitrust legislation, I don't know. But things can't continue as they are today.
Mad as hell: backlash brewing against SAP maintenance fee hike
Vendor maintenance fees: just say no
Legal basis for third-party ERP support industry
Custom systems: alternative to ERP
Total cost study for an open source ERP project
Reading the fine print on ERP contracts
High software maintenance fees and what to do about them