Enterprise System Spectator blog: ERP and enterprise system vendor evaluation, selection, and implementation.

The Enterprise System Spectator

Friday, April 24, 2009

Attacking and defending software vendor maintenance fees

Conversations in the so-called blogosphere can be hard to follow sometimes, and there's an interesting one going on the subject of vendor maintenance fees.

The short version: on my previous post on the Lawson CUE conference, I had one point regarding a dialog that several of us had with Lawson executives regarding Lawson's maintenance program.

Paul Wallis commented on the post, expressing the view that vendors need to do a better job defending their maintenance programs, and pointed to one of his own blog posts where he elaborated in more depth, concerning SAP's maintenance fee hike.

Vinnie Mirchandani then responded on his own blog.

Anyway, if you want to follow along, read the following posts in sequence:
My take: I'm with Vinnie on this one. The balance of power between software vendors and customers has tipped too far to the side of vendors. This is what many of us feared when the software vendor consolidation trend heated up with Oracle's takeover of PeopleSoft. The escalation of maintenance fees is just one symptom. I am a believer in free enterprise, and I believe that ultimately the economics of the current situation are unsustainable.

Some possible market responses include:
  • Some vendors deciding to compete on maintenance and flexibility
  • Third-party maintenance offerings (perhaps strengthened by some much-needed antitrust rulings)
  • Open source business applications
  • A pendulum swing back toward custom-development, especially when combined with open source
  • SaaS alternatives
I don't know what the answer is, but as I indicated, I think the current situation is unsustainable.

Related posts
Infor's opportunity: value in maintenance and support
Spinnaker offering third-party maintenance for JD Edwards clients
SAP and third-party maintenance: good for me but not for thee
SAP maintenance fees: where is the value?
Mad as hell: backlash brewing against SAP maintenance fee hike
Legal basis for third-party ERP support industry

by Frank Scavo, 4/24/2009 12:35:00 PM | permalink | e-mail this!

 Reader Comments:

Thanks for the link.

I am not sure how anyone can defend value from maintenance so long as formal SEC and other filings clearly show only 10 to 12% in R&D - out of which only a fraction goes into new product development and 30, 40, 50% goes towards SG&A. Unless they say they are misstating their financial statements it is there for everyone to see.

as I like to say if the Red Cross only contribtued 10% towards actual charity, there would be all kinds of protests and Congressional inquiries, but we have let sw vendors get away with it...
Hi Frank,

Thanks for the reference above.

It’s been interesting to see the reaction to trying to place the maintenance cost issue within a context of business worth rather than being “just more IT spend”.

I was once told that a good accountant would always save me more than he charged. I think the same about software - we shouldn’t look at the costs in isolation, but try to see and value them in the context of business contribution.

Having said that, I think that you are right that free market economics could cause a bit of a shake up in the market. We are at a point in time where companies are looking to reduce spend and charges are going up, which leaves a vacuum - and where nature abhors a vacuum, entrepreneurs love one.

We’re already seeing growth in third party support, which could well force prices down over time. Personally, I’m not convinced about Open Source business applications taking on the big boys. In my experience it is very difficult to get the business to place a value on something free.

“If we don’t pay for it then it’s not worth anything, and if we do pay for it then the cost is too high!”
Paul, I appreciate the feedback.

Regarding open source, I think most users have gotten past the concept that open source doesn't cost anything. There are plenty of costs in open source, just generally not in license fees.

As advocates like to say, open source is free as in "free speech," not as in "free beer." In other words, the freedom is in what you can do with open source, not what you pay for it.

At any rate, I happen to agree that the jury is out on whether open source business applications can make a dent in market share of the major vendors. But excessive vendor maintenance fees certainly help strengthen the case.
Post a Comment

Links to this post:


Powered by Blogger

(c) 2002-2018, Frank Scavo.

Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

About the Enterprise System Spectator.

Frank Scavo Send tips, rumors, gossip, and feedback to Frank Scavo, at .

I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.

Selecting a new enterprise system can be a difficult decision. My consulting firm, Strativa, offers assistance that is independent and unbiased. For information on how we can help your organization make and carry out these decisions, write to me.

My IT research firm, Computer Economics provides metrics for IT management, such as IT spending and staffing benchmarks, technology adoption and investment trends, IT management best practices, IT salaries, outsourcing statistics, and more.

Go to latest postings

Search the Spectator!
Join over 1,700 subscribers on the Spectator email list!
Max. 1-2 times/month.
Easy one-click to unsubscribe anytime.

Follow me on Twitter
My RSS feed RSS News Feed

Computer Economics
Outsourcing Statistics
IT Spending and Staffing Benchmarks
IT Staffing Ratios
IT Management Best Practices
Worldwide Technology Trends
IT Salary Report


2014 Best Independent ERP Blog - Winner 2013 Best ERP Writer - Winner Constant Contact 2010 All Star Technobabble Top 100 Analyst Blogs

Key References
Strativa: Business strategy consulting, strategic planning
Strativa: IT strategy consulting
Strativa: Business process improvement, process mapping, consultants
Strativa: IT due diligence
Strativa: ERP software selection consulting and vendor evaluation
Strativa: CRM software selection consulting and vendor evaluation
Strativa: Project management consulting, change management
StreetWolf: Digital creative studio specializing in web, mobile and social applications
Enterprise IT News: diginomica

Spectator Archives
May 2002
June 2002
July 2002
August 2002
September 2002
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
April 2003
May 2003
June 2003
July 2003
August 2003
September 2003
October 2003
November 2003
December 2003
January 2004
February 2004
March 2004
April 2004
May 2004
June 2004
July 2004
August 2004
September 2004
October 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
September 2006
October 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008
October 2008
November 2008
December 2008
January 2009
February 2009
March 2009
April 2009
May 2009
June 2009
July 2009
August 2009
September 2009
October 2009
November 2009
December 2009
January 2010
February 2010
March 2010
April 2010
June 2010
July 2010
August 2010
September 2010
October 2010
November 2010
December 2010
January 2011
February 2011
March 2011
April 2011
May 2011
July 2011
August 2011
September 2011
October 2011
November 2011
December 2011
January 2012
February 2012
March 2012
April 2012
May 2012
June 2012
July 2012
September 2012
October 2012
December 2012
January 2013
February 2013
March 2013
May 2013
June 2013
July 2013
September 2013
October 2013
December 2013
January 2014
February 2014
March 2014
April 2014
May 2014
June 2014
July 2014
August 2014
September 2014
October 2014
November 2014
December 2014
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
September 2015
October 2015
November 2015
February 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
January 2017
February 2017
May 2017
June 2017
October 2017
January 2018
April 2018
May 2018
Latest postings