Monday, February 16, 2004

Customers pushing back against enterprise software maintenance fees

Last week I wrote about customers pushing back against Microsoft's software maintenance program for system software and the Office suite.

Now it seems that the same sort of backlash is coming in the enterprise applications market. The problem is that as new license sales have slowed, vendors have been looking more and more to their existing customers for revenue, and have increased software maintenance fees to a point where they are out of line with the perceived value. According to a recent research note by AMR, customers "are furious about the cost to maintain those products and the policies that the vendors have established for enhancements and upgrades."

Vendors had better wake up. AMR's research shows that because of maintenance policies, 22% of customers are considering switching vendors, 21% intend to stop taking upgrades, and 12% will discontinue paying maintenance.

AMR has some advice for customers that are fed up with paying for maintenance that delivers little or no value:
  • Purchase applications in smaller increments. Don’t license more than you can use in the next six months.

  • Negotiate harder for maintenance terms than license discounts. The upfront discount has a much smaller effect on total cost of ownership.

  • Every purchase is an opportunity to renegotiate terms and structure. It is much easier to get the vendor’s attention when you are spending money.

  • Flexibility is the most valuable concession you can get; you will never be able to forecast your license requirements accurately.

  • If you can’t use the enhancements, don’t pay for them. Consider self-support or renegotiating with the vendor instead.

For more insight, read AMR's whole article.

No comments: