Tuesday, November 04, 2008

Pushing back on software vendor maintenance fees

negotiating software maintenance. He first asks, how is it that vendors are now charging annual maintenance fees that are 20% of the initial license cost (or more, in the case of SAP and Oracle), where they were typically charging 15% a few years ago? The answer, in effect, is because they can. In other words, buyers are simply not pushing back hard enough.

He then provides a list of 18 questions you can use to push back on your software vendor when it comes time to negotiate. Here are a few...
  • Why do I have to pay you to fix your own bugs?
  • Why should I have to pay software maintenance in advance?
  • Can you separate the cost of actual maintenance from how-to / technical support?
  • I'm only able to install half of the total licenses in the first year, so why do I have to pay maintenance on all of the licenses?
Read post to get the whole list.

I know I've been harping on this subject for a long time (see related posts below), as have other bloggers, such as Vinnie Mirchandani (aka, Vinnie Maintenance), Ray Wang, and Dennis Howlett. But things won't change until buyers start pushing back harder.

Or, antitrust actions are taken. But that's another story for another post.

Update, Nov 6. SAP's co-CEO Henning Kagermann defends SAP's plans to increase maintenance fees.

Related posts
SAP maintenance fees: where is the value?
SAP under the spotlight for "broken promises"
Vendor software maintenance programs: top 10 wish list
Mad as hell: backlash brewing against SAP maintenance fee hike
Oracle confirms: maintenance fees are virtually all profit
Oracle profits strong, thanks to your maintenance payments
Vendor maintenance fees: just say no
High software maintenance fees and what to do about them

1 comment:

Matthew King said...

Enterprise software should be licensed on a subscription basis only. No upfront costs. This in reality has already started to happen but is not transparent, hence the frustration. The upfront licence fees are typically heavily discounted, which operates as a sales tactic to make the customer feel they are getting something for nothing.

A more transparent model would be for maintenance to contain fixes, changes, upgrades, troubleshooting support, reporting of software errors, lodgement of development requests , and help libraries. In otherwords everything except design oriented consulting services.

If the customer wants out then they are on there own. But the difference is that they would never have paid an upfront licensing charge, and so if they want to scrap all or part of a solution then they only need to write off professional services charges. This arrangement would actually encourage the customer to keep paying maintenance because they will know that they won't need to find a lump sum each time they want to upgrade or add another application. They simply pay a higher maintenance rate each time their solution footprint expands.

Interestingly, a similar concept underpins Shai Agassi's "Better Place" initative, whereby a customer might lease an electric vehicle instead of buying it.