What Do You Think about Enterprise Software Maintenance?

Dennis Byron

Vinnie Mirchandani has responded to my recent post on his recent post about reshaping the enterprise software market.

His comments forced me to go back and re-read his original post. Apparently Vinnie's feelings about the entire enterprise-software-market revenue model were stronger than I gave them credit for with my throw-away paragraph at the bottom of my post about Time and Materials being an easy option for end-of-life software.

So let's start over, and hopefully we can hear from some of you. To cut through all the market-research theory in my post and his response to my post and my response to his response, ad nauseum, here are the key questions (not that I expect anyone to answer all of them):

  • Do you feel enterprise software suppliers are gouging you with this model of a one-time charge for right-to-use licenses, plus subsequent annual maintenance subscription for patches, help desk, and sometimes for upgrades?
  • Is it the model itself that's flawed or is it just that the typical 22 percent-25 percent annual fee is too high? Could you live with 15 percent , 10 percent? You name it.
  • Would you rather pay a one-time fee and get a warranty as with a car? (Don't go down the open source rat hole, which I realize also could change all the dynamics.)
  • Have you considered third-party maintenance, and how did that compare?
  • At enterprise-software product end of life, have you ever simply dropped the maintenance contract and depended on a T&M charge, and how did that work?
  • Are you using SaaS, a business service such as for HR benefits administration, and so forth as a way to change the maintenance dynamics? Or do you use those types of service arrangements for other business reasons?

Vinnie says:

"Most companies reluctantly continue to write maintenance checks to get the occasional bug fix (or in Microsoft case many fixes), and in some cases for future functionality. But when you measure the cost per patch or support call logged, it makes the DoD toilet seat of $640 look cheap."

I think most IT managers and staffs realize that enterprise software is priced "pay now and pay later" for historical reasons and just accept it for the way it is. For me not to believe this means I would have to believe a very vibrant market with hundreds of competitors and millions of customers has been acting irrationally for 35 years. A market research guy would go over the edge if that was the case.


Vinnie says the fact that I'm looking back 35 years is a problem. But during that period the market has looked at many other options noted in the questions above, and it keeps coming back to this way of paying for its enterprise software functionality. The jury is still out on how much SaaS -- which is really just the timesharing service bureaus of the '70s morphed into the EDI services of the 80s morphed into ASPs of the 90s -- changes things.


Let us know what you think.

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Jun 25, 2008 4:58 AM vinnie mirchandani vinnie mirchandani  says:
Thanks for starting this conversation. To clarify my hypothesis is based on three broad observations within my client basea) support needs show up in a bell curve. During implementation the needs are low as clients have consultants etc helping them. After 3-4 years of going live, the support needs drop off significantly. But vendors want to charge the same amount year after year and in fact charge for inflation and "uplifts" if customers do not upgrade to latest versionb) software support costs have dropped dramatically in last few years as vendors leverage offshore centers, offshore outsourcers, communities, open source code, testing and other automation. But they have not passed along such savings to customers.c) license discounting has increased significantly in recent years. But maintenance is often pegged to current list or to discounted price at time of license purchase, not current discount.I could go on with other nuances but these 3 drive a significant over pricing of maintenance from what my clients compalin about...and as they see 3rd party maintenance and SaaS options show up their suspicions are being validated that they have been overpaying for a while... Reply

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