Major software vendors are under increasing pressure to cut their application maintenance prices, according to a Forrester Research Inc. analyst and others, as customers push back against the fees and even cancel software maintenance due to the tough economy. So if your software vendor is not entertaining some flexibility, it may be time to play hardball.
As we reported last week, some hard-pressed CIOs are increasingly willing to drop vendor maintenance or move to cheaper third-party providers, even for mission-critical systems. New models, such as Software as a Service, are also making the vendors' historically inflexible approach to maintenance fees look positively prehistoric.
It's no secret that software vendors have CIOs over a barrel when it comes to application maintenance and support. Most vendors bundle software enhancements with support, making it difficult for customers to look elsewhere for cheaper third-party vendor maintenance. Many major vendors require customers to pay maintenance even on software that's not being used or fully deployed -- so-called shelfware. Extra licenses can earn CIOs bigger license discounts, adding another twist to the negotiation.
The following are strategies from Forrester analyst Duncan Jones for cutting your vendor maintenance costs:
- Cut noncritical maintenance contracts to show other vendors you mean business. The money
you save on the cuts also helps. Just make sure you won't need to upgrade within five years and
won't need support.
Cutting maintenance doesn't mean you can never upgrade, Jones pointed out. And doing so can actually work to your company's advantage should you later choose to buy new licenses for a new version, triggering what Jones calls a "return of the prodigal customer deal." Still, "Businesses should be prepared to run unsupported for a short while if they know a switch is imminent," Jones said.
Some areas ripe for maintenance termination include instances where companies are looking to consolidate software on a corporate standard or migrate from a legacy product to a new market leader. Indeed, some CIOs are speeding up migrations because of inflexible vendor maintenance. "I pretty much kicked them to the side of the road," one feisty CIO said of a vendor that tried to increase maintenance costs.
- Scour your maintenance program for any flexibility that could help you "earn savings."
- See if your vendor will allow you to take any shelfware off maintenance. Some will, Jones said,
while others will ask for the licenses back. You may lose some of your original discount level due
to the decreased volume but save more by giving back the unused licenses and paying less for
- If the vendor offers different tiers of support, analyze the maintenance record on the product
to figure out if it is prudent to move to a lower level of support. A lower level will cost
- If various parts of the business have their own software maintenance deals with the vendor,
investigate whether a global maintenance program would offer economies of scale. It costs the
vendor to separately invoice and service all these contracts, so a program that takes out that cost
could in turn offer you savings.
- Finally, try to earn rebates by showing vendors that your company's superior training, educated users and standards have reduced support calls.
- See if your vendor will allow you to take any shelfware off maintenance. Some will, Jones said, while others will ask for the licenses back. You may lose some of your original discount level due to the decreased volume but save more by giving back the unused licenses and paying less for maintenance.
- Earn exceptions to the vendor's contract rules by promising long-term rewards to the
vendor. Showing your vendors that your long-term technology strategy is joined at the hip with
theirs may be one of the few arguments that will hold some sway if you want to push hard for
exceptions in your agreements (pleading poverty doesn't cut it, Jones said, and threats have
limited effect -- tip No. 1 notwithstanding.).
"For example, IBM, Oracle and SAP have all acquired BI products within the past couple of years and are keen to sell them to existing users of their other products," Jones explained. If you are willing to move or purchase a vendor's newly acquired products, that shows you buy into its strategy, which may win you maintenance brownie points.
Another reward you can offer is your endorsement, particularly if you work for a well-known company. Parlay that name brand into vendor maintenance discounts by offering to be a customer reference or case study.
Let us know what you think about the story; email Linda Tucci, Senior News Writer.
This was first published in October 2009