It is a small sample, but one with gravitas. Kash Rangan and team at BofA/Merrill Lynch surveyed 21 CIO’s from major, well recognized U.S. organizations in the Fortune 1000 and across different industries and found improving success rates around their renegotiation of maintenance contracts - similar to what appears to have happened at Siemens
So, a new backup computer has its 60 day free Norton Internet Security expire. I try to renew and the site has no way to accept my existing account credentials. I have a left over license for Norton Antivirus but it will not let me install that without uninstalling the other Norton program first. Going through that process I am curious how the renewal price would have compared to market and I can find a price 75% lower than the Symantec site…
Just a small microcosm of the mess most companies have with software asset management. Vendors accuse companies of non-compliance and threaten audits all the time but the reality is there are too many versions, too many license measurement units, too many opportunistic prices.
The glib solution usually is “let’s sign an enterprise agreement”. Not only are most of them priced at too high an assumption of usage capacity, few vendors can resist tacking in exceptions and coming back for more periodically. Kind of the advertised “all-you-can-eat” buffet where the drinks, premium foods priced separately add up to more than the base price.
Ray Wang of Forrester just released v.2 of his Enterprise software licensee Bill of Rights. Must read for buyers and vendors in the space. He kindly permitted me to extract one of the graphics from his report.
As we know the Bill of Rights only included the first 10 amendments to the US Constitution and there have been many more since.
The Deal Architect is proposing some other amendments in the column in yellow. Click on image to open in another window then click on magnifying glass to enlarge.
Hopefully they will take less time for the industry to adopt than the 27th amendment to the US constitution which took 2 hundred years to be ratified!
I listened to Jim Schaper introduce the concept of Infor Flex today. Includes plans to upgrade to their SOA solutions, or exchange licenses towards another Infor solution. That is goodness, though the listed discounts and transaction fees will need customer analysis and haggling.
But there is no downgrade path. If customers only want a low-touch plan – some bug fixes, minimal number of support calls, regulatory updates – you have to keep paying at full rates. As I have written before, customer needs and vendor delivery speeds (and their support costs) vary considerably making it very hard to justify a single maintenance rate across the product lifecycle – so my suggestion about letting maintenance rates float
To a question I asked, Jim responded “Unlike what we are reading about our competitors, we are not seeing as much defection in our customer base to SaaS or third party maintenance. Besides we will offer SaaS in several components of our offering”.
In other words, our customers are peachy and not really asking about flex down. Interestingly enough, we hear the same thing from from Lawson, Oracle and SAP with a similar qualifier - “We read their customers (those of our competitors) are asking for it, but not ours”. A whole lot of reading going on.
With that definition of flex, remind me to not buy any bungee cord from any of them :)
Add to third party maintenance, SaaS, open source – another disruption to the traditional enterprise software market – shelfware reduction in the form of sale of unused licenses as Ray Wang at Forrester points out.
As Ray points out “This post provides an alternative that must be vetted by proper legal professionals. “ Indeed, don’t expect software vendors to give up without a significant fight. Even if they don’t let you resell licenses, if you can get them to not charge maintenance on your shelfware that would be a huge victory for most organizations. Parking should not only be for cars.
No, not talking about Iran. Talking about this article in Managing Automation where ERP vendors basically take the position of “Not sure about SAP, but we sure deliver value from maintenance”.
The only way to say if you are delivering value is to let your customers vote. As I wrote here - “Let it float”. Your customers may go to third party options, or may ask you for a low-touch maintenance plan at 5% a year or may tell you you need KPIs or tell you they are happy cutting you annual checks at current prices.
Let your customers speak. And let unbiased observers certify the results of the poll.
Otherwise expect rioting in the streets, even as you repeat on official TV that you won and are delivering value.
1) Customers paid extra for vertical modules like utility billing or retail merchandising (using vertical licensing metrics and price points far higher per function point than in the core) and continue to pay maintenance on that but little in the way of new functionality is being delivered
2) Analytics continue to be focused on internal, historical, structured data. Little in the way of predictive or web or unstructured analytics.
3) User interfaces continue to evolve at snail’s pace. Many vendors finally support Excel integration and that look and feel. Don’t hold your breadth about Surface computing anytime soon.
4) Customers report upgrades continue to be too cumbersome. Indeed they are forced marches. You would think by the 12th release of something, an upgrade would be a piece of cake?
5) Compared to application support. hosting and storage cost benchmarks coming out of SaaS and cloud world, your vendor’s ecosystem seems frozen in the annals of time
6) Compared to SLAs coming out of offshore and SaaS vendors, your software vendor’s support KPIs and SLAs quit evolving a decade ago. And there are toothless penalties for breach.
7) Compared to training and documentation materials coming out of Apple and Google, your vendor’s classroom training and documentation is antiquarian.
I better bring him in as partner before he drives me out of business :)
Seriously, David is one of the smartest people in the industry. And unlike so many market watchers unafraid to say it as he sees it. He also plays a mean game of bridge. Partner or not, I am not playing on the same table as him…
We have all heard about the software “iron triangle” – you can manage 2 out of 3 – cost, quality or speed of development.
Then there is the Mundell-Fleming model, which argues that an economy cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. It can choose any two for control, and leave third to the market forces.
Vinnie “Maintenance” Mirchandani has another iron triangle – this around software maintenance.
“A software vendor cannot simultaneously keep a “one price fits all” maintenance plan, a diverse customer base, and a diverse product base. It can choose any two, and leave the third to market forces.”
Customer needs ebb and flow. During implementation before they go live on software, few customers tax support lines. Often their systems integrator is the on-site “support”. Similarly after year 4-5, the support demands of most customers drop off as they stabilize their production environment.
Product support ebbs and flows. Enhancements are influenced by architectural changes, regulatory updates, bug fixes. And as products mature, support databases are automated, support moved to cheaper locations, customer calls drop off etc etc.
Now think of the ripples, waves and currents across thousands of customers and hundreds of products.
And for that software vendors expect one single rate (or a second in some cases typically even less affordable) to work across all customers and all products?
The stubborn “maintenance is untouchable” posture of software vendors causes bad will and growing hostility in customer bases, and is leading to many being lost forever to third party maintenance, SaaS, open source, BPO.
The stubbornness is similar to what many countries will do as they “manage” their currencies. When they eventually have to revalue – up or down – the effect is dramatic. They could have done it gradually, but often they are forced to do it in one fell swoop causing huge disruptions to their economies.
So, enjoy your assets – your customer bases and your products. Let the maintenance rate float. Offer a single digit rate to customers with very basic needs – bug fixes, regulatory updates and a few hours of support a year. A bit more to the mainstream customer. And more to those that want to the latest innovations and have continuous rollouts and special support needs. May be slice the customer base and offer couple more tiers – but make sure they start low.
Enjoy your assets – your customers and your products. Let the third side of the iron triangle, the maintenance rate - float.