As the recession bites, businesses can lower their IT
expenditure by focussing on the cost of their software maintenance
contracts.
Ray Wang, principal analyst at Forrester Research, has listed
five steps to tackle the on-going software maintenance burden IT
departments face in his latest
Software Insider
blog.
1. What did you pay this year for each support incident?
Was this cost-effective?
"Maintenance costs represent a major part of the software budget
and the largest growing source of revenue for software suppliers.
Not surprisingly, suppliers are hard at work vigorously protecting
their 70% to 80% margin in maintenance revenues, just as clients
and readers of this blog now zero in on this line item as the major
concession target during contract negotiations," writes Wang.
He urges IT directors and CIOs to put all contract information
in one place with a history of interaction with the supplier. He
says, "Most customers will find that for $1m a year, five support
calls can be pretty pricey at $200,000 a pop."
2. How much software do you license that is not being
used?
Software licences purchased, but not deployed still incurs
support and maintenance fees.
For example, an IT department could be offered a three-year deal
on a 1000 user licences at $1000 per user, but require software for
only 800 users. If annual maintenance is charged at 20%, then the
200 unused user licences would cost the business $120,000 over
three years, according to Wang's calculations.
3. What is your business' long-term plan? What software
will you need to support this plan?
IT directors should establish a long-term, recession-proof plan
for software upgrades and replacement. Users need to ask the
following questions: "What business processes will be supported by
the software? What roles will use the software? When will you
upgrade? Can you consider an alternative?"
4. What are your software upgrade/maintenance options?
Should you upgrade, switch suppliers or use third-party
support?
IT directors need to assess alternatives - either buying
maintenance contracts from their software suppliers, using
alternative products or renegotiating the existing contract. "If
there are no intentions to upgrade or enhance the software, self
support and third-party maintenance options from suppliers such as
Rimini Street and Spinnaker should be considered," says Wang.
5. Do the software company's sales reps know you are
unhappy?
Long-term preparation is key to successful software maintenance
contract renegotiation. "Put preparation on your side and begin to
let your sales rep know three to six months in advance that you are
unhappy with the current agreement. You now have the ammunition you
need to negotiate from a position of strength."
Picture from
Rex Features.