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Software maintenance contracts lack scrutiny

Paying a fifth of the original software contract value every year for support, big fixes and updates does not seem like good value for money

A study from the Campaign for Clear Licensing (CCL) has found that the majority of organisations are blindly renewing software maintenance contracts.

CCL’s research revealed that many businesses were renewing software maintenance contracts without assessing whether the contract was delivering value.

Only 10% of the 100 organisations surveyed were found to involve the IT asset management function in the decision to renew maintenance agreements, according to CCL, with the majority of software maintenance contracts being renewed either by system owners or those in finance.

“Software maintenance renewals are being renewed without sufficient information to make an informed decision,” CCL stated in its 2018 Software support & maintenance survey report.

On average, IT buyers tend to pay around 20% of the licence fee per year in support and maintenance, which effectively means organisations will have paid for their software twice after a five-year term. Traditional software support and maintenance typically involves bug fixes and security updates, technical assistance and access to upgrades.

CCL’s research found that the maintenance contract was perceived as an insurance contract, when in reality it is a completely different entity. But renewals take place anyway in the absence of any other viable alternative.

Legal grey area around software support

In the report, CCL warned: “The software maintenance market suffers from a lack of clarity over legal rights.”

The study found that organisations experienced fear, uncertainty and doubt about whether they were legally allowed to access to security patches if they did not have a support contract. There was also confusion among businesses over whether they could terminate a software maintenance contract, and if it was possible to then continue support at a later date.

Almost half of respondents cited security concerns as the biggest fear when not renewing maintenance agreements, followed by stakeholder perception at 21.5%.

The fear of penalties and so-called “back maintenance” is also a concern for organisations renewing support maintenance agreements, according to CCL.

“Oracle will charge 150% of the support contract, backdated to the original support lapse or product purchase date. A genuine financial alternative is to drop support and maintenance and buy the product again later when new updates are available, or support is actually needed, but lack of legal clarity often prevents this route,” CCL noted in the report.

Is there value in maintenance contracts?

Martin Thompson, who heads up CCL, said there was no accountability in the software business. For instance, a valid support contract would not stop a business’s website from going down. “Any SLAs [service level agreements] are around the response time, not around the time to fix the issue,” he said.

This raises the question of where a customer derives value from a maintenance contract. Tomás O’Leary, CEO and founder of Origina, a company that specialises in IBM support, said: “The value conversation is more difficult if the supplier is not giving anything else.”

Businesses that tend to use software for a long time may well have paid several times over for enhancements, but it is hard for companies to measure if these enhancements justify the high cost of the maintenance contract. It may well work out cheaper to stop paying for ongoing maintenance altogether, and buy a newer version later.

This is the niche filled by third-party support providers, which offer support at lower costs while customers wait until they are ready to upgrade.

But there appears to be a lot of confusion over what a customer can do with third-party support.

“Software publishers tend to differentiate between paperwork and policies,” said O’Leary. This is particularly helpful when a business decides to swap out the incumbent software maintenance contract for a third-party provider.

“The third party does not have a relationship with the licence holder, but if you understand the paperwork, your third-party agent is able to work on your behalf,” he said.

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