Tech & Work

Software maintenance pricing - Fair or out of control?

Like it or not, software and hardware maintenance is a way of life in IT. Although IT organizations make every attempt to free up enough dollars to continue moving the business forward, sometimes entrenched vendors demand an increasing part of the budget pie. My department is currently facing two large maintenance increases of 10% and 15%, respectively. With a 0% increase in my budget this year, these increases mean that something else has to go. Read on.

Like it or not, software and hardware maintenance is a way of life in IT.  Although IT organizations make Maintenance.  Keeping the old running.  Any way you put it, maintenance contracts are money spent maintaining existing systems.  Maintenance contracts and costs also make up a huge percentage of many IT budgets and the costs continue to increase year after year after year.  Double-digit percentage increases are, unfortunately, far from uncommon.  In fact, for the coming fiscal year, I'm facing double-digit increases in two large maintenance contracts.  One contract goes up 10% per year like clockwork while the other is going up 15% this year.  On the second contract, we we've apparently been under special promotional pricing for the past three years, which has now expired.  If we had still been under the promotion, the increase would have been only 5.75%.  5.75% I can stomach.

What am I getting at?

Software vendors are particularly proud of their wares.  The fact that we see 10% and 15% increases in maintenance pricing indicates that these vendors feel that major additional value is being added year after year.  Either that, or they're simply sticking it to us... attempting to be optimistic, I'll assume the former and do some analysis to determine if it's the latter.

What are my options?

On these software titles, I can't really rip and replace in the short-term.  The first title is our learning management system which is heavily used by our faculty.  Over the next year, however, we will start having discussions about the future of this product on campus to decide whether or not it is still serving our needs.  Although the product used to be very, very good, upgrades for the past two years have been pretty horrible; as such, we're two versions behind simply because there is a fear about what will happen with the next version.  While stability is always important, foisting what is sometimes considered unnecessary change (i.e. upgrading) on the faculty can be a losing battle, particularly when such as upgrade creates more problems than it fixes.

The second title is our ERP system.  Obviously, a rip and replace of an embedded ERP system is a massive undertaking.  To make the cost matter worse, we also have an added burden; next year, we'll slightly surpass 1,000 students for the first time.  Once we do so, we move into the next pricing tier for maintenance.  That impact: A whopping 50% increase in software maintenance cost for this title.  I am in the process now of negotiating with the vendor to see if we can lessen the impact.

We have a lot of other hardware and software for which there is maintenance attached.  In general, when maintenance cost increases get into the double-digits, I start looking for alternative solutions.  For example, up until about two years ago, we were very much a Cisco school.  We were, however seeing maintenance costs increase at 12% to 15% per year.  Cisco SmartNet isn't cheap to begin with, so there maintenance increases were relatively onerous.  We're now an HP Procurve school; the entire project was funded by replacing Cisco maintenance with a five year lease.  We now have a fully funded replacement cycle for our network paid for with what was maintenance money.  I keep a relatively detailed budget spreadsheet; any vendor that imposes double-digit maintenance increases on their product is reviewed to determine real need and value and to discover whether there is a viable alternative.

For the coming year, I don't have a choice; I need to keep supporting these products.  With a 0% budget increase, it simpy means that we'll have to skimp somewhere else or request additional budget funds.

In summary, when maintenance costs rise at crazy rates, you have a few options:

  • Negotiate with the vendor. While this won't work for every title, if you have real options for moving to a different solution, the vendor might back off the massive increase. In this economy, vendors can't afford to lose customers.
  • Start a search for a replacement. If a vendor won't negotiate, you can always start looking for alternatives, assuming they're out there and are affordable.
  • Rip and replace. Replacing our Cisco gear with HP was the easiest no brainer ever from a financial and technical perspective. Better equipment for less acquisition money and no accompanying maintenance cost? Sign me up!
  • Suck it up. Sometimes, the increase is simply an added cost of doing business.

What do you do?  Are you seeing double-digit increases every year in the services you use?

About

Since 1994, Scott Lowe has been providing technology solutions to a variety of organizations. After spending 10 years in multiple CIO roles, Scott is now an independent consultant, blogger, author, owner of The 1610 Group, and a Senior IT Executive w...

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