Discussion on:

Software maintenance pricing - Fair or out of control?

I'll be interested to see other comments on this topic, as it is relevant to many of us.

Let the vendor know the proposed cost exceeds the value. Most things are negotiable. Ask them about other options for maintenance, such as a per incident fee, third party support, etc. These may not be viable, especially if you're also interested in upgrades and fixes. Can you structure a payment plan that costs less this year and more in future years? Ask if they have different types of maintenance agreements. If you can legitimately identify alternative options that will likely provide some leverage. You may also want to engage a consultant to help you with the renewal. They can usually provide an idea of what other customers have paid that is hard to identify on your own.

With your new agreement contractually require a cap on annual increases to the CPI, 3%, or some other amount you can budget. If it makes sense have a renewal clause that brings this provision forward to future terms. I'm not a fan of automatic renewals, but that's another subject.

Great original article Scott and a number of good responding posts.

I can only add one observation ......

Why does McAfee charge more for the annual renewal of its PC protection software suite than it charges for a new licence ?

So much software is customized and tightly integrated within operations that software companies know it is difficult to extricate ones-self and switch. Scott Lowe was being very kind about the motivation for the uplifted pricing. Vendors of both software and hardware will continue automatic increases until users make them stop with actions, not begging.

Attacking hardware maintenance price increases is far easier than wholesale replacements every time there is an expired contract. The example of replacing CISCO with HP was one very effective approach. Also very effective is dropping SmartNet on stable devices and buying a few parts for the hardware break-fix needs. CISCO is a bit unusual in that SmartNet is a combination of both software and hardware maintenance - so dropping software maintenance requires another hardware maintenance strategy.

For other products (servers, client devices, printers, storage) the opportunities for cost control, if not outright savings, abound throughout the product life-cycle. In many cases (all?), the hardware service contracts being proposed(including pre-paid warranty uplift) have no price relationship to the service needs of the equipment. This is a formula for a rip-off. Users typically negotiate from the basis of a totally artificial and arbitrary price. Whatever the final discount - the result is always too much money being spent for too little service.

IT Managers can turn the tables and gain control of hardware maintenance pricing. Start the evaluation by focusing on the service actions needed to support the equipment (Reliability). This approach allows managers to compare the total cost-of-ownership for new devices, as well as providing a road-map for alternative service approaches.

Alternative service options include refining service level agreements to appropriate levels, self-maintenance, 3rd party maintenance, and all permutations in between.

All managers need is to know the reliability of the equipment. Some of this information is readily available (or should be) internally. The ideal next step is to collaborate with others to expand the knowledge base. If anyone wants further information on how to collaborate, we can discuss further.

Has anyone sought Citrix support recently? One of my clients' IT staffers claims that he contacted Citrix for support of a small Citrix installation, and was told that there was a $10,000 software maintenance fee, after which he would have the opportunity to pay $700 per support incident. Without the $10,000, there's supposedly no access to the $700 per-incident support. I didn't verify this myself, as it wasn't really my business, but it seemed pretty extreme to me.

...but I had a similar experience less than 2 years ago.

One of our servers hadn't been renewed (it was going to get retired within a month of making the call), and as such, they weren't willing to support an issue that impacted the cluster.

I eventually spoke with a manager, and got the help I needed, but not after some unnecessary stress.

NOTE: The issue itself had nothing to do with either the server or the cluster setup; asides from the fact that one server's hiccups were causing problems.

Something's gotta give.

Scott took action towards negotiation and seeking alternatives. Cisco lost and HP won.

We're caught in the middle sometimes in our IT realm, having to justify our services.

Thanks Scott for relating your experience; the positive outcome is encouraging.

No maintenance contract at all. Smaller places can't always afford to pay 10-15% of the total cost of an expensive system each year. In the mean time fix it yourself as much as possible. They figure paying on a per incidence basis is cheaper in the long run. Sometimes it is, sometimes it isn't.

Sometimes you're paying for upgrades, sometimes for support, sometimes you're paying to prevent everything from suddenly going dead as soon as your contract ends.

Sometimes I wonder why they still call it "buying" software?

Try to negotiate in a refund if the expected value added doesn't occur.

For example: I used to work at a hospital. We had a software program that we had paid 1M for and 500k for service over three years. We got absolutely no service or updates during that time. A new version had come out but they conveniently forgot about our site, or they didn't have time (new customers got first crack at the installers schedule). We had even purchased a component prior to release later "that year". It didn't appear on the market for 2 years all along we were paying for service on it.

The vendor had a lot of trouble in our area, their sales guy left, then a new guy came in and got promoted a couple months later to replace the north american sales guy, followed shortly by the regional tech support guy leaving etc, I feel their pain, but still they got 500k for absolutely nothing. Life would have been so much easier if we could have got our money back because we had it negotiated into the contract ahead of time. It should be no service no payment. That simple.

Large database vendors seem to be worst when it comes to increasing price of maintenance and support for no net gain in features or quality of support offered. We are currently stuck with a much older unsupported database version which the big O does not support but still expects ever increasing annual payments for problems they refuse to fix. Migrating would be far too big an exercise in the current economic climate. The only option is further consolidation of servers to reduce total number of licenses required.

Their maintenance is ridiculous. Sure, there actual help requests are on the level of Cisco, answered promptly and professionally. The sad thing is, google searches through their user support forums usually fixes my problems.

I have elected to purchase the product and NOT pay maintenance for a few years. I don't get the upgrades when they roll around, but they often don't roll around quick enough. It's cheaper for me to repurchase the software from scratch when a necessary update rolls around. I had a few licenses in the development/research department that needed support for some custom in-house apps, so I was allowed to simply pay "back payments" on those select licenses to catch me up. Saved money in the long run.

I don't necessarily agree with the switch from Cisco to HP, but I'm looking at it from my perspective. I have 15+ sites spread all over a city with fiber connections to all. Some are large buildings with WLC's and WCS's with clients talking on wireless voip all through the building without interruption. From a central management standpoint, I simply don't have the manpower to start dealing with other vendors and the problems that will certainly arise from gradual change-over. On a scale this large, I can't afford the time spent troubleshooting from an HP management tool here and a Cisco management tool there. And quite honestly, I have never seen any whitepapers on HP network equipment in a large deployment, particularly at the core and the backbone...then again I admittedly haven't looked either. My current Cisco setup allows me to manage a fairly large network with a network staff of 4. Honestly most of our time is spent pre-paring rollouts for new phases of construction/moves or adding levels of security. With around the clock service a must I can't switch vendors even if I wanted too. My constant purchase/trade-up of new equipment gets me alot of free cisco training that allows my staff to stay sharp.

On a smaller scale...yeah I'd dump Cisco and the absurd smartnet pricing in favor of other solutions. I have several colleagues that are quite fond of linksys business class equipment performance.

You have hit upon the key issue preventing competitive displacement generally, and not just for CISCO vs HP. Lack of confidence that the solution is solid is# 1. No one wants to switch vendors and put their butts on the line.

I am trying to remedy that information gap by tracking hardware failure rates in an independent and disciplined fashion. I'm not trying to use this forum as an infomercial - but in all seriousness we need people like you to share their experience so that we can build the knowledge base. Same with your friend that loves his Linksys equipment.

Once users can compare products on the basis of reliability, they can then make much better decisions on which products to deploy, which to retain, and how much is reasonable to pay for a service solution. There is a lot of fear of the unknown which is bloating budgets everywhere.

Go Open Source for your learning management system. Check out http://moodle.org/

From Eric S. Raymond, _The Magic Cauldron_ (1999):

"The brutal truth is this: when your key business processes are executed by opaque blocks of bits that you can't even see inside (let alone modify) you have lost control of your business. You need your supplier more than your supplier needs you - and you will pay, and pay, and pay again for that power imbalance. You'll pay in higher prices, you'll pay in lost opportunities, and you'll pay in lock-in that grows worse over time as the supplier (who has refined its game on a lot of previous victims) tightens its hold.

Contrast this with the open-source choice. If you go that route, you have the source code, and no one can take it away from you. Instead of a supplier monopoly with a chokehold on your business, you now have multiple service companies bidding for your business - and you not only get to play them against each other, you have the option of building your own captive support organization if that looks less expensive than contracting out. The market works for you."

Ten years later, and in this economy, this statement is more true than ever.

-Phil

Open Source based systems typically has lower maintenance fees and especially lower intial costs. Openess in source code level enables multiple vendors to provide support.
Ari Vainio, Priorite.fi

Ok - I am one of those evil software developers. Here is the story from the other side of the fence. In sum, stop your whining. The reason you are paying on the back side is because you are generally too cheap to pay on the front side.

Here is how it happens ... I see an opportunity in your industry that I think needs a software solution. I fund all the R&D up front out of my own pocket. Maybe the product will "make', maybe it will not. After 5 years of hell at my end, and 5 years of expense, and 5 years of risk, I have a package that with 5 people can do in 3 minutes what it used to take 300 people all day to do. So, essentially you are wasting a day-expense for 295 people. Let's say that your average cost is about $200/day/person and then add the hassle factor for all their whining and complaining and wanting of Christmas turkeys, etc etc --- you get the idea. At that point you are easily at over (200x300) $60,000 in expense (per year) to do this task. So the question is what is it worth to you to not have to pay this expense?

At my top end, with perfect software you should be willing to pay a little bit less that $60,000/ year for my solution, but of course my solution has cost too. Every once in a while your users will need training, every once in a while it will not be able to do something that you want it to do. And of course maybe it would be ok to split the savings.... You get the idea.

Now, are you willing to agree in your hearts that as an economic question that $60k/year should be the top end of yearly fee you could spend and still make money? NO - and the responses to this post will prove it. What happens is that you look at the software and you look at YOUR salary which is $150,000. Then, instead of keeping you eyes on YOUR dinner plate you look start looking at my side of the table to see how much money you think I am going to "make" out of the deal. So, instead of looking at things and assessing that in 3 years YOU will have saved your company $180,000, your will make a quick assessment that in 3 years you will have paid ME $180,000 and you will then fester and concentrate on this, whereupon, you will get jealous and begin to engage in populist thinking about how it is unfair that I get to make what YOU see as a "windfall". At that point the deal is essentially dead because now it is about YOU teaching ME a lesson. Remember now, it was MY brain that saw the solution in the first place, It was MY risk, not yours, that is all tied up in the offering - which is gong to save YOU $60,000/YEAR. So then, this is where the beatdown occurs and instead of negotiating with me as a value added ecosystem partner - a partner that can help you make money - you treat ME as a VENDOR. In that case then, I treat YOU as a customer and I will give you your deal, but then, in response to your cheap attitude, I simply will do not production test the main platform as much as I would like, and willl I give you the software at your desired "serfs wages" cost, but, I will execute a maintenance contract with you. Now YOU think that this maintenance contract is to fix crap that is in the software, but THAT is NOT what it is for . What it is really for is to compensate me for my brain and to get me the payment I want to get for releasing MY intellectual property for you to use to save yourself $60,000/year with. It is sad to me the impediment is in large part your jealousy that I am making money out of the deal as opposed to your happiness at looking at how much money YOU are making out of the deal.

In closing, every once in a while I come across a ecosystem partner that "gets it" and makes a payment based on his benefit, not mine, and for these people I work MY ass off because they reflect my line of thinking of trading value for value, instead ot thinking that they can trade me (my brain) like I was a commodity.