Amidst the hubbub about Oracle's lawsuit that alleges corporate theft by SAP is a key topic of the dispute, which is software maintenance fees.
The lawsuit's allegations are actually against SAP's TomorrowNow subsidiary, which provides maintenance services for PeopleSoft, JD Edwards and Siebel software. TomorrowNow is promoting that it provides more responsive and higher-quality support for half the price.
TomorrowNow and other third-party maintenance providers have a willing buyer in CIOs who want to reduce the yearly 20% fee for "maintenance and support".
CIOs hate paying maintenance fees, because what do they get for this yearly tax? Well, for starters, they get telephone support with pretty much one answer: "Upgrade to the latest version".
Even when on-premise software providers actually provide a software patch, such as with the recent Daylight Savings Time patches, the patch doesn't come close to actually fixing the customer's issue on their system - the patch comes with instructions telling YOU, the customer, to download the patch, YOU create a test environment and copy over all your data and configurations, YOU apply the patch, YOU test everything to ensure it works as expected, YOU apply the patch to production, and YOU verify it works. Feel free to email us if you have any questions!
Also, make sure you keep track of all the patches too - and the order in which you implemented them - because whenever you call for support, the on-premise software vendor will ask YOU for a list of every patch you've applied to the system.
On the vendor side, maintenance and support is a highly profitable revenue stream, so on-premise software vendors guard it jealously - Exhibit A is Oracle's lawsuit. Software conferences are filled with sessions on how to maximize the revenue and profitability from maintenance fees. Software contracts have all sorts of traps to prevent unbundling the fees or products to make the fees required, even if you're not using much of the software.
Some software companies simply live off maintenance fees - such as Computer Associates' highly profitable growth in the 90's from buying up dead software companies with captive customer bases and charging ever-increasing maintenance fees as long as possible. [Which raises a question: Is Oracle the next Computer Associates? Probably not yet, but the parallels are ominous.]
Software-as-a-Service, of course, changes the entire customer ownership experience to both increase the value from ongoing software usage and eliminate the maintenance fees.
For regular maintenance - such as maintenance upgrades, DST fixes, infrastructure improvements - the SaaS vendor simply does it as part of the service. Automatically-applied functional upgrades - every few months rather than every few years from on-premise vendors - provide ever-increasing value, again as part of the service. All the customer-borne costs with on-premise software of creating new environments, testing, running the infrastructure - completely eliminated.
Saas support is much better too, as the SaaS provider is motivated to actually fix the issue to ensure the customer uses the software, and is responsible for the entire technology stack and infrastructure.
Finally, with SaaS software, if you're not using it, you don't pay for it. No shelfware, and no contractual bundling that requires maintenance fees on shelfware.
Eventually, every software vendor will only charge for software that is used and is delivering business value, and will deliver real support and ever-increasing capabilities for ongoing charges. For now, look for true SaaS software providers for this.
Interesting article on how companies are acting as vampires. Definetely looks like world is headed for SAAS, but with all buzzwords of configurability, feature richness for lower costs, higher attention paid to issues, it will really depend on how companies architect and build SAAS products.
Posted by: Mahi | March 27, 2007 at 03:06 AM