Inflation-justified price increases by vendors should be met with renewed service expectations from customers says David McDougall, CRO, Spinnaker Support
Many enterprises are now questioning whether inflation-justified price increases for software maintenance are necessary, coming from vendors who have been massively profiting from support contracts for a long time. And for the kind of prices the vendors are quoting, you would expect exceptional, unparalleled support and maintenance. But is that what you’re getting?
However much your firm is paying for software maintenance, it’s almost certainly a lot more than it was this time last year.
Of course, rising prices are nothing new. Generally, enterprises can expect their software maintenance fees to rise in line with the headline inflation rate of the country they’re located in.
But when we’re talking about millions of dollars’ worth of software support, an increase of even a few percentage points is a significant financial commitment. Nobody is happy about this, but many enterprises respond with resignation; they simply bite the bullet and pay up. Prices are rising across the board, after all.
But it’s worth remembering that the software giants make an eye-watering 90% margin on their support business. Many enterprises are now questioning whether these inflation-justified price increases are necessary, coming from vendors who have been massively profiting from support contracts for a long time. And for the kind of prices the vendors are quoting, you would expect exceptional, unparalleled support and maintenance. But is that what you’re getting?
All too often we speak to customers who are upgrading solely because they need their systems supported.
As with any major software update or upgrade, your enterprise will only really see a marked benefit in functionality for end-users if all applications are upgraded, too.
Getting your database up-to-speed with the vendor’s latest release which they’re marketing and pushing heavily is all well and good, but if your enterprise is still relying on legacy apps and hardware to do their jobs, how will your users – and your enterprise – actually benefit?
The actual operational improvements could be imperceptibly small.
We’ve now arrived at a difficult place: your ERP maintenance fees are rising and you’re not even sure if your systems will be supported going forward. What else is there left to do but upgrade – even if it means little operational gain?
The third-party support alternative
Perhaps the most important consideration before embarking on a software upgrade or refresh is whether it’s in your enterprise’s best interests. To stay supported is not a good enough reason to keep upgrading in line with your vendor’s expectations and demands. If the latest software upgrade doesn’t make business sense to you – and doesn’t align with your transformation, growth and business objectives – our advice is: don’t go through with it.
Any other vendor’s timeline should not have to mirror yours exactly so that you can get the best out of your software stack. In fact, your enterprise should be able to leverage its software maintenance services to supportyour exact requirements.
Your enterprise shouldn’t settle for anything less than a bespoke, personalized software system that works hard for the business and its users.
A bespoke support and maintenance package may sound like an expensive endeavour, but it doesn’t need to be. Gartner revealed that by partnering with third-party support vendors, enterprises can cut the cost of maintaining their legacy ERP systems by as much as a half.
These cost savings are significant. Economic global fallout from COVID-19, inflationary pressures, and the economic aftershocks of the invasion of Ukraine have prompted enterprises to scrutinize their books more closely, looking for viable options to cut costs while ensuring their operations keep running securely and smoothly. Gartner notes that these financial factors are urging more and more enterprises to ditch their support contracts provided by the ERP giants in favor of third-party alternatives.
In fact, third-party software support deals made up 45% of all technology deals negotiated across APAC, North America, and EMEA in 2021-22 – a rise of 18% compared to the previous year.
Substantial OPEX savings aren’t all. Find the right third-party maintenance contract, and you’ll be working with a support partner. The value-added services on offer include: helping enterprises streamline their budgets, ensuring software works in tandem with transformational objectives and supporting legacy systems and applications.
One of the driving ideas behind third-party software support is that you, the customer, will always come first. Whether your priority is to optimize your current operations or move towards a hybrid software environment, it’s our job as your support partner to enable that.
Crucially, opting for a third-party support partner offers enterprises flexibility: a better range of contract options (no paying for support for products your enterprise doesn’t use), expert advice and consultancy on software upgrade, transformation and migration options – and specialist maintenance for products that vendors leave unpatched and unsupported.
By forcing upgrades and continually increasing maintenance costs, vendors have gifted their customers an opportunity to start looking elsewhere in the support market. It’s not up to the vendor how to run or manage your ERP systems – you want to understand your options, plan your enterprise’s future carefully and with stakeholder buy-in and then make decisions about change, acceleration and growth.
The question your support partner should be asking you is “how can our services help you achieve that”, not “when will your enterprise fall in line with our objectives.”
Support deadlines and fee increases imposed by vendors should not rush your enterprise to make critical business decisions. Work with a support partner who understands that and watch your enterprise continue to flourish and succeed.
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