These effective, yet left out best practices can reduce your software maintenance and support by 50%
It is no surprise that maintenance and support costs make up a large part of the IT budget in most organizations. In fact, SAP's support gross profit is at 82% while Oracle's is at 94%.
As a consequence, vendor and sourcing management leaders are under constant pressure to drive these costs down. It brings them in direct conflict with software licensors, who are tasked to keep this lucrative stream of revenue up and running.
The software, itself, usually ranks as the first or second largest cost regarding an IT budget, while software support revolves around more than half of that cost. It means that much of the budget dedicated to IT is not being spent on developing new and innovative ways of doing business, but rather on just keeping things running as they are.
Software Maintenance and Support Costs
On-location software maintenance and support costs are generally comprised of two primary elements: software upgrades and technical support.
Software upgrades, as their name would suggest, will upgrade the software, allowing the user to take advantage of any new functionalities that may have become available since the last upgrade.
Technical support, allows users to have access to general support, patches, bug fixes, and regular updates.
Together, maintenance and support costs are often calculated as an annual percentage of the initial cost of the license. On average, this cost ranges somewhere in between 16-25% of the license cost per year, or even higher, depending on the provider.
What's more, the price is not likely to remain the same as licensors often assume their right to increase this sum by a certain percentage per year.
How to Cut Your Software Support Costs
Even though these costs rise every year, the organization's experience will mature, and the application will stabilize, meaning that support requirements will decline during this period.
Nevertheless, there are possible ways to cut these software support costs by as much as 50%, in some cases.
Less Expensive Levels of Support
It is in the best interest of a company to thoroughly research all available levels of software support and maintenance provided by software vendors. The reasons for this is because the default support level can be 30% more expensive than by accessing necessary, but lower levels of support.
It is advisable to start off with one such service package, especially if the knowledge is low and the software is less mature. But as time goes on, premium support should only be accessed if it offers value-generating services.
Multiyear Support Deals
One of the fastest ways to reduce these costs is to negotiate a waiver of the annual inflationary increase, or by offering multiyear support agreement, in return for this waiver. At the very least, you should arrange a flat rate for the length of this agreement. Ideally, one such commitment should reduce these fees by a considerable margin.
Shelfware is comprised of unused licenses that still charge for support and maintenance. Enticed by various discounts at the start of the engagement, sourcing, and vendor management leaders might acquire a higher volume of shelfware that they will not need.
Some license vendors may allow customers to terminate their shelfware. There is also the option of temporarily suspending maintenance for a period until that software is needed again, even though there may be some reinstatement fees involved.
Nevertheless, some software providers will not allow any of these options, leaving customers with no other choice than to continue paying a considerable sum for products that they aren't using.
Third-party support, which implies support obtained from a different company than the licensor, will almost always provide less expensive services than the alternative. In some cases, this can be 50% less, depending on the circumstances.
Ameex Technologies is one example of the third-party support that can substantially lower your maintenance and support costs. For more information about the services provided, please feel free to contact us directly.