Software maintenance fee percentage

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. 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. Since , Scott Lowe has been providing technology solutions to a variety of organizations. What am I getting at? What are my options? The first item to consider is how the annual maintenance cost is calculated. While this is not always negotiable with the vendors, you should at least get clarification from the vendor and may be able to negotiate this calculated cost.

The second item is when the annual maintenance cost begins. Most vendors start maintenance the moment you sign the contract, or begin the implementation. Most vendors price according to the modules required, plus the number of named or concurrent users that will be accessing the system. Named users are anyone who may access the system at any time.

Because there was very little risk and almost no funding cost, these online debit cards had very low discount rates — often, just 0. However, Visa and MasterCard then started issuing offline credit cards, which did not have the online connection to the customer bank account. Because these offline debit cards had higher risk of nonpayment and higher funding costs, Visa and MasterCard initially charged slightly higher discount rates to merchants — around 0.

That imbalance of value between what merchants were getting for accepting Visa and MasterCard credit cards and Visa and MasterCard debit cards with increasingly similar costs sparked a merchant revolt.

Walmart and other big merchants started filing legal challenges against Visa and MasterCard and then took their complaints to Congress. Joined by small merchants, the merchant community persuaded Congress to include in the Senate version of the financial reform bill a provision that instructs the Federal Reserve to issue regulations to reduce the discount rates charged to merchants on debit cards.

With the House of Representatives now accepting the Senate provision with minor modifications in the final bill, what looked like an unbreakable fee structure for debit cards will be broken. Software vendors should take note. That matter of time may not be in or But sooner or later, I think the software industry will be forced by external action to change its maintenance fee structure.

Where there is precedence, as there is here, there will be repetition of history. So, what should software vendor strategists do? Well, since there is no immediate sign of regulatory or legislative challenges to the maintenance fee structure, the short answer is — nothing. If and when signs do emerge, the obvious step would be to start mounting a counter-offensive — preparing legal teams to defend the software maintenance fee structures, building the arguments to present to Congress about why the software maintenance fee structure is so critical to software innovation.

After all, so many software vendors are so dependent on maintenance fee revenues that it is almost unthinkable that they would abandon the current structure without a fight. But let me suggest an alternative. The maintenance fee structure of today originated at a time in history when software was still new and still rapidly evolving.