The Maintenance Conundrum
We all tend to believe that technology gets better and cheaper over time. Maybe you are not paying less in some cases (whether adjusted for inflation or not), but you are getting more value with each iteration of a given technology. And there is plenty of evidence for this – today’s smart phones would have been multi-million dollar super computers a few technology generations ago; today’s laptops and tablets are far cheaper and much more powerful than early iterations of the personal computer; your fast Internet connection at home would have been thousands of dollars per month less than 20 years ago if you could actually get a direct connection and could afford the hardware to support it.
However, there is at least one exception to this commonly accepted, almost universal belief. And this exception cost more every year – often between 5% to 10% or more each year – and while you generally do not receive less value (although sometimes you do), it is easy to argue that you are not getting more value for the money being spent. What is this exception in the technology world? Business systems of any kind! On premise, off premise, hosted, SaaS, ERP, open source, databases, whatever, I dare you to clearly show me a system that delivers measureable increased value to your organization equal to or greater than the annual increase being paid out.
How did we get here?
Implementing on-premise or hosted business systems, particularly those that touch the entire enterprise, are expensive and time-consuming efforts. Besides the up front costs of the systems themselves, there are hardware infrastructure costs, consultant costs, training costs, change management costs, and risk mitigation costs among others.
If done well, a business system implementation will result in an organization that will become more efficient, smarter and hopefully, reduce overall costs (fewer employees, more automation, push work out to your customers through self-service, etc.). Hope, however, is usually short-lived, if it had a life at all, and the savings, if there were any, dissipate with time.
Your vendors, however, are doing just fine.
Because, of course, there is the on-going annual maintenance costs that go on and on and up forever.
And what do you expect to get for all the money going into your vendor’s pocket?
- The ability to receive timely support and resolution when problems with the software occur
- The ability to receive regular software updates without additional costs
- Software updates that provide improved and new capabilities that allow the organization to improve their effectiveness and adjust to changing business needs
Unfortunately, reality and expectations are often at odds, to wit:
- When submitting a software issue there is rarely a clear indication of when the problem will be solved, if it will be solved at all
- Submitted enhancement requests may or may not ever make it into the product
- New capabilities are introduced as new products with new licensing fees and additional on-going (and escalated) maintenance costs.
The vendor challenge!
Vendors are always looking for ways to increase revenue and profit and there is nothing wrong with this unless there is nothing for the customer in the equation. Maintenance fees are understood by customers to be support for and investment in the software. Although vendors appear to contractually meet their (often vague) support obligations, there appears to be very little, if any, improvements or enhancements to existing software that improves an organization’s effectiveness.
Instead, it appears that vendors are using whatever maintenance fees that do not go to support the software (i.e. fix bugs) to enhance profits and invest in new product that will increase revenue and profit. Furthermore, vendors may be using the maintenance revenue stream to invest in cloud solutions, which if architected and deployed correctly, will result in significant cost reductions for the vendor, reductions that customers are unlikely to see passed on to them.
Subscription fees do not appear to address this customer challenge either. Customers pay by the user and what resources (e.g., data storage, API calls) they use but there is little or no understanding as to what the vendor is investing in beyond, for example, quarterly upgrades that may or may not deliver value to the organization.
What is an organization to do?
It never feels good to be treated as if you are a captive audience by your vendor. An organization needs to determine what the best balance is between cost and the value being provided by the vendor.
An organizations and their leaders must not forget the fundamentals – what are they trying to accomplish, what are their priorities, what are their organizational assets (soft and hard), and how can they use the organization’s assets to move forward?
Part of the answer lies with the software you already have. Are you using it to its full potential? Have you kept it updated and your staff trained on updates? Part of the answer to maximizing value lies in evaluating and changing or eliminating business processes to take advantage of existing software and changes in your customer and constituents expectations.
It is also important to stay focused on constituent and customer needs – they alone should dictate what you need to do and it is the first step you need to take to determine how you get the most value out of your current software assets and your relationships with the vendors.
If you find that you have squeezed all the value you can out of your software and conclude that you are not receiving desired and needed enhancements to existing software that provide new and improved capabilities, you are not receiving full value for your maintenance dollars and your ERP vendor should step up and do so.
Or maybe it is time for a different approach such as using multiple vendors and smaller more flexible components to meet business needs.