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Checks and Balances in Maintenance Contracts

10/18/2010

It is a commonly held belief that there exist very few CFOs who can write out a check for an annual software maintenance contract with a smile on their face. However, I’d venture to guess that CFOs never smile when writing out checks -- only when they’re cashing them.

Maintenance contracts tend to get a bad rap – especially so, it seems whenever we enter into a period of economic distress. This is when customers start letting their maintenance contracts lapse in the interest of trying to reap short term cost savings. Many rationalize that they can go without their maintenance contract if their system is “stable” and they don’t make many support calls. (This is the great irony for software vendors -- the perceived need for a maintenance contract is in many ways in inverse proportion to the quality and stability of the system!) 

Maintenance is like an insurance contract … (I know, as if you’ve never heard that before) that you offer customers in order to ensure the continued operation of their systems. While you might be tempted to let your maintenance contract lapse with plans to sign up again when the next version is released, you should make sure you fully understand any penalty fees involved so you can determine whether this will really save you money. Also, if you have users who need a lot of “care and feeding” and/or your company is rapidly expanding its use of the software, the maintenance fees you’re paying may well be justified, as maintenance doesn’t just cover fixing what gets broken, and investment in new releases, it also provides access to resources that help you get the most out of your system. 

Aside from this, you need to balance the potential short term gains with what I call the “opportunity loss.” By far, the biggest benefit of a maintenance contract is that you receive new software releases, updates and new features that address new and emerging business requirements and incorporate best practices from other customers just like you.  In this way, business systems – especially ERP which serves as the critical business operations backbone -- are very dynamic. 

Once you cancel your maintenance contract, you no longer have a dynamic system that is continually evolving to help you meet new business needs; and there’s a risk that your business needs might outgrow the existing functionality of your software. And, if your business prospects, scope, or strategy change sooner than you expect, you may well find yourself short on options. 

At some point, upgrades become inevitable, and if a company hasn’t stayed current on maintenance (benefiting from software features and functionality along the way), it often must do a “rip and replace” approach, leapfrogging several versions. And as a result, sometimes the biggest pain they feel is in the “drinking from a fire hose” effect from users who find themselves overwhelmed trying to relearn what now -- due to the advent of so many new features, functionality and enabling technology – seems like a completely different system. 

If ever there was a topic to stimulate healthy debate it's software maintenance. So let’s have it … I’m interested to hear your point of view. 

Posted by Dan Whelan, Senior Vice President, Worldwide Support, Epicor

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