In this series Tim gives us a quick guide to negotiating more favourable licensing agreements.
PART THREE – The Software Maintenance Game
As we all know, there’s a lot of buzz these days about inflated maintenance charges. Frankly, I think users of commercial software are moving beyond frustration and on to anger, and reading articles about the 85% profit margin that Oracle enjoys on its maintenance fees, for example, only fuels the fire.
In addition to introducing flexibility on maintenance terms (Part 2), software buyers should keep the following points in mind when negotiating maintenance terms and options.
One new concept is “reverse maintenance”, and the notion is this. Instead of paying up front for something that I may never receive (or not want if I do receive it), why can’t I pay later for the something; that is, when I receive it and if I want it? Seems fairer to me, and it would actually incent software vendors to create and improve their products. Under the current model, software vendors take in the same amount of maintenance fees regardless of whether they deliver anything (of value) in return.
The other new concept is “pay for performance”, and one version of it works like this. You pay your maintenance fees up front, but you are entitled to reimbursement depending on what your vendor actually produced during the prior maintenance revenue period. One obvious shortcoming of this approach is that it incents your software vendor to produce something during a maintenance revenue period, but not necessarily something that is of value to users. Should the reimbursement metric be based on volume of stuff produced, value of stuff produced, or both? If value figures into the equation, how are we to measure value?
In all events, software buyers want and deserve better (more realistic) maintenance options. If software vendors don’t respond with a better maintenance model, more and more software buyers will opt for no maintenance—whether at time of acquisition, or perhaps sooner in an application’s lifecycle.
Just to clarify, when a software buyer chooses not to buy maintenance at time of acquisition, or should a buyer attempt a reverse maintenance or similar concept, the buyer can expect to pay a higher license fee. This is to be expected, and it will vary across acquisitions, but the hike in the license fee will usually be much less than the sum of (normal) annual maintenance fees paid out over the life of the application.