Labor Day (US Holiday) traditionally marks the end of summer BBQ’s, the beginning of the fall conference season, and yes, the time to begin a review of your software maintenance contacts that expire end of year.   As clients prepare for this seasonal ritual, a few trends in 2009 should set the stage for negotiations:

• Continued weakness in the economy. Vendor revenues continue to decline ^[1] as new license sales drop and vendors become more dependent on support and maintenance revenues.  Customers looking to upgrade or commit to new apps can expect vendors to be more generous on the support and maintenance front.
• Dated and inflexible architecture of legacy applications. Change in business models, workplace dynamics, and macro economic conditions apply new pressures to aging systems purchased pre-Y2K.  Customers seek paths to upgrade but are limited by economic pressures.
• Vendor awareness of customer discontent with existing support offerings. Customers now seek to understand what value vendors deliver in their support and maintenance agreements.  Many vendors have proactively responded by improving service or making appropriate concessions.
• Growing acceptance of third party maintenance (3PM) options. Vendors such as Rimini Street ^[2] and Spinnaker ^[3] have proven to the market that they can deliver 3PM ^[4] to an array of ERP applications.  Cutting maintenance fees by 50% or more can free up funds for innovation or pay for the next upgrade.

Align your apps strategy before negotiating contracts – do your homework

Contract negotiations strategy should be planned in conjunction with an overall apps strategy.  Begin the process 2 to 3 months in advance.  Make sure the teams have the proper incentives ^[5] in place.  Take the following steps as you prepare for your maintenance renewals:

• Assess current usage of maintenance and suppor ^[6]t
• Begin apps strategy ^[7] planning to determine product adoption road map
• Conduct an internal license audit.
• Determine extent of shelf ware ^[8].
• Ensure that maintenance contracts are not bundled ^[9]
• Followup with your sales rep

The bottom line – follow the seven simple steps to successfully negotiating software contracts ^[10].

1. Ensure that the right team is in place
2. Identify the organization’s key business drivers
3. Determine the product adoption plan
4. Consider contract strategy implications of the software ownership life cycle
5. Align contract strategy with product adoption
6. Identify leverage points
7. Prioritize key contract objectives

Your POV

Looking to hear your best practices with software maintenance contract renewals.

• Is your maintenance contract up for renewal at the end of the year?
• Do you need help putting a strategy in place?
• Have you conducted an apps strategy assessment?
• Would you like to break free from your vendor but don’t know what options exist?

Post your comment here or reach me direct at r at altimetergroup dot com or r at softwareinsider dot org.

Copyright © 2009 R Wang. All rights reserved.