Paying more for less

Like oblivious revellers in the last days of the Roman Empire, enterprise software vendors are enjoying themselves at customers’ expense with ever-increasing maintenance fees, overpriced support costs and forced-march upgrades. Imagine their shock when this party comes crashing to its inevitable end.

And there are portents of that fate already appearing.

Consider the sobering results from an AMR Research survey of 202 users of enterprise business software.

More than a third of these users (38 percent) are now training internal IT staffers to provide the necessary tech support for their applications. Some 35 percent intend to renegotiate maintenance contracts they can no longer abide, and a truly desperate minority (12 percent) has decided to quit paying for maintenance altogether. That’s akin to cancelling your home owner’s insurance and hoping your house doesn’t catch fire.

AMR analyst Jim Shepherd said that nearly one quarter of the survey respondents were sorry they’d even upgraded their software packages, because they got no additional business value from the new features. CIOs want to show their boards that they’re doing more with less — not paying more for less.

Now, you could argue that users have always complained about maintenance and support fees. But in the past few years of this brutal economy, the applications vendors have steadily increased those costs to make up for declining sales. Annual software maintenance fees that once accounted for 7 to 10 percent of licensing costs have moved uptown into the 17-to-25 percent range.

Whatever the future holds for enterprise software, this practice of paying more for less can’t endure. Perhaps the buy vs build pendulum will swing back with a vengeance from packaged applications to internally developed ones.

Maybe the service-provider model (à la Salesforce.com) will triumph as more application functions become commodities. Open-source alternatives (such as the Java Desktop System vs Windows) could provide yet another escape hatch for users determined to break the cycle.

If the enterprise software vendors keep on fiddling while their customers feel burned, they’re doomed to repeat one of those lessons of history. The one about how fast empires can fall.

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