A report by Clear Licensing (CCL) has highlighted the fact that most organisations simply renew software maintenance contracts without assessing whether those contracts deliver value.
1 In 10 Companies Check
The CCL report (which is based upon research conducted in and May this year), took into account the responses of 100 global participants, and was designed to understand current trends and identify best practices for the software maintenance market.
The key statistic that the research uncovered was that only 1 in 10 organisations involve the IT asset management function in the decision to renew software maintenance agreements. The inference from this is that software maintenance renewals appear to be blindly renewed without sufficient information to make an informed decision, and without any real assessment of the value they deliver.
In fact, the CCL report found that most software contracts are renewed by system owners or those in finance, and that typical survey respondents had no idea of support volumes, support quality or the strategic value of software maintenance renewals.
Organisations typically spend a large proportion of their annual IT budget on paying for existing software support and maintenance contracts in a market that is estimated to be worth $250 Billion. For example, IT buyers often pay around 20% of the licence fee per year in support and maintenance, thereby meaning that organisations will have paid for their software twice after a five-year term.
Lack of Clarity
Although a software support and maintenance contract typically involves things like bug fixes, security updates, technical assistance and access to upgrades, the CCL report notes that organisations are often confused about what they are actually entitled to and what they are actually getting for their money. For example, maintenance contracts are often perceived as insurance contracts when they are not, and organisations are often afraid and confused about whether they are legally allowed to access to security patches if they don’t have a support contract, and whether they can terminate a software maintenance contract and continue support at a later date.
What Does This Mean For Your Business?
Businesses are worried about a number of things when it comes to deciding about software maintenance and support contract renewals, such as security, stakeholder perception, and the fear of penalties and back-maintenance problems. The CCL report has also highlighted the fact that a lack of clarity about the contracts, not enough scrutiny, the wrong departments making the renewal decisions, and a lack of alternatives at renewal time are just some of the reasons why the path of least resistance is being taken and contracts that may lack value are being blindly renewed.
According to the CCL report, some ways that businesses can avoid this happening include:
- IT Asset Managers starting with a default position of “no” when it comes to software support renewals.
- Using ITAM tools / SAM technology providers to help validate the business value of a support contract.
- Performing a cost / benefit analysis of a contract to help decide about renewal.
- Applying the 80 / 20 rule. IT Asset Managers can make a big impact on freeing up annual budgets by scrutinising spend on a few well chosen contracts.
- Getting IT Asset Managers to create decision trees to empower smart decision -making.
- Collaboration with legal professionals to clarify legal rights around contracts.