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Software Licensing: Are You Losing Money On Software Maintenance Revenue?

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Software Licensing: Are You Losing Money On Software Maintenance Revenue?

January 04, 2012
By David Sims, TMCnet Contributing Editor

Flexera Software’s Cris Wendt and Anna Connell are here with some good advice for the New Year – “maintenance deserves the same respect as your software license.”


The two industry insiders recently blogged for Flexera, a software licensing solutions provider, and noted that IDC (News - Alert) conducted a survey a few years ago that demonstrated the importance of software maintenance to an enterprise software company’s revenue, which is usually accomplished by offering a perpetual software license.

The study found that while license revenue grew a respectable seven percent annually, maintenance revenue was “a greater portion of overall revenue than license revenue.”

Surprised? Many people would be. But even though software companies make a lot of money from maintenance, there is what Wendt and Connell call “a surprising inattention to optimization.”

Helpfully, they’ve outlined a few areas you can check yourself, to see if you could be making more money off maintenance than you currently are.

Do you even have a maintenance offering? Or do you “provide updates and bug fixes for free for as long as the customer owns the product,” and are thinking about maybe offering a maintenance product someday?

Maintenance makes money like a product, are you treating it like one? Does it have a product manager, is it defined, priced and are its features communicated to customers and channel partners?

Are maintenance renewals handled by what Wendt and Connell call “a separate and dedicated team whose role is to generate high renewals rates and grow the existing maintenance revenue stream?”

Is maintenance defined beyond “phone support and updates?” How much customer value is there in those updates, as opposed to paid upgrades?

How accurate are your records of your customers? Effective maintenance renewal requires accurate information – which as the blog admits, is much tougher to get via indirect sales channels.

Is maintenance pricing consistent and reasonable, considering the fact that some products may provide value with their updates and may reflect a different price than maintenance on another product?

Are you overlooking maintenance and renewal when something happens with the product itself? As the Flexera blog explains, “a price change to the list license price of the product has the same result to maintenance and must be explained at renewal.”

Let’s make 2012 the year we stop losing money off maintenance, shall we?


David Sims is a contributing editor for TMCnet. To read more of David’s articles, please visit his columnist page. He also blogs for TMCnet here.

Edited by Carrie Schmelkin

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