Software Vendors Should Back off on Fees, Forrester Says

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Now is the time for companies to compel their software suppliers to lower their maintenance charges, according to Forrester Research.

The recessionary times and the rise of software as a service (SaaS) models has put pressure on software vendors to cut support charges or lose business, according to Forrester senior analyst Duncan Jones.

In a new report, Jones claims budgetary pressures are forcing IT leaders to demand reductions in maintenance costs -- and many of them are succeeding.

"They can't talk about it publicly due to gagging clauses in software agreements, but many customers have won support cost reductions from even the most infamously intransigent industry giants," Jones writes in the report.

Recently, SAP reversed its decision to raise its maintenance prices due to collective pressure from its customers, which Jones said was indicative of the power of the customer.

But the SAP example is one where the customers fought back against a price rise. When it comes to negotiating for discounts, software vendors have traditionally taken a tougher stance.

Jones accused software vendors of employing "customer-unfriendly practices that wouldn't be accepted in other spheres," such as bundling support and upgrade rights, forcing customers to pay maintenance on unused licences, and preventing the use of third-party support providers.

However, Jones said many vendors are mending their ways as alternative software models, such as SaaS, starts to gain stronger market share and becomes a threat to traditional, inflexible software pricing models.

In the report, Forrester made some recommendations for IT leaders that are negotiating their software agreements:

  • Create a strong negotiation teamMake full use of any licence purchases
  • Escalate beyond the account manager to find any available leeway
  • Bring a senior executive to the tableUse threats, but only if they are real

This story, "Software Vendors Should Back off on Fees, Forrester Says" was originally published by Computerworld UK.

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