What exactly does a 22% annual software maintenance contract buy? Jyoti Banerjee considers the value components of software support, and talks to TomorrowNow, a controversial company that is changing the rules.
A while ago I did a study for a business applications software vendor that was concerned about falling renewal rates among its maintenance customers. The problem was not that the software was poor – in fact, it was too good, and customers were taking a view that they did not want to pay for ongoing maintenance when they needed very little support across the year.
The study did find that customers who felt they had an ongoing relationship with the vendor were six times more likely to renew their maintenance contract than those who received no communications from the vendor through the year. (Really, if you are a software vendor, and not delivering a good programme of communications to your existing customers, you are throwing away good money).
But the gnawing doubt remained. Why should the delivery of a monthly HTML newsletter make that much difference that a software customer would be willing to pay 22% of their original software price on an annually recurring basis?
Recently, the whole software maintenance thing started to make a lot more sense to me. The person who helped me understand it was Andrew Nelson, ceo of that flamboyantly named company, TomorrowNow. A former Accenture consultant concentrating on PeopleSoft implementations, Nelson founded TomorrowNow in 1998 as a third party provider of software maintenance for enterprise applications, but the company has really blossomed since its acquisition by SAP in 2005.
