Enterprise software in 2009: Opportunities, risks

Enterprise software is sure to remain a buyer's market during the economic downturn next year, but assuming you've got a budget, be careful to avoid boondoggles while in pursuit of a bargain, say analysts, consultants and IT executives.

Pointers from industry insiders for enterprise software in 2009 include:

Buy if you can, but don't go overboard

"It's almost self-evident that software vendors right now want to close deals," said Frank Scavo, managing partner of Strativa, an IT consulting firm in Irvine, California. "Buyers are probably in the strongest position they've been in years. The balance of power has shifted considerably."

One IT executive said the rocky economy is clearly providing him with a strategic advantage.

"Vendors are doing everything they can to gain our business," said Mykolas Rambus, CIO of Forbes Media. "As far as technology spend, we're certainly making prudent cuts. But at the same time, we're plowing money into areas we think generate ROI." Those areas include e-commerce and data warehousing, he said.

Software companies are willing to deal because it is "a matter of having a dollar in hand versus a dollar in the client's hand," said Eliot Arlo Colon, president of Miro Consulting, a Fords, New Jersey, company that advises Oracle customers on license purchasing.

Colon is predicting that Oracle, seeking to cash in on its "shopping spree" of acquisitions over the past few years, will heavily discount licenses for some products, such as content management and BI (business intelligence), in 2009.

But the company won't offer deeper discounts on products like its database, Colon said. "They just feel they have the stranglehold on the market."

Whatever happens, just because something is cheap doesn't mean you need a lot of it, Scavo said. "You don't want to overbuy software that's just going to turn into shelfware. You'll just end up paying maintenance on it."

Examine software maintenance costs

SAP's decision in July to move all customers to a richer-featured but costlier software maintenance plan -- resulting in an outcry from some customers -- could have a lingering effect, Scavo said. "I think it's caused buyers in general to start paying more attention to maintenance fees."

There's no clear sign that many more companies will follow the lead of companies like Rimini Street, which provide third-party maintenance at lower rates than vendors.

But these companies are already making an impact, said technology purchasing consultant and bloggerVinnie Mirchandani.

"The thing about third-party maintenance that people do not often realize is just its presence/threat forces a lot of discounting from the source vendor," he said via e-mail.

A number of large outsourcers also provide maintenance "on the quiet" for customers, according to Mirchandani.

"Overall, software maintenance pricing will be under even more pressure next year," he added. "Not just SAP, by the way. [It's] not surprising -- few markets, in tech or elsewhere sustain 90-percent-plus gross margins for more than a few years."

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