A suggested alternative to maintenance fees

So just what is a fair value for enterprise software maintenance and support? More than half of the respondents to a Forrester survey (57 per cent) said that a fair maintenance fee should fall below 16 per cent. And they'd be happy to pay that, Wang notes. "But when you actually look at what they paid, it's about 26 per cent."

Those percentage points add up, course: Every per cent reduction in a US$1 million deal equates to an annual savings of $10,000, Wang points out.

Vinnie Mirchandani is a former Gartner analyst and founder of Deal Architect, a consultancy that works with technology buyers in the vendor selection process. He contends that maintenance should be priced on tiered levels, not a one-size-fits-all rate.

For example, Mirchandani suggests that there's one category of customers who are content with the software's current release, just want bug fixes and application tweaks that comes with base support, and have no desire to upgrade. They would pay 10 per cent in maintenance fees.

A second category of customers (charged 15 to 17 per cent) is one that plans to stick with the product and carry out upgrades, as well as receive base support. And a third category (charged full maintenance rates) is one that is looking for high-level support and all the bells and whistles-next-generation software-as-service (SaaS) and service-oriented architecture (SOA) applications, for example.

Forrester's Wang notes that the typical maintenance and support cycle has a big drop off of customers needs at the end of an application's life. "When you get to year six, seven or eight, when there's really nothing going on-just regulatory updates or patches, maybe some changes to hardware-you really should be paying somewhere between 5 per cent and 10 per cent then," he says.

The result of "maintenance discontent," Mirchandani writes in an e-mail, is that CIOs have to fight harder for initial license discount, since maintenance is usually a per cent of net license cost. Annual maintenance renewals are more contentious-"vendors love to sell multiyear renewals to avoid that scenario each year," he says. And lastly, lots of companies are evaluating third-party maintenance options.

"Many just use it to negotiate the software vendor down," Mirchandani says. "But a growing number are walking away to a third-party provider like Rimini Street."

In the end, it's important that IT executives and business leaders remember when they have the most leverage with their vendors. "Use licensing, maintenance fees and provisions for the software licensing contract as part of vendor selection criteria upfront," Wang says. "The only time you have leverage is when you first sign that deal, so how you structure that contract is so important."