Stop overpaying for support

Feel like your vendor is failing to live up to its maintenance fees? Consider third-party options If you are paying 20 to 25 percent in maintenance fees for an ERP application, you are burning a big wad of cash. Think about it. If you buy software every 10 years, at those percentages, you are paying 2.5 times the original license cost simply to maintain the app, says Ray Wang, principal analyst at Forrester Rese

Feel like your vendor is failing to live up to its maintenance fees? Consider third-party options

If you are paying 20 to 25 percent in maintenance fees for an ERP application, you are burning a big wad of cash.

Think about it. If you buy software every 10 years, at those percentages, you are paying 2.5 times the original license cost simply to maintain the app, says Ray Wang, principal analyst at Forrester Research.

"I don't know anyone that is getting that kind of value out of their software," Wang told me. And he should know, because he spends a lot of his time talking to CTOs.

Wang believes the financial arguments for taking your maintenance and support needs to a third-party enterprise software support vendor are huge -- in some cases, cutting the cost of maintenance in half.

Two of the biggest third-party support companies are Rimini Street and TomorrowNow.

"Customers we talked to say they are getting the same or better performance from third-party suppliers," Wang adds.

How is that possible?

While there may be many reasons for this, including the fact that up until very recently, maintenance and support from the major software vendors was poor, the real reason has to do with the fact the entire generation of software from the likes of Oracle, Siebel, SAP, PeopleSoft, and JD Edwards have all reached a high level of maturity during the past decade.

Seth Raven -- founder, president, and CEO of Rimini Street, and before that of TomorrowNow, and before that head of service for PeopleSoft -- says that when a new product line rolls out, it may take a year or two to work through the bugs.

"There has been no generational change in [enterprise] software, and the next is due somewhere between 2015 and 2017," Raven says.

That may sound like some far-off time in the future, but it is actually only 7 to 9 years out.

Raven is right when he says we will hear a lot about SAP NetWeaver and Oracle Fusion, but it will take time before the code is written, the case studies are completed, and the products are adopted globally by the enterprise. In the meantime, as changes take place, the core is mature and likely to stay that way.

Forrester's Wang says companies such as Rimini Street and TomorrowNow can halve the cost of maintenance simply because the profit margins for maintenance and support are incredibly large.

"By year three, the margins for the vendor are 40 to 50 percent; by end of life, it is about 80 percent," Wang says.

Wang concedes that Oracle and SAP have improved their support programs. However, "for a lot of people, they left a bad taste in their mouth," he adds.