I live in one of those neighbourhoods where you’re likely to receive a knock on your front door at least once a week by someone looking for money. Last night it was an environmental group, whose spokeswoman started giving me a long-winded spiel before I interrupted her. Did they want money? Yes, but not just a one-time donation. She explained that the charity was asking for a small monthly sponsorship. “That way we have an idea of what our regular income would be,” she said.
Wow. This woman should have tried to sell Microsoft’s Software Assurance.
A report from a Forrester Research analyst this week indicates customers are getting fed up with the company’s program that gives corporate customers software upgrade rights and other benefits during a multiyear contract in exchange for a flat annual fee. According to Forrester, nearly a quarter of customers have already indicated they will abandon Software Assurance, while another third are still on the fence. It should be noted that the report was based on a fairly small sample size of only 63 firms, but the consensus seems clear: IT managers no longer feel they’re getting their money’s worth.
The interesting thing about Software Assurance, and other maintenance programs like it, is that they rarely get mentioned when a company like Microsoft launches its latest operating system, server software or office productivity applications. The focus is on the features, functionality and business case. That job is probably difficult enough for sales managers without having to convince users to look at the longer-term costs of paying not just one time for the acquisition of the product, but yearly allotments of their budget for upkeep.
Microsoft might make Software Assurance more palatable by revamping the program to correspond with the upgrade patterns of its customers, which are a lot more spaced out than what the vendor recommends. Or it could take the really brave option of trying to justify more frequent upgrades, but that’s hard too because it suggests Microsoft isn’t delivering something of long-term value.
As the IT industry continues to mature, vendors are counting on programs like Software Assurance to make up the balance of their annual revenues. It’s not as big a deal for companies that also deploy software on an as-needed basis, but Microsoft has been slow to move to a services-based model, as have several other industry giants. If they don’t want to become another Salesforce.com, however, vendors are going to find it tougher and tougher to make their maintenance programs attractive.
Infrastructure software like an operating system may be one thing, but business software of any heft will eventually be sold directly to individual departments like finance rather than IT. How willing will those departments be to make room in their budgets for annual maintenance when they are still getting their feet wet making technology-related decisions?
Before I shut the door on the charity who came to solicit me last night, I was prepared to cut her a cheque for $50. She pressured me on the monthly sponsorship, pointing out that they started as low as $5 a month. If I had taken that option, her non-profit would have gotten $60 next year, or nearly the same amount I was willing to give. Software customers are faced with similarly difficult economics. They are likely ready to pay a premium on a great product. If it’s only great for a 24-month period before you have to call for support, that premium isn’t going to seem worth it any more. Microsoft is likely not alone in having to figure out how to prove the “Assurance” in Software Assurance is for customers, and not itself.