New ITSMA Research Shows that Pricing Pressures for Software Support Services Will Increase

Sixty percent of study respondents being asked to reduce cost of software support

LEXINGTON, Massachusetts—July 17, 2006—Maintenance revenue streams at software companies are under pressure. According to a new ITSMA report on software maintenance and support practices and preferences, this pricing pressure will not let up anytime soon. Nearly two-thirds of the customers interviewed for the report indicate that they are being asked to reduce the amount they spend on software support services.

The report shows that the top strategy for reducing software support costs is contract renegotiation—84% of respondents said they are attempting to renegotiate existing contracts to get the same service levels at lower prices. Consolidating applications is another popular tactic for reducing costs, with 74% of respondents reporting that they are looking to uncover unused licenses and modules so that they can build a case for reduced fees.

Good News for Software Vendors

Although pricing pressure is increasing, there is good news for software companies: “According to our research,” said study author Julie Schwartz, ITSMA’s senior vice president of thought leadership, “customers are in no hurry to sign up for support services from third-party providers. While third-party maintainers may charge up to 50% less than the software vendors, their services are limited to bug fixes and help desk support. Our research shows that the primary driver of value for software maintenance contracts is major software upgrades. At most, 10% of the market may be attracted to the low-cost third-party service value proposition.”

About the Report

The report, Key Trends in Software Maintenance and Support, is based on 150 phone interviews with customers involved in the purchase or renewal of software support and maintenance services. Respondents represented enterprises with revenues ranging from $200 M to more than $20 B per year in four vertical markets:

• Manufacturing
• Financial services
• Healthcare
• Public sector

The report addresses questions such as:

• Who do customers turn to for support with the three main types of software: system software, development tools, and application software?
• What are the key drivers behind software support purchases?
• How satisfied are customers with software support providers?
• What are the current perceptions of value for software support?

For more about the report, see http://www.itsma.com/research/abstracts/f011.htm.

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