Support Execs Deserve a Seat at the Corporate Table

In most high-tech companies, support executives don’t yet have a seat at the corporate executive table – they should. According to SSPA Research’s 2005 Support Demand Enterprise Series, support and maintenance contributes 20% to 60% to IT vendors’ bottom-line profitability. Over the last five years, support and maintenance revenue and margins have dramatically increased as license revenues have slowed. In fact, at an operating margin level, support and maintenance is often more profitable than new products or licenses. The result is that support and maintenance now accounts for a disproportionate share of the company’s earnings per share (EPS) when compared to its share of revenues.

A seat at the table is more important now than ever before as customer’s pressure on the total cost of support and maintenance (TCSM) increases. Customer CIOs are shifting their focus to more closely scrutinizing their support and maintenance contracts. Given the important contribution support and maintenance makes to overall company profits, this pressure not only puts support and maintenance revenue at risk, it also puts company EPS at risk. In our analysis, a decline in support and maintenance revenue of just 10% could result in a drop in EPS of 5% to 12% depending on the company, the product, and the maturity of the product.

Customers are also demanding that vendors meet their current service level agreements (SLAs) and will increasingly demand vendors to guarantee performance against those SLAs. Customers also want vendors to play a bigger role in reducing their TCSM and will increasingly use this as a criteria for their purchasing decisions. 82% of those surveyed said they prefer vendors who help them reduce their TCSM.

Though these issues are solidly placed in the support organization, the impact on customer loyalty and continued business reach far beyond support to product development, engineering, marketing, professional services, and other business units. Support and maintenance channels are also the most-used direct links to customers.

Support executives not only deserve a seat at the table, their voices are required to make the most informed decisions for their companies.

The SSPA Research 2005 Support Demand Series is the result of joint research conducted by the Service & Support Professionals Association (SSPA) and Tech Strategy Partners (TSP).

For more information about the 2005 Support Demand Series, contact John South, SSPA Director of Membership Development, jsouth@thesspa.com or call 858-674-5491.