Defend Your Technology Maintenance, Service and Support Prices
By Shawn Santos, Senior Program Manager, SSPA
Your maintenance, service and support contracts are under price pressure from your enterprise customers. The newly released Industry Committee white paper is the most important piece of research that the Services & Support Professionals Association (SSPA) has ever delivered to protect member companies’ bottom line. This white paper is one of several value-driven programs that provide SSPA member companies with the tools, research and expertise they need to navigate the rapidly changing service and support landscape.
The current white paper research articulates the emerging trends that threaten to reduce services growth and margins, as well as effective strategies for defending prices for maintenance, service and support contracts. Acting to defend maintenance and support revenue is a company issue, not just a service & support problem.
In the spring and summer of 2005 the SSPA Industry Committee on Maintenance and Support ROI began research on effective strategies for defending prices for maintenance, service and support contracts sold by enterprise technology vendors. This Committee included 30 leading enterprise technology companies who provided data and feedback, of which 12 acted as the working committee.
The Committee was created in response to research findings from the SSPA’s 2005 Support Demand Enterprise Series completed in the fall of 2004 in partnership with Tech Strategy Partners. According to research by the Service & Support Professionals Association (SSPA) and the Technology Professional Services Association (TPSA), services, support and maintenance now account for over 50% of revenue for large enterprise software companies as a group and over 60% of Earnings Per Share (EPS). SSPA and TSP concluded that price pressure on technology maintenance, service and support contracts was now a permanent part of the enterprise customer landscape and was likely to increase in 2006 and beyond.
To identify effective responses to this price pressure, the Committee surveyed support executives at leading enterprise technology vendors. They identified best-practice vendors as those that reported discounting their maintenance fees less often than their marketplace peers. Those vendors’ practices around support annual contract marketing and sales – particularly on renewals – were then examined in-depth.
Where possible, findings were also validated against a larger sample – the 114 enterprise vendors who had completed the SSPA’s 2005 Benchmarking Survey as of October 2005.
All vendor surveys and interviews included companies selling hardware, software, as well as network solutions. The markets they serve include large enterprises as well as small/medium-sized business customers.
Perhaps the most significant trend uncovered in the study found that of the last five years technology companies have seen the emergence of services, support and maintenance as the primary economic drivers of corporate revenue and profits. Over the five-year period since 2000 services, support and maintenance have accounted for over 70% of total corporate revenue growth. A similar phenomenon can be seen among large hardware companies where, as a group, services now account for more than a third of total revenue and a stunning 98% of total corporate revenue growth during the same period. Of all services, it is maintenance which is the most profitable.
SSPA’s primary finding is that while discounting cannot be eliminated it can be controlled and minimized. Levers do exist to bring this issue more under management’s control. Based on the degree of financial risk involved, the ability of technology companies to manage this problem should be emerging as a top corporate priority for CEOs, CFOs, Marketing, Sales and Service executives. This report identifies these levers and details what programs and practices companies should implement to better defend their maintenance, service and support prices.
To complement this valuable research, the SSPA has developed two important on-demand, pay-to-access webcast options available in late November to cover this issue in detail and explain how to utilize the results:
- 30-minute briefing for non-service execs (CFO, VP Sales, VP Marketing) as well as sales personnel with responsibility for maintenance and support contract sales and renewals.
- 90-minute comprehensive review of findings for service & support management and staff.
Although the complete white paper is available to members only, the revealing white paper abstract is available to SSPA community members. Through research such as this white paper, conferences, seminars and ongoing professional programs, SSPA is providing a vibrant forum and deliverables for executing new ways to leverage best practices, enhance productivity and build ROI throughout the support value chain.
Visit the SSPA Industry Committee White Paper page to find the members-only white paper download and community-member access to the white paper abstract.
If you are interested in learning more about how an SSPA membership can benefit your company’s bottom line, please contact John South at jsouth@thesspa.com
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