Users being milked by recurring contracts: analyst
- 02 December, 2007 22:00
Business should avoid bundled and discounted software contracts or risk being locked into exorbitantly priced maintenance, support and upgrade cycles.
That's the view of US-based Gartner analyst Jane Disbrow, who spoke at the Gartner Symposium ITxpo in Sydney recently. Warning users of the hidden tricks used by vendors in software licensing deals, Disbrow said upgrade cycles can push contract costs up by as much as 50%, with an average rise of 35% for SOA deals.
She said users should spend about 25% of the time evaluating contract usage rights because this is where the highest area of risk lies.
Contracts should be ditched, she said, if they do not clearly define a licensed user, such as multi-role, casual and work-from-home staff, or non-human devices, including multiplexing front- ends.
"Business must be scrupulous with understanding usage rights and must nut-out how users across internal departments will affect licensing costs," Disbrow warned.
"One of the biggest problems is vague usage rights. Think about what should be excluded as well as included, because you don't want to pay excessive costs when an audit comes around."
Maintenance and support costs are the surreptitious money spinners of software contracts, according to Disbrow. She said vendors will drop software costs by more than 20% or bundle 'free' software to lock customers into mandatory support maintenance and upgrade cycles.
"They offer suites of so-called free products at high discounts, which is used to push out competitors because the bundled software is generally what customers will turn to if they need a product," she said.
"But it is a double sting because you still need to buy licences — the up-front cost is all about getting the foot in the door.
"The best discounts often have the worst [up-front] purchase prices."
Customers who avoid lengthy contracts or opt for off-the-shelf products are free to evaluate emerging products, which Disbrow says will give a competitive edge over those locked into deals.
Upgrade cycles, which can cost more than the value of the contract, should be free, according to Disbrow's customers.
They argue, she says, that new releases should be free as part of ongoing maintenance and support costs, which average 22% of the contract price.
"It really gets to me that customers are getting squeezed for often outdated software upgrades when there can be better alternatives in the market. It's just a revenue generator, " she said.
Virtualisation is a licensing cash cow for furtive vendors. According to Disbrow, some vendors are guilty of manipulating usage rights on virtualised platforms, which often lumps customers with extra user fees.
"Every time a new virtualised technology is used, new licensing rights come out, and there is no consistency. Customers can be hit with additional fees for deploying on a virtual machine even if there are no extra users," she said.
Disbrow slammed third party support vendors and labelled them "basically technical support".
"If they don't own the source code, they are basically giving you technical support," she said, adding that they can offer good legacy support but with reduced protection and increased liability risks.
Business should steer clear of contract renewals, she said.
"Consider products from small vendors and open source providers, also evaluate the cost of outsourcing and internal builds," she said.
"Open source has taken off in terms of growth and we now have seven analysts devoted to it.
"Build versus buy is making a lot more sense now, but it requires a lot of consideration."
Security applications, such as Snort, are the most popular from the open source arena, followed by operating systems, application servers, development tools and content management systems, Disbrow said.
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