By Cris Wendt and Anna Connell IDC conducted a survey a few years ago that illustrated the importance of software maintenance to the overall revenue stream of an enterprise software company (generally offering a perpetual software license model). The result of the analysis was a simple, compelling graph. One line was the license revenue growing at an annual compounded rate of 7% (healthy, but not spectacular), and the other line showed the growth of maintenance revenue, priced at 20% (annually) of the associated perpetual license with an 85% renewal rate. It showed that within 10 years, the maintenance revenue was a greater portion of overall revenue than license revenue (and continues to grow). This illustrates the power of maintenance revenue over an ever-increasing software installed base. However, in the spirit of a marketing perception audit, if maintenance were a person, it would be Rodney Dangerfield, and would be quipping, “Hey, I get no respect”. While software companies generate substantial amounts of money from maintenance, maintenance is often treated as an appendage to the primary software products, with a surprising inattention to optimization of the offering. Here are signs that you may be neglecting your maintenance business and leaving millions of dollars of (mostly bottom line) revenue off of the table: Lack of a maintenance offering. Sometimes software companies seem overwhelmed or new to software and declare that they “provide updates and bug fixes for free for as long as the customer owns the product. Maybe someday, we'll have an offering”. Maintenance is not treated like a product, where it is assigned a product manager, whose responsibility is define the product, price it, and communicate its salient features to customers and channel partners. Maintenance renewals are not handled by a separate and dedicated team whose role is to generate high renewals rates and protect/grow the existing maintenance revenue stream. Without this level of focus, maintenance revenue is frequently cannibalized in preference of new license revenue. The maintenance offering is often ill-defined other than “phone support and updates”. Little consideration is given to what is included in an “update” and what might the value be to the customer. Are there boundaries to what functionality defines an “update” you receive on maintenance as opposed to an option that is paid as an “upgrade”? Software companies often have poor discipline accurately keeping accurate records of their customers – either by company name or by key contacts at their customers. This means that the maintenance renewal process cannot be effectively performed, if it can be performed at all. The problem becomes worse if sales are made through an indirect sales channel. Keeping accurate customer and sales records allows companies to track maintenance revenue and renewal rates which can gauge the health of their business long term. Pricing for maintenance is very ad-hoc, over-simplified, and pays little attention to the product lifecycle. Maintenance may have 1 or 2 price points that reflect an annual price that is a simple percentage of the purchase price of the original software license. Little value is given to the fact some products may provide tremendous value with their updates and may reflect a different price than maintenance on another product. Also, phone support is rarely separated from software updates (although often for good reason). Maintenance and renewal are typically overlooked when an event occurs on the product associated with the maintenance. A price change to the list license price of the product has the same result to maintenance and must be explained at renewal. When products are re-packaged and re-bundled, entire customer configurations often have to be adjusted to reflect the new packaging and pricing, leading to many manual steps to align current product offerings with what the customer originally purchased. While many of the problems above are related to ” entitlement management ” business processes and systems where Flexera Software can help you, a good first step is to honestly evaluate your maintenance business and to make it a priority with good leadership.