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Do ERP vendors require the customer to buy an annual maintenance contract?
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5 Answers
In my experience, it is typical for an annual maintenance fee to be part of the total purchase price of enterprise/business software. The annual service fee is typically between 15 and 20 percent of the base price of the software license(s).
That said, the maintenance fee also typically grants the purchaser upgrade rights throughout the maintenance period. This means that as newer versions of the software are released the purchaser can optionally choose to upgrade without additional cost. It’s also important to note that upgrades typically contain bug fixes and functionality improvements.
Maintenance agreements provide positive incentive for both the customer and the software vendor. During the maintenance period, the customer’s likes, dislikes, and needs are communicated to the vendor and these are considered when vendor decides what to include in the next release.
For this reason, maintenance agreements are an integral part of the software acquisition. I typically recommend that customers negotiate the cost of maintenance, but not consider trying to remove it. It’s also important to note that some vendors separate out maintenance agreements from service agreements. As with all legal contracts, customers should carefully read the terms of software license agreements and insist on clarification (and re-wording if necessary) of any ambiguous or obscure terminology.
I don't know about most ERP vendors "requiring" the customer to buy maintenance, but if my memory serves me correctly, Oracle did require their customers to purchase maintenance for using the database (not their ERP, which they might treat differently), else the license to use the software was terminated. In addition, this memory is from about 5 years ago, so perhaps this is different now.
I put "requiring" in quotes, because for most ERP vendors, maintenance is optional. Having said that they will probably treat customers who are on maintenance vs off maintenance differently when it comes to support, training, upgrades, etc.
Every company has the freedom to negotiate the terms of its ERP contracts.
In my experience, vendors of on-premise or hosted ERP (the distinction is relevant) don't require their customers to enter into maintenance contracts. However, most companies do enter into maintenance and support contracts. Now, companies using SAP and Oracle ERP systems have an alternative to SAP and Oracle M&S. Third-party providers such as Rimini Street offering maintenance and support at roughly 50% of the rates.
Now, my answer changes for SaaS ERP. In general, there's no practical way to opt-out of maintenance and support. That's because maintenance and support obligations are baked into the service offering and the software subscription prices.
Rogers, you may have follow-up questions. Please feel free to ask them on this thread or live, at the roundtable event.
There are many organizations that bought the ERP solution that best matched their needs and then over time as business requirements changed customized the software to address those needs. Unless the software vendors themselves performed the enhancements they typically will not provide support for these enhancements. If they did perform the enhancements than they will typically support them at a premium rate.
Forced to support their own enhancements, organizations often look to third parties to provide support and services. Many third party organizations will provide support at a fraction of the cost of the vendor and include all of the enhancements.
If the vendor is still providing new releases of the software, this is then a quandary for the customer who will want to stay on support to get those releases that come with support. We have seen several of our clients stay on vendor support and also engage our support services for the enhancements. Most organizations cannot afford both.
Another reason organizations stay on vendor support is because many software products require license keys that only the vendor can provide. Older license agreements imply the customer has access to these keys in perpetuity regardless of whose support they employ. Newer license agreements are either tied to the serial number of the hardware or specifically state the customer must be on vendor support to get keys. Customers must have access to these keys to upgrade their hardware or for disaster recovery. These keys are so important that some customers stay on vendor support regardless of the value the support services provide for fear of not being able to run the software. Only a legal counselor knowledgeable in these agreements can provide a risk assessment to determine if a company must stay on vendor support or be able to take advantage of the third party support offerings in the marketplace.
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