Admin Alert: Auditing Your IBM i Software Maintenance Bills

Dealing with IBM i third-party maintenance can be a pain. You buy a software package once, but wind up paying yearly maintenance bills for the life of the application, paying 15 percent or more of the original purchase price per year. And the vendor may increase the cost on a yearly basis. This week, I’ll discuss software maintenance fees and give you some tips on keeping your maintenance costs down.

Basic IBM i Maintenance

Third-party software maintenance is a necessary but expensive proposition for IBM i vendors. Software vendors need to charge yearly maintenance to provide cash flow for creating new software versions, providing customer support, and covering other expenses that can’t be financed solely by one-time software sales. Yearly maintenance bills can typically run 15 to 20 percent of the software purchase price, so software maintenance is a big part of any shop’s IBM i budget.

But software maintenance costs can be a moving target that changes each year, and some years you’ll get hit with maintenance increases. Common reasons for maintenance price increases include:

• Automatic price increases baked into the contract, capped to the inflation rate or some other metric.
• Price increases tied to the current price of the software. You may have bought the software for $10,000 for example, and the vendor originally started charging you 15 percent of the purchase price for yearly maintenance. However, after they decide to increase the purchase price to $11,000, they will sometimes increase yearly maintenance by a similar amount to reflect 15 percent yearly maintenance for the new purchase price.
• Special price increases to keep up with increased costs for the vendor. Often the company will just announce a price increase, notify you by mail, and then bill you at the increased price.

Some vendors are very good about staying with the yearly maintenance cost that you started with. Others can and do take advantage of these situations, slowly raising your maintenance costs over a number of years.

The problem is that yearly maintenance price increases add up. And the software that you started paying 15 percent to 20 percent yearly maintenance for may suddenly start costing you 20 percent to 30 percent or more of your original purchase price. All of which makes it worthwhile to audit your software maintenance bills as they come in.

Information Is The Key

It’s important to have relevant information when dealing with software vendor maintenance contracts, especially if you want to renegotiate a contract for more favorable terms. To that end, I always try to scan and store the following items into separate server folders for each piece of IBM i third-party software running on my systems.

• The signed software licensing agreement and signed proposal from when my organization bought the software. This usually contains the terms of the purchase, the original software maintenance agreement, how much the vendor originally promised to charge me for yearly maintenance, and any exit clauses that may be in force.
• Yearly bills for software maintenance. Prior year bills show what I paid for maintenance each year and whether the yearly maintenance bill has been consistent or whether it has increased each year.
• Any vendor correspondence about software maintenance price increases. IBM i third-party software vendors and third-party software vendors in general, like to send price increases by snail mail, so make sure to open all contacts from your vendors even if they look like advertising. I rarely see a maintenance increase come in by email. Many vendors will also send increase notices months in advance so that you know a price increase is coming, before you have to do your yearly software maintenance budget. The early warning is nice but it also makes it easy to ignore the increase since you’re not taking an immediate hit to your budget.

It might take some effort to create a vendor bill folder for each piece of third party software you use. You might have to dig through old bills to get this information or go to your Accounts Payable archives. But once you have historical information on your bills, you also have some ammunition if you need to dispute and hopefully reduce excessive maintenance increases.

When You Want To Renegotiate Maintenance

If you see a yearly software maintenance increase that looks excessive, here are some tips for attempting to keep software maintenance costs in line.

1. Refer to the vendor bill folder for all the historical information you can find. Determine whether the new bill is or isn’t in line with previous bills and the license agreement, and determine whether this is an excessive increase. This can be tricky as you might not worry about a 1 to 2 percent increase for a single year. But you might worry about a series of 1 to 2 percent increases over the last 10 years such that you’re now paying 30 percent of the original purchase price in yearly software maintenance. Other situations such as the maintenance price increasing 10 percent over last year, are also red flags that you’ll want to talk to the vendor.
2. If you know someone else who’s running the same software, call them and compare notes. A sister division is perfect for this type of research, or you can poll your contacts in LinkedIn, Twitter, Facebook, etc., to determine what price other people are paying for the same maintenance. In my shop, I’m exposed to the IBM i maintenance bills for several different companies. This helps me to understand how the vendor is pricing maintenance. It also helps alert me to variances in the vendors pricing scheme, such as one company getting charged more or less than another company.
3. Look for mistakes on the bill. Check to see whether you’re being billed correctly against your licensing. If you’ve recently upgraded to a new iBM i machine, make sure the vendor isn’t still billing you against your old serial number and P-group that may be more expensive to maintain.
4. Call your vendor to see if you’re getting the most current pricing. Vendors can change their pricing schemes and sometimes new customers get better software licensing costs because they haven’t gone through years of price increases. Talk to the vendor to see how your maintenance scheme stacks up against their more current maintenance plans and ask whether there is any advantage to resetting your maintenance to a newer plan to reduce costs.
5. Be polite but firm. Ask for explanations as to why the bill is going higher. If the yearly increase is fairly high (say 10 percent or more), you might be justified in politely telling the vendor that “your management” isn’t happy with the price increase and wants to know what we can do about it. IMHO, it’s better to do this as a friend and partner with the software vendor rather than as an angry customer. Even if you can’t get a decrease in licensing fees, you may be able to lay the groundwork for more concessions later.
6. Be persistent. Don’t hesitate to ask for a discounted rate more than once. Persistence pays.
7. Look for options. If they can’t lower your maintenance cost, can they lengthen your maintenance period by a few months? Can they give you a discount on another piece of software or service you need? Can they hold the maintenance increase for one year so you can budget for it next year? There may be other options that make up for the increase in other ways. Don’t be afraid to ask the vendor to be flexible.
8. Ask to talk to someone in upper management, if you can’t get satisfaction with your current rep. I surprised myself one time when I decided to cold call the president of a company that was levying an excessive charge on my shop. I not only got through but he put me on to the exact person who was able to help me. Sometimes you need to climb the ladder a little to let your voice get heard. Again, if you’re going over the rep’s head, be polite about it so you don’t make an enemy. But don’t hesitate to aim high, if you need to.

IMHO, fighting for lower rates depends on three things: courtesy and respect for the company you’re dealing with; good information on past maintenance bills for yourself and others; and persistence. I’ve done this for years with various vendors and I’m always surprised how flexible they can be and how I can get unexpected results.

The morale is: if you’re not happy with rising support costs, take your case to the company and ask for a reduction. Just be polite, be prepared, and be persistent. The worst they can do is say “no.” The best they can do is say “yes”. . . and reduce your costs.

Follow Me On My Blog, On Twitter, And On LinkedIn

Check out my blog at joehertvik.com, where I focus on computer administration and news (especially IBM i); vendor, marketing, and tech writing news and materials; and whatever else he come across.

You can also follow me on Twitter @JoeHertvik and on LinkedIn.

Joe Hertvik is the owner of Hertvik Business Services, a service company that provides written marketing content and presentation services for the computer industry, including white papers, case studies, and other marketing material. Email Joe for a free quote for any upcoming projects. He also runs a data center for two companies outside Chicago. Joe is a contributing editor for IT Jungle and has written the Admin Alert column since 2002.

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