Value of Annual Maintenance Plans

Our Opinion

We are often asked by clients to express an opinion if they should renew annual maintenance plans with software vendors.   In the Dynamics world these are called Enhancement Plans.

With the current economic climate, we get this question more than we use to get it.

The fact that the system is stable and users understand the features does make users question if an additional expense is really justified.  But that is a short term perspective.

What do you risk?

First you need to understand the Re-enrollment fees.   With Dynamics, you would pay approximately 20% of List Price for the lapsed period + one year in advance at 16% (minimum).   This really means that at about 4 years of lapsed plan, you are essentially repurchasing the system again.  If you stay on the plan, then it would be almost 6 years to reach that same cost level.   Is it easier to come up with a lower dollar amount every year or one large sum at some future point?

Ability to add users or modules is impacted.   With Dynamics, you can not add users or modules without being current on a plan.   So the marginal cost of adding the additional user gets quite high when you pay both the cost of the user and re-enrollment fees.

Ability to upgrade to a new version is another risk.   You may say that Version X meets all our needs, so we don’t need to upgrade.   That may be true, but at some point your Version X will no longer be supported by the publisher.   Even if you have a great consulting team supporting you, they will not have support on Version X should they require it to solve a problem for you.

Ability to have consultant support is another risk.  Even if your version is still supported by the publisher, is the consultant penalized by working with you?  With Dynamics, if the consulting organization is also a reseller then chances are the answer is NO, they are not willing to work with you.   The reason is that Microsoft is penalizing resellers with lower margins if their client renewal rates on plans fall below a certain percent.   They will probably make more by keeping a high percent margin with Microsoft then the revenue earned off of the revenue from an occasional incident with you.

A reasonable analogy is that older car you own.  Do you continue to invest in maintaining it or do you run it until it dies then buy a new one?   The difference is that getting a new car is a lot less painful then purchasing a new accounting system and having it implemented.

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