Text settings Story text Size Small Standard Large Width * Standard Wide Links Standard Orange * Subscribers only Learn more Minimize to nav Enterprise-sized businesses spend, on average, 28 percent of their software budgets on unwanted upgrades, migrations, and licensing changes. Often, those firms’ IT heads think those changes are detrimental. Those results are according to a survey of 2,018 chief information officers and senior IT decision-makers at companies with at least 10,000 employees that Origina commissioned for its report, “The Software Tax.” About half of the respondents (1,011) are from the US, and the rest are from the United Kingdom. All respondents worked at companies with at least $1 billion in annual revenue.
Keep in mind that Origina provides maintenance for various enterprise software. Its report points to independent software maintenance as a way for IT leaders to regain control over software budgets, illustrating its potential bias. A third-party research consultancy, Censuswide, conducted the survey. Among the report’s most concerning findings, enterprises often make software purchases that IT heads believe could hurt the organization.
Ninety-five percent of respondents said “their organization has paid for a vendor-driven upgrade, migration, or licensing change in the past three years that it believed at the time would reduce performance, reliability, or business value,” the report says. Fifty-three percent of respondents “have done so more than once,” the report notes. “Some 76 percent say their organization has very little real leverage in negotiations, and 80 percent say moving away from major vendors would cause significant disruption,” the report says, referring to the share of respondents who selected “strongly agree” or “somewhat agree” to those statements. “When the alternative to an unwanted upgrade is losing support on systems the business runs on, saying yes is often a rational response,” Tomás O’Leary, one of the report’s authors and Origina’s CEO and founder, said in a statement. “That’s exactly the problem. The market has left some of the most experienced technology leaders in the world with little room to refuse, and that cost shows up in budgets, in engineering time, and in innovation that never gets funded.” The result is less funding for other areas, particularly, per the report, innovation (named by 36 percent of respondents), human resources (32 percent), security (31 percent), and “customer-facing investment” (31 percent). In a statement accompanying the survey’s announcement, Liberty Mutual’s CIO, James McGlennon, pointed out that an upgrade cycle could occupy top technical workers for “the better part of a year.” “That’s not a one-off cost, it’s a recurring drag on capacity, and every year it repeats is a year those people aren’t working on the initiatives that actually differentiate the business,” he said.
The majority (91 percent) surveyed would support laws that give enterprises “protections comparable with those available to long-term residential tenants.” Only 1 percent opposed this (with the rest signaling that they neither support nor oppose the idea). CIOs should “negotiate the exit before the entry” to have more control over software budgets, Marshall Van Alstyne, the report’s co-author and an information sciences professor at Boston University, said in a statement. Origina’s report suggests “settling the terms of a potential exit,” including setting a price for migration assistance and caps on renewal and expansion prices, during initial negotiations with the software vendor. Origina’s report didn’t call out any specific vendors as forcing enterprises’ hands.
However, every survey respondent currently runs “at least one of IBM, HCL, VMware/Broadcom, or SAP at meaningful scale.” Scharon Harding Senior Technology Reporter Scharon Harding Senior Technology Reporter 8 Comments
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