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Are you going to be surprised when I tell you that Support, Maintenance and Subscription arrangements have a lifecycle too? I didn’t think so!

New Agreements

Most of these agreements are entered into as an adjunct to the purchase of a piece of hardware or software, although subscription licenses are the actual license, but paid for on a regular basis rather than once off.

The factors behind the decision to purchase a subscription license  are similar to the decision behind purchasing a perpetual license – essentially it is just the form that is different. The decision to purchase subscription vs perpetual will depend on comparative costs, the longevity of the license, management costs, and, interestingly, whether the organisation capitalises software costs, or writes them off as expenses… but I’m not going to talk about that in any more detail here.

Just as there is a decision to actually purchase hardware or software in the first place, there is the decision to enter into a support and maintenance contract. The decision is usually independent of the purchase, except for some software titles, where the purchase of support and maintenance for the first year is often compulsory. The decision to take out a support and maintenance contract will usually be made as a result of discussions among the techies, management and procurement, and will be based on cost of the support or maintenance, in-house expertise, desired service levels, and whether or not the purchase (or non-purchase) would affect any other, more vital support and maintenance – remember what I said last week about some software companies taking the ‘all or nothing’ line that if one active license isn’t supported than none are!

Lifespan

The key difference between support, maintenance and subscription agreements and the purchase of a piece of hardware or a perpetual software licenses is that it must be renewed on a regular basis or it will lapse. The decision whether to renew the contract is based upon similar factors as the decision to take it out in the first place,such as the importance of the hardware or software, in-house skills and desired service levels.

For most organisations, the biggest management challenge is to implement processes that ensure the contract is flagged up as being due for renewal, and that the whole renewal process is followed through to its conclusion, including final confirmation that the contract has been paid for and that the suppliers is also in agreement that the contract has been renewed.

Support, maintenance and subscriptions are intangible assets just like perpetual software licenses, and so similar care should be taken to run regular open PO and unpaid invoice reports in order to identify any problematic transactions. Another thing to bear in mind, particularly for subscription licenses and software support and maintenance, is that some manufacturers will expect you to be able to show evidence of a continuity of support in order for the current support to be valid. This is is to discourage organisations from taking ‘time out’ in a support or subscription contract, and if a license ‘falls out’ of support, the manufacturer may sometimes charge a penalty fee or ‘uplift’ for the privilege of putting it back into support.

End of Life

At some point the hardware or software that is supported will no longer be required by the organisation, and the support contract can be ended. Most of the time, companies will just let their support lapse at the end of the period,  but large and/or very long term contracts may need to be actively terminated, and a refund of fees paid may be due.

On the other hand, subscription licenses may be at the other extreme, and have a penalty charge applied for ending the contract early, like mobile phone contracts. And of course, particularly with software support and maintenance, you  should be sure that cancelling the support and maintenance will not affect support and maintenance for other licenses because the manufacturer has an ‘all or nothing’ policy.

So that’s the lifecycle of support, maintenance and subscription license agreements.  Next week I’ll outline some tips and tricks for managing them effectively.

Picture credit: Kylie Fowler