- Depending on your Accounting system, the software purchase itself could be considered a capital expense, while the software maintenance is usually an operating expense. So if you’re planning on buying a new package for your IBM i in FY 2014, for example, you may have to budget for software maintenance in your operating system budget as well as for the software itself in the capital budget.
- In general (and there are exceptions), software vendors charge ~20-25% of the purchase price of the software every year for maintenance. For some this is less, but that’s the general rule. This means you can expect to pay for the software a second time for every 4-5 years you own it. And sometimes the vendor will base their software maintenance fee on the current price of the software, which can rise every year. So don’t just look at the purchase price of the software, consider how much that software will cost you over its useful life.
One enterprising IBM i company I dealt with is now leasing their software on a quarterly, semi-annually, or yearly fee. You don’t buy the software but you pay regular maintenance fees to use it. This is an intriguing idea which would totally move a software purchase out of capital expense into operating expense. I’m hoping more vendors start looking at this trend.
- Many companies will give you a break on software maintenance if you buy the maintenance for a longer term (say 2-3 years, instead of 1 year). If your going to buy maintenance anyway, it may be worth your while to buy long-term, especially if your accounting function can amortize the cost of that maintenance over 2-3 years.
- Always ask questions about how your software is priced for the IBM i. Many vendors price on CPW while other still price on P-group. Make sure their pricing is accurate based on the machine you’re running the software on. I recently received a quote for some new software for a P-10 machine that was priced as if the machine were a P-20. I contacted the vendor to change their pricing to P-10 and the cost went down $7,000. It pays to ask questions.
- If you buy software for a company division where there are other divisions buying the same software, compare their pricing with yours. You may be able to piggyback on a deal they got or one of you may discover that you’re paying more than the other guy. Vendors are usually tight-lipped about their pricing but getting comparative pricing can be a godsend.
- If you have a DR machine, talk to the vendor about licensing. Some vendors will want you to buy a second package. Some will want to sell you a reduced cost DR license for when you switch over. And some vendors will be glad to give you a 30-day temporary key for when you run on the backup machine. If you’re only running the backup machine once or twice a year, you may want to forego buying a license and just get a temp key whenever you’re going to test or use it