When a waiter gives bad service, it's reflected in the tip but is rarely fatal. But when your software services provider falls down on the job, your enterprise could be at stake.
Fortunately for five of the largest enterprise application vendors, customers are very satisfied with their service, according to an IDC survey of more than 1,000 IT professionals. In fact, the average satisfaction scores among the top five are so subtle that analysts suggest the software support service category remains a highly competitive market.
"The reality is that the majority of an enterprise's experience with a software solution will occur after the implementation is complete and, given the complexities of enterprise software, typically lasts for five to 10 years," says Elaina Stergiades, a senior research analyst at IDC. "As a result, software support services should be a key consideration when enterprises are evaluating software for mission-critical processes."
Naming names here, the top five vendors are Hewlett-Packard Co. (NYSE: HPQ), Microsoft Corp. (Nasdaq: MSFT), Oracle Corp. (Nasdaq: ORCL), SAP AG (NYSE/Frankfurt: SAP), and IBM Corp. (NYSE: IBM). The IDC survey said each one does a very good job of meeting the varying needs of its customers through at least three levels of support services -- and some offer significantly more than that.
Each of these five companies has been providing software services and support for quite some time. HP recently bolstered its services industry with the acquisition of Electronic Data Systems Corp. (EDS) (NYSE: EDS). Big Blue is known for its Global Services division. Microsoft has built out its services division piece by piece, SAP through long-term customer loyalty, and Oracle through acquisition of services contracts.
And while most enterprises have come to rely on vendor-supplied software for their day-to-day operations, many often underestimate the importance of support services when evaluating which applications to purchase and implement.
"A single negative support experience can have a dramatic impact on overall satisfaction and is one of the top reasons for changing support providers," notes Stergiades. "Given the importance of support services to a customer's overall experience, vendors are constantly evaluating and refining their offerings to ensure that they are offering the services and packages that best meet their clients' needs."
So, what do the top-tier enterprise vendors do next? Renew contracts while the customer is happy. An Aberdeen Group Inc. survey of 260 service organizations found 90 percent customer retention between 2008 and 2009 as well as an 85 percent contract renewal rate -- not a bad track record for such a down year.
Software service vendors are also expected to continue providing customized solutions. While the majority of contracts are standard or premium in nature, Aberdeen found half of those service organizations interviewed are considering raising their use of performance-based contracts in the coming year. Among the targeted verticals: Smart Grid/green tech, cloud services, and government.
But there is a warning to customers: The service being sold may serve the bottom line, but that bottom line may not be yours.
"It is interesting to note the significance placed on service revenue in the determination of the viability of new product offerings or the continued support of current product offerings," says Aberdeen analyst and report author Sumair Dutta. "In essence, the success of product offerings is no longer just tied to the sales price but also in the revenue streams they can generate from the service side of the business."
For enterprises, the challenge comes in finding the right balance between spending like a sailor and being ridiculously cheap. Like any service that's needed when something goes wrong, enterprise customers want a quick, effective response. That's worth paying a little extra for.
— Michael Singer, Senior Editor at Internet Evolution, is focused on executive (Executive Clan) and midmarket (Midmarket Clan) issues.