Big companies keep paying for software upgrades they expect to hurt

Almost every large company has done something its own tech leaders thought was a bad idea. In a new survey, 95% of IT leaders said their organization paid for a vendor-driven upgrade, migration or licensing change in the past three years that they believed would reduce performance, reliability or business value.

What the survey found

The report is called "The Software Tax." It surveyed 2,018 chief information officers and senior IT decision-makers at companies with at least 10,000 employees and $1 billion or more in yearly revenue. About half are in the US and the rest are in the United Kingdom.

• 95% approved an upgrade or change they expected to hurt, and 53% have done so more than once.
• 76% say their company has very little real leverage in negotiations with software vendors.
• 80% say moving away from major vendors would cause significant disruption.

The last two figures count people who answered "strongly agree" or "somewhat agree."

Why they say yes

The main reason is fear of losing support. Tomás O'Leary, CEO of Origina and a report author, said that when the alternative is losing support on systems the business runs on, saying yes is often a rational response. Every respondent runs at least one of IBM, HCL, VMware/Broadcom or SAP at meaningful scale. The report did not name any vendor as forcing companies' hands.

The cost beyond the price tag

Respondents said the spending squeezes other areas. They named innovation (36%), human resources (32%), security (31%) and customer-facing investment (31%). Liberty Mutual CIO James McGlennon said an upgrade cycle can occupy top technical workers for the better part of a year. He called it a recurring drag on the work that sets a business apart.

Some 91% of those surveyed would back laws giving companies protections comparable to those of long-term residential tenants. Only 1% opposed the idea.

A reason for caution

Origina commissioned the survey, and Censuswide, a third-party research firm, ran it. Origina also provides maintenance for enterprise software, and its report points to independent software maintenance as a way to regain control of budgets. That gives it a stake in the findings.

What to do

The report's advice is to negotiate the exit before the entry, in the words of co-author Marshall Van Alstyne, a Boston University professor. Settle the terms of a possible exit during the first negotiation with a vendor. That includes setting a price for migration help and putting caps on renewal and expansion prices. Smaller businesses signing software deals can ask for the same terms.