Gartner has gone on the warpath, smacking down proprietary vendors' practice of discounting upfront license fees in order to lock customers into lucrative, ongoing maintenance contracts. The ironic thing is that it sounds somewhat similar to how commercial open-source companies price their software, except that there is no upfront license fees.
The difference is that open-source vendors aren't using inflated license fees to set the maintenance price (typically around 22%, on average) and don't force customers to pay extra for the right to updates. Customers subscribe to the open-source vendor's services, which include maintenance, support, and updates/upgrades: Not so in the proprietary world:
[Gartner] said upgrade cycles can push contract costs up by as much as 50%, with an average rise of 35% for SOA deals....
Maintenance and support costs are the surreptitious money spinners of software contracts, according to Disbrow. She said vendors will drop software costs by more than 20% or bundle 'free' software to lock customers into mandatory support maintenance and upgrade cycles....
"The best discounts often have the worst [up-front] purchase prices."
Customers who avoid lengthy contracts or opt for off-the-shelf products are free to evaluate emerging products, which [Gartner] says will give a competitive edge over those locked into deals.
The interesting thing to me is that the proprietary vendors clearly want some of the advantages of open-source revenue models without conceding the benefits of them to their customers. (More and more money is shifting into "maintenance mode" for proprietary vendors. Oracle earns something like 50% of its revenues from maintenance contracts.) In other words, they want their P&L to look like an open-source vendor's P&L, but don't want their customers to be as free as an open-source vendor's customers are free.
In the open-source world, the customer enters the contract today and leaves when she pleases. My support isn't any good? Walk away and keep the software. As a vendor, my value must be demonstrated on a daily basis or my customers won't renew. This is exceptional for the customer and it's also good for the vendor because it keeps us on our toes, ensuring we deliver continuous value.
Not so in the proprietary world, as Gartner points out. The proprietary world attempts to foist outdated software on its customers - software that other products have surpassed but which the customer is locked out of buying. There is a better way. It's called open source. Have you heard of it?