LawsonGuru Blog

Thought-Provoking Commentary for the Lawson Software Community

Is LWSN Re-Investing Your Maintenance Fees?


Phil Simon forwarded this blog post about how software companies are “skimping” on R&D, and are using maintenance revenue streams to finance their on-going operations.  You—as the software customer—send the vendor some money each year—some to be used for providing you support, but some of it is expected to be used to further enhance the product. 

 

Just to clarify, I calculated Lawson’s “Return on Maintenance”, based on figures taken from Lawson’s public financial statements:

R&D compared to Maintenance Revenue

What this shows is that, yes, Lawson is spending less on R&D—falling from a high of nearly 42% in 2004 down to 23.6% so far this fiscal year.  In other words, R&D spending has been cut nearly in half as a percentage of the maintenance fees paid by customers.

Clearly, however, this phenomenon is not just reflective of Lawson, but as this graph from the Abridged Mind blog shows, it appears to be an industry trend:

Graphic Source: http://abridgedmind.blogspot.com/2009/04/broken-promise-of-software-maintenance.html

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7 responses to “Is LWSN Re-Investing Your Maintenance Fees?

  1. Phil Simon May 7, 2009 at 5:44 pm

    Interesting stuff. I wonder if there’s a good way to adjust for ‘quality’ development. I’m sure that all would agree to the following: quantity does not equal quality. I wonder how much money has been spent on projects that have been scuttled. I would imagine that, all else equal, more money spent means better software developed. All else is rarely equal, though.

  2. John Henley May 7, 2009 at 6:03 pm

    It would be nice to see how much is attributed to maintaining old product vs. new development.

  3. MTFF May 8, 2009 at 7:24 am

    This is a very interesting topic!

    I am surprised by the trend in declining R&D dollars for ALL SW Vendors. What does this mean as a whole? There is no more innovation to be had in the CORE corp software or has the industry shifted from delivering solid products to more “fluff” add-ons, or just more money went to Marketing and promotion (create Lars Lawson cartoons and Apple commercial spoof)?

    The other way to look at the decline is this. Since 2004, a lot more software R&D has been outsourced for its cheaper cost. One could argue (and backup with real Dollar numbers) We are spending less, but, getting more. Lawson itself has shifted its R&D to ASIA, the cost of a software engineer in ASIA is maybe 40% of the cost of a SE here in the US. So, in theory, you could reduce your R&D spending by 60%, and still get the same output. IN THEORY.

    I am willing to bet if we ask Lawson, or SAP, or Oracle, thats that they will tell us. The decline in R&D percentage is due to lower input costs.

  4. dj May 14, 2009 at 9:42 pm

    Yes, some of the reduction in R&D expense is surely attributable to off shore development however experience here is that the cost of support has sky-rockected as the offset to that development.

    I suspect that ever since the Y2k boom that profit expectations have not returned to normal reasonable.

    It’s not only the stockmarket that is crashing and resetting ROI expectations.

    So are the software vendors.

    Let’s face it most traditional business applications are a dime a dozen all the way from the Mom&Pop shop to the Multi-State Plant Operations and there are many players.

    The winners in the next decade will be those that address new and emerging needs and technologies as opposed to new and emerging versions of Microsoft and Oracle.

  5. MTFF May 17, 2009 at 6:42 am

    a new and emerging need is putting medical records on “disks” so patients have control over their own data, and easy to transfer.

    Lawson already has a BIG presence in Hospitals, they should leverage that, and create and sell electronic medical data management systems!

    BUT, Lawson is spending their money on Lars Lawson and spoofing Apple commercials……..

  6. TONY June 1, 2009 at 9:38 am

    Part of this is that they are spending less for R&D. A lot of companies have outsourced to foreign countries for this is stuff. I’d be interested in seeing those figures (i.e. home vs. aboard, customer satisfication, etc.)

  7. Pingback: The Morphing of the Enterprise Software Vendor Revenue Model « LawsonGuru Blog

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