I used to be thrifty. A search for the best price, use the cheapest option, kind-of-a-guy. But over the years, I’ve matured as a consumer and business owner, and I’ve learned that the old saying “you get what you pay for” has some merit. Least expensive does not always equate to best value. Quality and competence come at a price. So why, then, do I still struggle with the high cost of software support? Do you really “get what you pay for” when it comes to monthly maintenance fees? Since Epicor announced in August that it is transitioning the support staff overseas, Zerion’s customers are bringing up support more frequently.
During the birth of ERP software programs like Eclipse, there were huge upfront development costs in writing the software. The time and money put into that process was not often covered by the initial customer-facing price tag of the software. The resulting strategy was to charge ongoing support fees, sort of like “rent”. Software companies nestled in to this structure, and rightly so … we exist in a capitalistic society and the model is still making them money. In a Forbes article last month, contributor Dan Woods remarked, “After all, annual support fees provide a profit margin of 90% or more for them. In the case of Oracle, support fees account for about half of the company’s revenues and almost all of its profit.”
90% profit margin. Almost all of its profit. That’s staggering! Yet, people keep paying it. Why? In our world of hard goods distribution and Eclipse software, the reasons are fairly straightforward. Users don’t have enough options to cause an uproar. We’re not at a tipping point yet, because Eclipse is still the best choice. There may be better ERP technology out there now, but Eclipse’s feature set is still the best you can find for this industry within one package.
But the issue is broader than that, and bigger than just Epicor. The current fee structure has run its course and people don’t like it. Many bundle support and maintenance, so you can’t “opt-out” of their support without also dropping maintenance. And without paying for maintenance, you can’t get any bug fixes or updates from the vendor. While the discontent keeps expanding with every new option that comes on the market and every organizational change software companies make, customers continue to feel like what they’re paying each month doesn’t match up with the service they’re receiving. That’s most likely because the vendor has very little incentive to truly support its customers. They aren’t held accountable for service … they’re getting paid for support regardless of whether or not they do a good job.
This has brought SAAS (software as a service) models to rise. That usually means a lower price point for entry, but larger monthly fees. And, it’s easier for customers to leave if they aren’t happy with the product or service. Only when someone can fire a software vendor in any given month, does service really start to matter. But for Eclipse users, there’s no comparable SAAS alternatives.
So if your best bet is to stick with Eclipse, what leverage do you have to change this hefty monthly check? The only way you will initiate industry-wide change, and see your support fees go down, is through a lot of pressure on the model over a period of time. This pressure is already starting to be applied with vendors like Oracle by way of a shift toward third-party support. In Woods’ article, he said, “Nonetheless, the trend toward third-party support for on-premises ERP systems continues, with Gartner predicting that 10% of organizations will cancel their vendors’ on-premises ERP support contracts by 2020, reducing their annual support fees by about 50% in the process.”
If you can’t easily switch to another software, and you shouldn’t expect your monthly fee to change any time soon, how about addressing the elephant in the room – can you stop using Eclipse’s support and maintenance? As we said before, you can’t dump one without dumping the other. And, there is value in the maintenance piece you’re paying for – those bug fixes and software updates that are released periodically to paying customers. They do require Epicor staff hours and other overhead costs to research and develop. That’s something that no one else can offer. Eclipse is proprietary software that no one else can sell.
But, do you really need those updates? We never recommend users abandon Eclipse support entirely. People do it, and it works out just fine in most cases, but it’s risky. There are instances where a system failure could be unrecoverable without their help. But, Mr. Woods has a less conservative take when referring to Oracle customers: “In the first couple of years following a new software release, bugs and other issues are identified and addressed by the vendor. After that time, issues with the base code dramatically decrease and the software becomes very stable. An organization running a seven- or eight-year-old version of Oracle E-Business Suite, for example, is unlikely to have a “software-stopping” problem that requires a fix that only Oracle can provide.”
As for support, we believe this is a necessary component to running a successful business on Eclipse. You need someone to call when your team has a question no one internally can answer. You need a resource to learn from, help manage settings, train new hires, or provide custom programming. But, should that phone call be to Epicor? Or, can it be to a third-party, like us at Zerion?
We generally try to avoid sales pitches in our newsletter. We created it to demonstrate our industry knowledge and provide a service to our customers. But, as a third-party support provider, we kind of have to toot our own horn a little if we want to provide a complete evaluation of this topic. So, here goes. At Zerion, every one of our consultants has a distribution background and has served “in the trenches”. When we help customers, we aren’t reading from a manual. We get our hands dirty to find answers and solve problems. We work hard to offer clear explanations and present the whole picture. And, we always hold ourselves accountable. When you hire us, you get “support” via your own dedicated Eclipse expert that you can email or call directly.
Woods’ article echoes the same type of thinking. About third-party support providers, he says, “They don’t just serve as tech support, but as problem solving ninjas. And because these products are so complex, usually the solution is not a bug that needs to be fixed, but a mistake in configuration, customizations or in the way the product is being used. This can be solved without any needed participation of the software vendor.”
A customer of ours, Darren Dalton from Hulbert Supply, commented about our approach to support. He said, “I like having an easily accessible person that I can just shoot an email to.” He added, “It’s hard to build a relationship if you don’t have a single contact. When you start a service request with the software company, you don’t know who is going to get it, or who is going to call you back. I like being able to build a relationship with that personal touch, and I attest to that 100%. It’s pleasant to deal with a company where I can call the owner directly.”
We also try to clearly correlate what you’re paying to what you’re getting. “When I initially signed on I was expecting the monthly or quarterly service charge type of contract and it was a nice surprise to just be able to buy blocks of hours,” noted Darren. “The flexibility in Zerion’s billing to us is nice. I like that a lot. I know that they’re there when I need them. And I only pay for things that I need to pay for when I need them. I know that I’m not getting nickeled and dimed every time I ask a question. It’s a very comfortable relationship.”
While we agree it’s simple, and affordable, using us isn’t always to accomplish “cost savings”. The majority of our customers hire us to support them IN ADDITION to Epicor. And, this is usually the way we steer anyone who asks: you should keep your support agreement in tact, but your organization would be well served to employ someone like us for true consulting, guidance and support.
So, what conclusion can you draw from this question-filled discussion? Whether you’re a thrifty guy like I used to be, or you’re okay with paying a premium for the best service, every Eclipse user will need to adapt and adjust. The voice you hear on the other end when you call support will soon be different; but, your monthly support fees won’t. We can hope Epicor’s internal organizational changes will be seamless and positive … That they will work better for you and your team and that you will truly “get what you’re paying for.” But, it’s hard to make that call right now. We also hope that the pendulum will begin to swing your way, with better software options becoming available and fee models beginning to shift. But, we can’t predict that either.
Ultimately, the future is up to you. Your choices will not only impact your own operation, but also help shape the software and distribution industries. We can’t make those decisions for you, but we’re here to help in any way we can if you choose to use us.
Tony King is the owner of Zerion Group whose roles include sales, consulting and management of a team of 12 consultants who work directly with customers to help them achieve their business goals.