Third-party Software — a low-cost alternative for technology solutions

Technological infrastructures form the base of any organization. Be it e-commerce, telecom, manufacturing, consumer products or any other service industry, the back-end software solutions remain important for the firm’s day-to-day operations. Majority of the operational costs that the firms incur would comprise of these IT infrastructure costs that the company would want to reduce to improve the margins. In this process of optimizing the operational costs let’s discuss on few changes that the firms might want to do to reduce its cost pressures.

Companies, mostly, depend on the prominent players for their IT systems. Be it order management, billing, CRM, campaign management etc., they depend on products from IBM, Microsoft, Oracle etc. to name a few. While these are standard and trust-worthy products, these are not cost effective. This is where the firms could have an alternate cost-effective way to cater to their needs.

Firms might require IT systems on a large scale for its end-to-end functionalities or for few specific identified functions that need to be performed. Though it’s good as an investment for the firm in long term to go with the OEM channel partners like IBM, Oracle for its large-scale implementation, it might not be advisable to use these for specific functional aspects required for a small-scale implementation. Best-of-breed software functions, which performs targeted specific functions unlike the all-in-one large-scale solutions like these could be catered by cost-effective independent Third-party Software Support (TPSS). These TPSS systems provide a considerable reduction in the maintenance costs, which forms the majority of the IT costs, of the IT infrastructure.

These TPSS systems aren’t authorized channel partners of the big players like IBM, Oracle, and they don’t have relationship with OEMs, and are more like an independent software vendor. While TPSS comprise of more than 20% of all technology deals across North America, EMEA, APAC, a significant reduction in software maintenance costs and support costs could be a game changer encouraging companies to move towards the TPSS systems. TPSS market grew at the rate of 30% over the past five years.

Advantages of TPSS

ü Offers cost-cutting and cost avoidance to reduce current and future operating expenditure. The TPSS software systems, as one could estimate, when compared to the OEM software, would be comparatively lesser. For companies that are looking for targeted software to cater to certain narrowed functionalities, then TPSS would be a considerable cost saving option.

ü Reduce software budgets. The average annual savings is typically 50% when comparing TPSS services costs to the annual maintenance and support pricing models and policies of the mega vendors

ü Increased flexibility in software maintenance and support contracts, which might not be much expected in the traditional OEM solutions. For example, start-ups that are in initial stages of their development, might need a solution that is not fixed and weigh more on flexibility. They’d want to scale it up for the later stage or would want to establish a full-fledged solution once the business process operations are finalized. In these instances TPSS would be a preferred option for the customers.

ü Customize agreements for shorter term duration comparing to annual contracts of mega vendors. This could as well reduce the cost spent on the idle capacities of the software that are not being used throughout. When the requirement of the software is time restricted or seasonal then TPSS would be beneficial

Few best-of-breed features provided by TPSS include Production Installations, Bug Finds & Fixes, 24/7 Help desk & remote support, Customer entitled updates & New versions, Security Patches, Security & Vulnerability Protection, Global Tax & Regulatory compliance services, Performance Tuning etc.

When can TPSS play a convincing part

ü Cloud Migration

• When version upgrades are no longer needed during cloud migrations

• When customer entitled version no longer supports the needs of the organization

ü Migration to Alternative vendors

• When organization is planning for alternate solutions to replace on-premise software products

ü End-of-Support announcements by Software vendors

• Situations when older-version software will no longer be supported by the mega vendors without additional fees then TPSS could be evaluated to support the older-version products

ü Absence or expiring Maintenance

• TPSS could be evaluated to reduce the increase in caps for price protection in contracts

ü Low-value maintenance evidenced by low-frequency technical support

• When ROI is not to be expected when compared to the value received and cost incurred

• For low-value, low incident software product support, TPSS could be considered for a better alternative

Thus, owing to advantages with respect to cost savings and increased awareness amongst the companies, it’s expected that the TPSS would play a major role in the future and there’s a good scope for the independent third-party vendors.

References:

1. Jo Ann Rosenberger, Michael Silver, Rob Wilkes: “Market Guide for Independent Third-Party Support for IBM, Microsoft, Oracle, and SAP Software; Published in Gartner 23 August, 2021

2. Woods, D., 2022. Why Third-Party Software Support Is Possible And A Good Idea. [online] Forbes. Available at: https://www.forbes.com/sites/danwoods/2016/04/18/why-third-party-software-support-is-possible-and-a-good-idea/?sh=1ae3cb46c77d

3. Brodkin, J., 2022. The pros and cons of third-party software support. [online] Network World. Available at: <https://www.networkworld.com/article/2298429/the-pros-and-cons-of-third-party-software-support.html>

4. Horton, C., 2022. Have third-party software support providers got ERP vendors on the ropes — ERP Today. [online] ERP Today. Available at: <https://erp.today/have-third-party-software-support-providers-got-erp-vendors-on-the-ropes/>