CIO: Help my software vendors are squeezing me

CIO: Help my software vendors are squeezing me

Summary: There's a downside to software acquisitions. These newly bulked up giants will increase your software maintenance and support costs.

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TOPICS: Tech Industry
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There's a downside to software acquisitions. These newly bulked up giants will increase your software maintenance and support costs.

Just ask Eric Wilson, CIO for Raley's, a California supermarket chain with more than $3 billion in revenue. At a National Retail Federation panel Wilson bemoaned his escalating software costs.

"If you take labor our biggest cost is software maintenance. One of our pet peeves is how much software maintenance has gone up over the years. It used to be 10 percent a year now it's like 20 percent. Now it's going to drive us to make our own solutions."

So who is doing the squeezing? Everyone including Oracle and Red Hat. "Poll CIOs on how much their software maintenance costs have gone up," says Wilson. "It's not just me."

[POLL=44]

"These companies are selling investors on recurring revenue and delivering," says Wilson. He notes that software vendors are increasingly negotiating off of their retail list prices and bundling maintenance and support. A few years ago, a customer could pick and choose what support features they wanted.

As a result, Wilson says he's stepping up his deployments of open source software. The goal: Don't be too dependent on any one vendor. "Most of our business runs on Red Hat Linux and we're driving that to back end. We develop on Eclipse," says Wilson.

Wilson, who was on a retailing panel with Charlotte Russe CIO Ed Wong and Dick Bauer, CIO of Price Chopper, hit a nerve. Increasingly, these CIOs are looking to service oriented architecture to build components that can serve as an ERP system. These CIOs were wary of being dependent on a "monolithic vendor." Meanwhile, ERP is lacking core components such as being able to keep tabs on variable weight inventory needed for the grocery business.

"ERP vendors don't have grocery capability," says Bauer.  "There's a big opportunity for those that get it right for ERP for groceries. It's not fleshed out for what need."

Among other key themes:

--Wong has replaced his company's merchandising systems, business analysis tools and data warehouse applications. He's also rolling out new point of sales systems, workforce management software and CRM. For these investments he has a few theories:

1). Buy off the shelf and customize nothing. 

2). Outsource whatever you can. In Charlotte Russe's case that means "we outsourced our entire infrastructure."

3). Consider being an early adopter to keep those software costs down. "If you are an early adopter you get tremendous leverage," says Wong, who has relied on JDA Software to overhaul much of  Charlotte Russe's technology.

--RFID is a non-starter. No CIO on the panel has started an RFID pilot. Returns just aren't there and the technology isn't developed enough.

--Labor is tight. Bauer has been partnering with local universities such as the University of Albany and Rochester Institute of Technology near Price Chopper's Schenectady, NY headquarters. "Help is hard to find. We needs more business analysts too," says Bauer.

Topic: Tech Industry

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8 comments
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  • Exactly!

    This is what you get when you get software (or applications) as a service. You get locked in and once the company realizes you're locked, they start jacking prices. And funny thing, the enhancements you keep asking for seem to take forever to arrive (if at all), and cost mucho extra. Of course Microsoft would love to get into the same business, but they're doing just fine convincing people that they MUST upgrade or lose support for 'antiquated' or 'unsafe' older software/OSes.

    It's your data. It's ethically wrong for a company to hold it hostage on you.
    Dr_Zinj
  • Nothing new

    CA has been doing this for years.I remember hearing customers complain about this over 15 years ago.
    has3_colorado
  • Good points but....

    Very good points are made in this article but you guys need a good copy editor. I realize the speed of business is now a few clicks beyond light speed but as professional journalist, you need to get it right.
    chiefgeek2007
  • Ah the dark side of SOA and outsourcing

    [b]As a result, Wilson says he's stepping up his deployments of open source software.[/b]

    And he's not alone. Stiff your users hard enough and they'll start developing alternatives. If your alternatives are deployed on open source platforms you can shop for support. That doesn't preclude proprietary components like SQL Server, which I like. But when you consider the cost difference, MySQL and PostGRESQL look pretty darn inviting.

    I do disagree with part of this philosophy.

    [b]Buy off the shelf and customize nothing. [/b]

    If your apps are built on open platforms you can afford the customization to fit the software to your business practices. Just keep a tight reign on the budget and make vendors stick to their deliverables. If you shop around you can usually find small, local shops that produce high quality work without the overhead of an EDS or IBM.

    [b]"Help is hard to find. We needs more business analysts too," says Bauer.[/b]

    That's not true, either. What is hard to find is help that will work 60 hour weeks for 50K. If that's what he means then yes, labor is tight.
    Chad_z
  • Cost go down only if you use Linux or BSD OS and software

    I have saved a bundle for me and my clients.

    Don't forget to include less downtime. A whole office waiting while you fix the problem of the month on a Windows server can cost a fortune. At least retraining these people to BSD or Linux is a good use of money.
    slim-01
    • I don't know about that

      Sure you save on initial licensing but you still get nailed by maintenance and support unless out build you own solutions. If you buy the software and want support and maintenance you have to pay reguadless on what OS you use. Even open source software comes with price. If you want support for Linux you can buy it just like the others and it ain't cheap that's for sure.

      Just keep aware that Linux may not reduce your cost all that much.
      voska
      • Already has because 90% of my office and clients have basic needs

        One Remote server or VMWare can handle the rest. But email and web access can be secure. Also most users can save a ton by not buying MS Office.

        Like I told my client before we switched. Anyone that takes over 1/2 day to figure out the difference between MS Office and OpenOffice/Evolution isn't smart enough to keep on the company's payroll.

        They are pretty much the same thing.
        slim-01
  • Switching could be expensive.

    Unfortunately switching sometimes is a very expensive activities. While I do agree the there is only a little difference between the current MS Office and the OpenOffice, rolling it out is not as simple as it sounds.

    laman
    laman