Support And Maintenance B2B applicaiton

We have written a B2B application that is hosted on customer's Hardware. Its now time to write the support and maintenance contract.

How much do we charge? 15%----22%

And what does a support and maintenance contract normally cover?

1) Is the customer buying hours of work or is the customer buying support if something goes wrong?

2) what if nothing goes wrong? Does the customer have access to the unused hours?

3) Do we have to fix bugs for free during the support period?

4) if the contract includes delivery of new features... Do you need to outline the features they are going to receive?

Thanks in advance
Ravi

I've sold B2B software for years and was always happy to charge for "Support & Maintenance". There was usually two pieces to it though:

• Support in terms of services : Meaning cant the customer call you, send you email requests and stuff like that. Can they do that 8x5 or 24x7? Do you have an SLA with them (like you have to do your best to solve within 24h)? That basically builds your support pricing between Bronze, Silver and Gold (as an example). you can charge 20%, 25%, 35% or something like that. The amount needs to be built out of your cost structure. How much does it cost you to handle those support calls? how many support agents do you have, etc..? Only you can come up with such the real number, but what I gave you is standard for the software industry.
• The Maintenance of your software : Meaning Bug fixing, minor releases and Major releases:
  • It is pretty standard to have bug fixes included in your software. My personal feeling is that when a customer buys your software it should be pretty much Bug free and it is part of your agreement to fix bugs if they appear. This is why you have to put and end of life time to your software, otherwise you'll keep spending time fixing 5 year old versions of your software.
  • For Minor Releases, they should be part of your "bronze" support service. for 15% or 20%, your customer will get the support 8x5, plus smaller releases. This basic support should also be included in all your support contract by the way.
  • Re Major releases, there are two schools: For (roughly) 25% annually, you would get the major version for free when they come out. The other school is that you don't ever sell this, and offer upgrade pricing for your customers. Here again, you have to do the math bases on how often do you release major versions, how much development time (cost) do you put in them, etc.. Both have pros and cons, for example, the free upgrade (part of the maintenance offer), usually helps getting your customers to migrate and avoids having lagging versions to support. It also helps getting more cash upfront which can give you the resources to actually build major releases.. The drawback is that the bill to the customer is bigger and that might increase your sell cycle.

Can you do all the support over the web and not in person? If you can, then maybe you could offer premium support to all accounts while you're building your client base?

What I've seen many companies do is offer "community and self service support" to the lower accounts, email support to the middle accounts, and phone/screen sharing support to the most expensive accounts.

One thing I learned that hard way is you need a way for people to easily get answers to the questions they have about your software (searchable FAQ, videos, tutorials, community support forum, etc). If you don't have that in place and can't offer phone & email support to your early customers, you'll piss them off and won't have any evangelist and happy customers for reference.

I'll take a shot at this one.

1st) Here is a site with sample agreements - http://bit.ly/eRgnCJ. Reviewing several of these will give you a good idea what is reasonable and customary regarding what is included in your typical software maintenance and support agreement.

2) Do some research in your specific space to ensure you are offering comparable services to your competitors. You can usually get a pretty good idea what they are charging just by asking potential customers - but be sure you are talking to a reliable source.

3) Evaluate the information you've gathered from the two steps above and determine what services you can reasonably provide and what your actual costs are likely to be - then you can set a fair price with a reasonable markup and clearly explain the value proposition to the customer and, most importantly, deliver when required.

4) You may decide to offer more than one level of support at different price points. Evaluating different pricing models may be worth while as well. For example you could charge a flat monthly fee per user instead of a percent of the annual license. Or it could be a combination.

Something to keep in mind - Someone like Oracle who may be charging 22% on a $1M annual contract (an extra $220,000 per year for maintenance) is actually spreading the cost of their support group across many customers. You may want to take into account how your company will look at one, two and three years into the future when determining a price point.

One last point - it's very hard to raise prices if you come in too low. Better, in my opinion, to come in too high and lower them later if necessary.

Hope this was helpful and good luck.