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    ASPonline.com  >  Reports  >  Maintenance Renewal Rates
 

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Maintenance Renewal Rates
Publication date: 9/05


Executive summary

In mature software companies, maintenance contracts now produce a third or more of total revenues and an even larger share of total profits. These numbers have put a spotlight on the marketing and pricing of maintenance plans, usually with positive results. But these efforts sometimes neglect the most important profit and revenue variable of all—the contract renewal rate. Unlike traditional product sales, maintenance generates recurring revenue. At least in theory, a maintenance contract can produce a revenue stream for as long as the customer keeps using the vendor's software.

Surprisingly often, however, this powerful economic engine sputters along in low gear. Sales reps "can’t be bothered" to call customers whose contracts are expiring, renewal anniversaries are overlooked, and a whole year may go by with no human contact between the support team and the customer. Invariably, this kind of benign neglect has a negative impact on a company’s renewal rates and on the revenue stream from maintenance.

But even companies that recognize the importance of high renewal rates sometimes find themselves in uncharted territory, looking for benchmarks and data about industry best practices. To address these questions, the ASP queried 187 software and technology companies about their maintenance contracts. The ASP's Maintenance Renewal Rates report covers the following topics:
  • Basic benchmarks for renewal rates
  • The impact of key variables, such as product price, lost customer rate, and sales model
  • Required vs. optional plans
  • Calculation methods: Contract units vs. dollars
  • Maintenance renewal best practices


Copies of the survey are free to ASP members in the members-only area.

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