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Maintenance & Services Ratios
Publication date: 11/04

Executive summary

Technology pundits are always on the lookout for “disruptive” changes in the software world, but they’ve mostly missed one of the biggest transformations of the last few years—the greatly expanded role of services. Though there are still major companies (notably Microsoft) that remain almost exclusively product-centric, most successful software vendors these days have adopted a business model that depends heavily on services. Among larger companies, services typically generate more than a third of all corporate revenues; for powerhouse vendors like SAP and Oracle, the services ratio often exceeds two-thirds of revenues and a substantially larger share of profits.

Yet the large and growing role of services is often under-measured, under-managed, and under-invested. To provide some necessary benchmarks for the services side of the software business, the ASP has compiled current data from a hundred public software companies (all of which are named in the report, with data on revenues and services-related financials) on the performance of their services operations. In addition, we consulted top experts on services metrics and accounting issues to offer guidance on the fine points of maximizing services revenue and correctly tracking those revenues.

The ASP's Maintenance & Services Ratios report covers the following topics:

  • Revenue contribution of services to total revenues (percentage and absolute dollars)
  • Profit margin on services (percentage and absolute dollars)
  • Impact of company size (contribution and margin)
  • Maintenance contribution and margin (percentage and absolute dollars)
  • Professional services contribution and margin (percentage and absolute dollars)
  • Revenue recognition rules for services revenue
  • How to design a management P&L for services
  • The role of renewal and attach rates
For those who want to explore the underlying data in more detail, the report includes an Excel spreadsheet that contains all the financial data used for our calculations.

This report will be updated in August 2005 with new data and the results of a survey of Maintenance Renewal Rates.

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

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