5 Minutes to Save $50,000 in 2012
There are a lot of interesting maxims in business and finance, but a simple one is often overlooked. Cash now is more valuable than cash later.
The move to cloud services has wide reaching effects on operations and finance, but a major impact on bottom lines is that paid support and system maintenance fees are rapidly becoming cash drains of the past.
Take a closer look at the sacred cash cow that is maintenance cost. Site-premised technology providers might provide steep discounts on the technology itself, but support and maintenance, which typically ranges from 15% to 20% of the list price (not sales price) is usually the one item they won’t negotiate. Another sticking point—most vendors start charging maintenance from the day a product ships (usually a couple of days after signature) even though successful implementation can take four, six or nine months.
Maintenance is so important to these vendors because that’s where the profit is. During the economic downturn, revenue declined at many site-premised technology hardware firms, but that was often offset by record profit margins due completely to the ongoing maintenance fees charged to their customers. Home shoppers have seen this before: “give away the razor; sell them the blades.”
Cloud contact center services drastically change the cost paradigm at a time businesses need it most.
Cloud services typically include support as part of service delivery and pay-as-you go pricing model. This means customers neither lay out cash upfront for technology nor tens of thousands of dollars each year so they may call support if something goes wrong.
Each December, site-premised tech sales reps channel their inner CPA. They highlight to contact centers the tax deductible windfall that can follow a large capital expense on their systems. This may all be well and good, but, two things:
- This bit of accounting overlooks the fact that a contact center organization still must finance an upfront purchase that can total up to $1 million or more.
- This account also quietly omits the profit producing vendor maintenance fees which can be contracted for multiple years.
The commitment to pay a great deal of cash in a tough time is bothersome — if not downright scary. Why spend a million to save $200,000? And if a contact center is looking at savings, let’s put all the costs on the table, including the $50,000, $100,000 or more in maintenance depending on the size of the contact center deployment. Then, do not forget costly professional services.
Capitalism works when consumers have the information to make good choices. Only then can market forces truly dictate what can be charged, what succeeds and what fails. Eliminating maintenance fees is another step toward added flexibility and financial security. Cloud services can make maintenance charges a thing of the past.
Keep your cash.