Friday, September 08, 2006

Jeffery Tarter Makes a Case for Software Companies To Sell More Services

Tech Guru Jeff Tarter's latest report from the Association of Support Professionals lays out a strong case for why software companies need to get into services marketing. Simply put this is smart business that savvy executives will not pass up.


ASSOCIATION OF SUPPORT PROFESSIONALS PUBLISHES NEW BENCHMARK DATA
FOR MAINTENANCE & PROFESSIONAL SERVICES

Watertown, Mass.-- For high-end software companies, revenue from support- related services continues to pull ahead of product and license revenues, according to a new research report from the Association of Support Professionals (ASP). The report, based on data from a hundred major public software companies, shows that maintenance and professional services now
generate 50.8% (median) of total revenues for a typical software company.

"Though there are still major companies that remain almost exclusively product-centric, most successful software vendors these days have adopted a business model that depends heavily on services," says ASP executive director Jeffrey Tarter. "That shift in emphasis from products to services has happened quietly, but it's definitely the new economic reality of the software business."

Services also make a substantial contribution to overall profitability, the report points out. Maintenance is the top cash cow, with a gross profit margin rate of 82.8% (median). Professional services, a category that includes custom development, consulting, and training, is a more eople- intensive business, but still delivers a median 19.7% margin.

Copies of the "Maintenance & Services Ratios/2006" report are free to ASP members (membership fee is $80/year). For more information, visit http://www.asponline.com/maintsvc06.html

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