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The Association of Support Professionals Publishes New Benchmark Data for & Professional Services
For most high-end software companies, post- sale services now contribute more total revenue than product and license sales, 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 54% (median) of 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.
"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 81% (median). Professional services, a category that includes custom development, consulting, and training, is a more people-intensive business, but still delivers a median 22% margin."Services revenues, especially from maintenance, also tend to be highly predictable and usually involve at least some advance payment," says Tarter. "Moreover, services build customer loyalty, so additional license sales are often the direct result of a positive services relationship with a customer."
The ASP's "Maintenance & Services Ratios/2008" report notes that software companies vary considerably in their emphasis on services, but suggests that the ASP's data can provide basic peer-to-peer benchmarks for services contributions to revenues and profits. The report includes tables that identify all one hundred individual companies and provides their most recent fiscal year top-line revenues, services revenues, and services costs. The report also comes with an Excel spreadsheet that provides this data in electronic form.
In addition to the benchmarking data, "Maintenance & Services Ratios/08" includes expert commentary on revenue recognition rules, internal P&L reporting, and the impact of attach and renewal rates.
Copies of the survey are free to ASP members; membership is $80/year for individuals and $500 for companies. For more information, visit the ASP Web site at http://www.asponline.com/maintsvc08.html .
The Association of Support Professionals is a membership organization that publishes research reports for software tech support managers and professionals, offers workshops in services marketing, and conducts an annual competition for the "Ten Best Web Support Sites."
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 81% (median). Professional services, a category that includes custom development, consulting, and training, is a more people-intensive business, but still delivers a median 22% margin."Services revenues, especially from maintenance, also tend to be highly predictable and usually involve at least some advance payment," says Tarter. "Moreover, services build customer loyalty, so additional license sales are often the direct result of a positive services relationship with a customer."
The ASP's "Maintenance & Services Ratios/2008" report notes that software companies vary considerably in their emphasis on services, but suggests that the ASP's data can provide basic peer-to-peer benchmarks for services contributions to revenues and profits. The report includes tables that identify all one hundred individual companies and provides their most recent fiscal year top-line revenues, services revenues, and services costs. The report also comes with an Excel spreadsheet that provides this data in electronic form.
In addition to the benchmarking data, "Maintenance & Services Ratios/08" includes expert commentary on revenue recognition rules, internal P&L reporting, and the impact of attach and renewal rates.
Copies of the survey are free to ASP members; membership is $80/year for individuals and $500 for companies. For more information, visit the ASP Web site at http://www.asponline.com/maintsvc08.html .
The Association of Support Professionals is a membership organization that publishes research reports for software tech support managers and professionals, offers workshops in services marketing, and conducts an annual competition for the "Ten Best Web Support Sites."
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