May 24, 2010 By Andy Opsahl
Some revenue-starved local governments are targeting ongoing maintenance fees paid to IT vendors as an area for cutting costs. One of them is Montgomery County, Md., where CIO Steve Emanuel wants vendors to lower their profit expectations.
Typically when a government buys hardware or software, it also purchases an ongoing service plan for repairs and replacement of parts. Maintenance fees can be lucrative for vendors, and they frequently grow on an annual basis. Some CIOs like Emanuel believe today's maintenance charges no longer reflect realistic amounts that governments can pay. He wants the county's vendors to lower the profit expectations they attach to those services, but many vendors are not showing much willingness to do that, according to Emanuel.
Vendors risk losing government business if they don't adjust to governments' current fiscal realities, he said.
"In some cases, it's going to drive us to other products. In some cases, it's going to drive us to other service providers. In some cases, it's going to make us take the risks we really don't want to take when, in some cases, there really isn't a whole lot of added cost to our providers," Emanuel said.
Lower maintenance costs from vendors would enable him to save government jobs, he added. "If we've been a good long-term customer, then this is an investment they need to make in order to keep that long-term relationship as a partner," Emanuel said.
Emanuel dismissed concerns that forcing vendors to drop maintenance costs would cause them to stop offering services to governments. Emanuel said such a move on the part of vendors would look bad to other governments with whom those vendors still wanted to do business.
"Guess what happens with that public opinion? It resonates through my partners. It resonates through my jurisdictional partners. It resonates through other agencies. That's not a good choice for business," Emanuel said. "They need to understand we are vocal."
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