VMS Annual License Fees - Love 'Em or Hate 'Em?

Extortion or Essential? It is common to hear integrators use both term when describing VMS software maintenance licenses / recurring software upgrade fees. While these types of fees, often 15%-20% or the purchase price each year, are well established in mainstream IT, they are less common for physical security market. In this note, we dig into integrator survey results, examining trends and positions about these controversial costs.

[Update: Our take on why VMS annual license fees are unfair.]

Overview

The following pie chart captures the basic position of integrators on VMS recurring license fees:

Not surprisingly, a strong negative opinion emerged, with over 68% of Integrators either 'never' or 'try to avoid' reselling them.

Analysis

In the following sections, we group detailed responses according to some common themes. Integrators chose to answer this poll question in several ways; some elected elaborate on their poll selection by simple illustrating how they deal with the prospect of paying or reselling these fees, and other chose to elaborate on why they support or condemn the practice. Accordingly, we have broken our responses into the following groups:

• Avoid/Refuse These Fees
• Okay With These Fees
• Support Fees: Sales Benefit
• Support Fees: Sales Liability

Avoid/Refuse These Fees

These answers elaborated on integrator's active refusal or avoidance in selling products incorporating these fees. It becomes clear that integrators in this group, representing the majority of responses, have such a negative perception of these fees internally that selling endusers on their benefit is a challenge.

• "I try to purchase larger VMS solutions with no recurring fees"
• "We are used to one time charge so we try to avoid the license fee that are recurring. If it's a one time fee, it's easier to mask that charge in the installation cost."
• "Dont sell these fees, ever."
• "The VMS's license fee's give me assistance on site and benefits if needed? ill pay it, otherwise i avoid them."
• "I do not like Software that has to be paid after initial purchase. I haven't found a customer that did not agree."
• "I hate the idea. Maybe I'm old school but once I've paid for a product why should there be ongoing licensing fees? Still can't get used to paying for IP camera licenses!!"
• "None of the products we currently use have any recurring fees. If updates are required to fix problems they should be free."
• "No thanks.I bought the product, and the VMS software it uses should not have any bugs."
• "They are sometimes necessary but they usually are a rip off. Just another way to get more money and get paid for fixing bugs that they should have caught in the first place."
• "Why would that be acceptable when you pay for it once per camera already? Maybe for continuous upgrades but even then it is a stupid business model."
• "Sounds like a money grab, if we were getting updates then ok, but for software to expire? Not a good idea."
• "Seems like a cash cow for the manufacturer."

Okay With These Fees

Interestingly, integrators who responded they less an average of more than 32 cameras per job reported a more favorable impression of paying/selling these fees. More than 50% of these larger project integrators responded their customers 'Regularly accept them and are OK with them'. This clearly demonstrates that larger customers have a pronounced expectation of system uptime, and are willing to pay to have that assurance.

• "I fully accept that for support and software updates they charge. I think this is completely acceptable as long as they are adding value."
• "I accept them, but do find most to be priced on the high side."
• "You can't expect to pay for something and then reap the benefits of upgrades forever."
• "For the most part I'm fine with this. We pass the cost onto the customer so our company is not paying for it and most customers have no problem paying for it."
• "I´m quite new in video surveillance, but an old warrior of IT projects, so these fees and warranties has been familiar since i began."
• "I understand this is how they make their money. If I feel a customer can absorb the cost then I will put it in there."
• "Its the nature of the business, and now days dealing with the IT guys more and more everyday, they are used to paying these fees like with other software they run."
• "Paying for updates that add new product support and features seems reasonable in most cases"

Some responses went a bit deeper and expanded on integrator opinion if these types of fees are viewed as a benefit or sales liability. The following responses stop short of simply calling these fees 'good' or 'bad', but rather expands on the 'why' behind those answers.

Support Fees: Sales Benefit

These responses indicate the value in positioning ongoing support to end users and typify how these fees are an expected element of most first-tier software vendors. Again, the primary responders in this group report larger average camera counts, which indicates the customers described below are enterprises that program security expenses in a budget. End users in this category typically have portions of operating budgets allocated for these types of fees.

• "Companies who charge it seem to have better software evolution/development."
• "Support fees give manufactures a reason to put money back into R&D."
• "It's the nature of the industry and I understand software companies need to be payed."
• "They need to make money somehow! All software companies (larger ones anyway) will charge for support so why should VMS be any different?"
• "If you avoid them you can get into a bind"
• "If a particular product doesn't require such fees, the customer may feel that the manufacturer could disappear at any moment."
• "Licensing keeps us current, keeps the customer current in a relationship, keeps the customer paying."

Support Fees: Sales Liability

Integrators responding in this category expressed difficulty in justifying these fees to their customers. Tight end user spending, coupled with incomplete communication identifying the benefits of these products, places the integration channel in a difficult position of selling endusers on the value of these products.

• "I can't explain to my customers, why is so important to pay for future upgrades. They always expect upgrades for free."
• "Customers are becoming increasingly dissatisfied with the Microsoft model of recurring license fees. We are continually converting to those manufactures that only have an initial fee. The customer is driving this trend"
• "I include when i can but is the first that gets dropped when a customer wants lower costs."
• "HAVING RECURRING FEES COULD BE THE DIFFERENCE BETWEEN A WON AND LOST SALE."
• "It is a bad market practice that we are trying to change."
• "All of our clients avoid recurring licence fees. Some of the even avoid maintenance fees."
• "Our customers do not accept to be charged recurrently, and besides we don't find it to be ethically acceptable. We like to add value every time we charge the customer for our services, we respect and value our customers and don´t see them as cows that we milk endlessly."
• "Most customers' angst is at the renewal license fees, not the initial installation license fees. often feel they are overpriced for something you don't know what you are getting for you money when you pay for it."
• "Most customers don't want to upgrade their software on an annual basis. Most of the time we don't need the support."