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Maintenance & Services Ratios
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Maintenance & Services Ratios
Publication date: 8/05, 11/04
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Executive summary
Technology pundits are always on the lookout for “disruptive” changes
in the software world, but they’ve mostly missed one of the biggest
transformations of the last few years—the greatly expanded role of
services. Though there are still major companies (notably Microsoft)
that remain almost exclusively product-centric, most successful software
vendors these days have adopted a business model that depends heavily on
services. Among larger companies, services typically generate more than
a third of all corporate revenues; for powerhouse vendors like SAP and
Oracle, the services ratio often exceeds two-thirds of revenues and a
substantially larger share of profits.
Yet the large and growing role of services is often under-measured,
under-managed, and under-invested. To provide some necessary benchmarks
for the services side of the software business, the ASP has compiled
current data from a hundred public software companies (all of which are
named in the report, with data on revenues and services-related
financials) on the performance of their services operations. In addition,
we consulted top experts on services metrics and accounting issues to
offer guidance on the fine points of maximizing services revenue and
correctly tracking those revenues.
The ASP's Maintenance & Services Ratios report covers the following
topics:
- Revenue contribution of services to total revenues (percentage
and absolute dollars)
- Profit margin on services (percentage and absolute dollars)
- Impact of company size (contribution and margin)
- Maintenance contribution and margin (percentage and absolute
dollars)
- Professional services contribution and margin (percentage and
absolute dollars)
- Revenue recognition rules for services revenue
- How to design a management P&L for services
- The role of renewal and attach rates
For those who want to explore the underlying data in more detail,
the report includes an Excel spreadsheet that contains all the financial
data used for our calculations.
Copies of the survey are free to ASP members in the
members-only area.
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