Large enterprises say they spend an average of 28% of their software budgets on upgrades, migrations and licensing changes they would not have actively chosen, according to new research from Origina published in a report with Thinkers50.
The research also found that 95% of IT leaders say their organisation has paid for a vendor-driven upgrade in the past three years that it believed would reduce performance, reliability or business value, and more than half (53%) have done so more than once.
The Software Tax, What does it cost, and who benefits?, the report built on the survey, links this pattern to how little practical ability these leaders have to refuse upgrades and changes
once a system is embedded in the business.
The most recent of these vendor-driven changes cost respondents’ organisations an average of $12.87 million, and the impact reaches well beyond the IT budget. Innovation was the budget respondents most often said was hit, with hiring and security close behind.
When asked about the last time an AI or data program was slowed, paused or canceled, 34% of respondents said vendor-driven costs had a major contribution to that decision; 56% said it had a moderate one.
The survey of 2,018 senior IT decision-makers in the US and UK, conducted by Censuswide, shows how little room buyers have.
Nearly eight in ten (78%) agree that their primary vendor, rather than their own organisation, sets the timing and terms of change.
About three quarters (76%) say they have very little real leverage in negotiations with major vendors.
Eighty per cent (80%) say moving away from a major software vendor would cause significant business disruption.
Tomás O’Leary, CEO and Founder of Origina and co-author of The Software Tax, said, “When the alternative to an unwanted upgrade is losing support of any systems the business runs on, saying yes is often a rational response. That’s exactly the problem.
“The market has left some of the most experienced technology leaders in the world with little room to refuse, and that cost shows up in budgets, in engineering time and in innovation that never gets funded. We want to make that cost visible so customers can
start to take back control of it.”
People and hardware are affected too, according to respondents. Some 84% say senior engineering talent “always” or “often” spends time on vendor-driven upgrades rather than building future capability.
Ninety-one percent report they have scrapped functional hardware in the past three years purely to meet a software vendor’s support deadline, losing an average of 1.65 years of useful hardware life.
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“At the scale we were operating, a single upgrade cycle could occupy some of our strongest technical people for the better part of a year,” noted James McGlennon, former CIO of Liberty Mutual and a member of Origina’s board.
“That’s not a one-off cost, it’s a recurring drag on capacity, and every year it repeats is a year those people aren’t working on the initiatives that actually differentiate the business.”
IT leaders surveyed also back changes to the rules. More than nine in ten (91%2) would support legislation giving enterprise software customers protections comparable with those in long-term residential rental relationships.
And 82%1 support software-support requirements similar to those placed on hardware manufacturers under EU rules on hardware repairability.
