What's Next: Upgrade Madness

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Unfortunately, making decisions about upgrades is not quite as easy as simply saying no. Dragging your feet can in some cases be a mistake--even if there are no readily apparent advantages to the new software. Mariam Zahedi, a professor of information systems at the University of Wisconsin at Milwaukee, says that sticking with older software can be a big turnoff to younger, technophilic employees. What's more, while new software features may not seem useful in the context of how you do business now, they could in fact be critical to taking new approaches in the future. "By the time your competitors figure out how to be innovative with the new software, you could be left behind," Zahedi says. Unless your dreams are way more vivid than mine, for example, you probably didn't wake up this morning wishing you had a Xen Virtualization Hypervisor. But Red Hat's upcoming operating system, Enterprise Linux 5, will have one, and it will allow some servers to support multiple operating systems and thus a broader range of software. That, in turn, might translate to being able to offer customers a wider range of services inexpensively over the Internet. And that's a pretty good upgrade incentive for businesses running Enterprise Linux 4.

Whether or not shelling out for an upgrade will pay off for your business, you can bet it will for the vendor's. Upgrades are an enormous source of revenue for the software industry, and most vendors aren't above engaging in some form of stick-waving with customers who won't jump for the carrot. The big stick in this regard is the threat to retire older versions--declare them officially obsolete and withdraw support. Anyone who uses software from Oracle, JD Edwards, Siebel, and PeopleSoft has heard this warning many times, and it's not a bad idea to heed it. That's because Oracle has acquired the other three vendors, and plans to replace all of their software with integrated versions that won't be compatible with older versions. If you're a key customer of a smaller software vendor, you might be able to pull a reverse arm twist and get the vendor to make an exception for you. Otherwise, resistance can be futile.

And while you can hire third parties to maintain your older software when the vendor won't, that can turn out to be far more costly than just biting the bullet and paying for the upgrade. Praxis' Roback notes, for example, that when a new version of Windows comes out, it'll be difficult to buy new computers that come with an older version. "I see it all the time--a company wastes thousands of dollars on consultants trying to get its old Windows software to work with the new Windows software, and then they have to go through it all over again the next time they buy new computers or software," he says.

In the end, the only reliable way to approach the question of whether to upgrade is on a case-by-case basis, paying careful attention to what your business really needs and what other companies like yours are doing. And there are a couple of ways to avoid the head-scratching altogether. You can sign up for the free upgrades that come with a software service plan. Or you can run software, also upgraded for free, that's provided in the form of a subscription service accessed over the Internet, such as Salesforce.com. Bear in mind that "free" can actually be pretty expensive: Expect to pay around 20% of the cost of a software license each year for a service plan, as well as a monthly fee for the online service. But once you ante up, much of the burden of making upgrade decisions is shifted from your shoulders to the vendor's, which tends to ensure that upgrades will be worth the trouble. "We have to get customers to renew their subscriptions, and the value of our upgrades becomes part of the sell," says Bonfiglio of CollabNet, which recently brought out a major new release of its collaboration software for programmers.

Come to think of it, free upgrades would be a good deal in any number of industries. I've got a Sony PlayStation and a Volkswagen Passat that are just begging to be replaced.

David H. Freedman, a Boston-based writer and Inc. contributing editor, is the author of several books about business and technology. (whatsnext@inc.com)

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