Enterprises Wasting Over a Quarter of Software Budgets on Undesired Upgrades, Survey Finds

Image: Ars Technica · Source

A survey of IT leaders at large companies reveals that 28% of software budgets are spent on upgrades and changes perceived as harmful, highlighting limited vendor negotiation leverage and negative impacts on innovation.

A recent survey conducted by Censuswide for Origina, an enterprise software maintenance provider, exposes a significant inefficiency in large enterprises' software spending. Surveying 2,018 chief information officers (CIOs) and senior IT decision-makers from companies with at least 10,000 employees and $1 billion in annual revenue, half based in the US and half in the UK, the report reveals that firms allocate nearly 28 percent of their software budgets to unwanted vendor-driven upgrades, migrations, and licensing changes.

Alarmingly, 95 percent of respondents acknowledged that their organizations had paid for software modifications in the past three years that were believed to degrade performance, reliability, or overall business value. More than half (53 percent) reported undergoing such changes multiple times, indicating a recurring challenge.

The core issue appears to be the lack of leverage that enterprises have during vendor negotiations. Approximately 76 percent of surveyed IT leaders stated their companies have minimal negotiating power, while 80 percent believe that moving away from major vendors would cause considerable disruption. Tomás O’Leary, Origina’s CEO, noted that facing the choice between accepting an unwanted upgrade or losing vendor support often compels firms to consent, restricting their ability to refuse costly changes and straining budgets.

The consequences extend beyond immediate expenses; innovation, human resources, security, and customer-facing investments suffer due to diverted funds and engineering efforts. For instance, Liberty Mutual’s CIO, James McGlennon, highlighted that upgrade cycles could occupy critical technical staff for nearly a year, consistently postponing progress on strategic initiatives.

To address these systemic challenges, the report suggests enterprises proactively negotiate exit terms with vendors from the outset of contracts, including migration assistance and price caps on renewals, to regain budgetary control. Additionally, 91 percent of survey participants support legislative measures granting enterprises protections similar to those for long-term residential tenants, underscoring the widespread recognition of vendor power imbalance.

While the report does not target specific vendors, all respondents currently operate major software from companies such as IBM, HCL, VMware/Broadcom, or SAP at scale. This study highlights the pressing need for enterprises to reassess software vendor relationships and contract strategies to reduce costly and counterproductive software expenditures.