New Delhi [India], October 20 : Large enterprises may face growing constraints on innovation and artificial intelligence (AI) investments as vendor-driven software upgrades, migrations and licensing changes consume an average of 28 per cent of their software budgets, according to a report by Origina published in collaboration with Thinkers50.
The research found that vendor-driven costs had made a major contribution to decisions to slow, pause or cancel AI or data programmes for 34 per cent of respondents, while 56 per cent said the costs had a moderate contribution.
The findings highlight how recurring software expenses could limit enterprises' ability to redirect resources towards technology development, hiring and security.
The survey of 2,018 senior IT decision-makers in the United States and the United Kingdom found that 95 per cent of respondents said their organisations had paid for a vendor-driven upgrade, migration or licensing change in the past three years that they believed would reduce performance, reliability or business value. More than half, or 53 per cent, said this had happened more than once.
The most recent vendor-driven change cost respondents' organisations an average of USD 12.87 million, according to the report.
Innovation was the budget most frequently identified as being affected by these costs, followed by hiring and security, indicating that the financial burden extends beyond software expenditure.
Tomás O'Leary, CEO and Founder of Origina and co-author of the report, said organisations often had little practical choice but to accept unwanted upgrades when the alternative was losing support for business-critical systems.
The report also found that 78 per cent of IT leaders believed their primary software vendor, rather than their organisation, determined the timing and terms of changes, while 76 per cent reported having little negotiating leverage with major vendors.
The consequences also extend to engineering resources and hardware. Around 84 per cent of respondents said senior engineering talent always or often spent time on vendor-driven upgrades instead of developing future capabilities.
Additionally, 91 per cent said their organisations had scrapped functional hardware in the past three years solely to meet a software vendor's support deadline, resulting in an average loss of 1.65 years of useful hardware life.
Marshall Van Alstyne, Professor at Boston University and co-author of the report, said organisations should negotiate exit options before entering vendor relationships, adding that the ability to leave could strengthen their negotiating position even if they chose to remain.
The report also found support for regulatory intervention, with 91 per cent of respondents favouring legislation providing enterprise software customers protections comparable to those in long-term residential rental relationships.