We’re in the middle of second-quarter earnings season, when all of the publicly owned vendors of manufacturing-focused software and systems report their results from the past three months. One consistent theme is emerging from a wide array of vendors of enterprise software, automation platforms, design tools, and others: Although the recession appears to be easing, many business technology buyers are not rushing to open their wallets. Purchasing decisions are taking much longer and requiring sign-off by a wider range of executives, even board members. And, when a manufacturer does decide to buy technology, it’s often just the software that is absolutely necessary. Vendors are seeing fewer big, comprehensive, multimillion-dollar deals. And many manufacturers prefer to continue to use older releases of enterprise software rather than springing for upgrades.

In some ways, this is not surprising. Mired in economic uncertainty, manufacturers, like other businesses, are intent on preserving capital.

At the same time, however, this lingering reluctance on the part of manufacturers to commit to significant technology purchases contradicts a core argument made over and over again by vendors of enterprise software: That, by enabling automation and other process improvements, purchasing and successfully implementing enterprise software saves manufacturers money and improves their competitiveness. If that is true, why aren’t manufacturers rushing to deploy new applications or to upgrade applications that are already in place, particularly during a recession when every penny of cost-cutting counts?

I think there are a few reasons for this that go beyond the natural spending conservatism that often takes hold along with economic uncertainty. Some of those factors include:

• Vendors, particularly enterprise software providers, have a history of over-promising and under-delivering. Over the years, manufacturers have learned that, for a variety of reasons not all the fault of vendors, enterprise applications tend to be harder and more expensive than expected to deploy and often don’t deliver the kind of process improvement and ROI that was expected. So why take on more big IT projects, particularly when cash is tight?
• Many users of enterprise software are reluctant to make purchases or upgrade investments that might increase the already high software maintenance bills they are paying.
• At the same time, many manufacturers are beginning to question the value they get from software maintenance, which can add up to millions of dollars per year. The implied contract was that vendors would use customers’ maintenance payments to continually enhance product innovation. But there’s mounting evidence that many vendors are simply using maintenance to pad their own bottom lines. Take SAP’s second-quarter earnings, announced last week. The company saw a healthy 22% increase in revenue from maintenance and support. But, with new software sales slumping, the company decided to cut research and development spending during the quarter by 11%. If you’re a big customer, you have to wonder where all those maintenance dollars are going.
• Many manufacturers are anticipating a transition to enterprise software that is delivered via the software-as-a-service (SaaS) model. If the future features software functionality to which you can subscribe over the Web, why continue to invest aggressively in new on-premise applications?

These are all factors and perceptions that make it less attractive for manufacturers to make big new enterprise application investments, particularly in the middle of a serious recession. But I’m guessing they will continue to impact software purchases long after growth has returned to the economy, unless vendors can do a better job of making a case for the value of their products and the fairness of their business practices.