Businesses may have to fork out 22% of the software licence cost
for new maintenance contracts when they buy SAP software or run
SAP's Business Objects reporting tools.
SAP announced last month that is no longer offering its standard
support contract to new users charged annually at 17% of the
licence fee.
Instead, the ERP supplier has introduced Enterprise Support, an
annual contract priced at 22% of the SAP licence fee. The contract
is designed to support businesses that wish to build applications
using a service oriented
architecture (SOA). Under the contract, SAP will offer support
for SAP products such as NetWeaver along side non-SAP software.
IT departments will have to assess whether they need the extra
level of support for SOAs available through SAP's Enterprise
Support contract or whether other third-party suppliers, such as
Rimini Street, can provide better value.
Damien Ghee, IT and programme director at bakery Warburtons,
said, "The extra support SAP provides is actually for areas we
currently engage other suppliers. Given that sometimes we have had
challenges in getting a high-quality service from these companies -
particularly with the newer SAP NetWeaver components - buying these
additional services direct from SAP could be a useful
alternative."
However, the cost of this additional support will increase the
total cost of ownership of SAP significantly.
Ray Titcombe, chairman of the Strategic Supplier Relations
Group, said, "A 5% increase from 17% to 22% is a significant
expense for users and SAP has to demonstrate that the extra cost
will reduce business users' costs."
One pitfall is that users may end up paying for Enterprise
Support when they do not actually need the extra services it
provides.
"In our conversations with ERP customers we found a general
wariness of overpaying for annual maintenance services that are
under used. Many companies are really paying for upgrades or
security patches and don't fully engage with their maintenance
contract," said Ovum principal analyst Madan Sheina.
At the moment, SAP users are able to renew their existing
standard maintenance contracts when they expire. However, SAP could
remove this maintenance contract altogether, said Ray Wang,
principal analyst at Forrester Research.
"Existing customers should brace themselves for a price hike or
prepare for some intense contract negotiations in the near future,"
he said.
Peter Wesche, a research director at analyst Gartner, said that
few users took SAP's previous higher value, 22% per annum premium
support, when it tried selling it three years ago,
IT experts agree that most businesses already running SAP's
standard 17% support contract should stick with it, rather pay the
extra 5% for Enterprise Support. "Today, standard support is still
a good choice," said Wesche.
Businesses that plan to implement a SOA, however, should look at
Enterprise Support, which covers support for third-party software
products, along with SAP software.
There are a number of companies such as Rimini Street that offer
independent support for SAP. IT directors should also evaluate if
it is cheaper buying from these providers than SAP.
A study from analyst firm Forrester Research has found that most
users question the value for money of their maintenance and support
contracts. A survey of business process and applications
professionals found that more than half wanted to see maintenance
fees reduced to below 16% of their license costs, and 21% of
respondents believe maintenance should range between 10% and
12%.