SAP has made history in the software industry by becoming the
first supplier to agree to meet key performance indicators (KPIs)
in its software support programme.
The move, which demonstrates the power of SAP's well organised
user group community, will make SAP's competitors sit up and take
notice.
SAP agreed to introduce mutually agreed KPIs, following high
level talks with the global federation of
SAP user groups, Sugen.
The talks followed an outcry from users over SAP's plans to
raise its support costs.
SAP plans to increase its prices from 17% to 18.6% in January.
But further increases towards 22% will now depend on SAP meeting
the KPIs.
Although the agreement is unique in the industry, Ray Wang,
vice-president for enterprise applications and strategies at
Forrester Research, says it is unlikely to result in immediate
changes to the way other software suppliers deliver support.
"Maintenance will continue to be the battleground as suppliers
rely on this stream to meet shareholder expectations," he says.
Key performance indicators
Alan Bowling, chairman of the SAP UK & Ireland User Group,
says the challenge facing SAP and IT departments is how to define
KPIs and then how to measure them.
However, once in place, the KPIs should enable users to see if
they are getting value from software support programmes.
"SAP users should be in a position to know whether they are
receiving value," he says. "Others may not be so clear."
Vuk Trifkovic, senior analyst at Datamonitor, says it is too
early to predict if SAP's move will set a trend, but he says it is
a clear indication of a change brewing in the software
industry.
"Software suppliers in general are listening much more closely
to their customers," he says.
One of the biggest drivers, according to Trifkovic, is increased
competition from software-as-a-service suppliers.
Businesses are also looking for greater value from suppliers as
they reassess IT spend in more challenging economic times.
"Enterprises now have more choice," says Trifkovic, and this
means big suppliers have to work more closely with end-users.
The result, he says, is that software supplies are working more
closely with customers, collaborating and demonstrating value.
Software-as-service is also driving another important trend.
Businesses are setting increasingly rigid KPIs for suppliers in
outsourcing agreements.
This is already happening with software services, says Joost
Berden, senior consultant at Metri.
Analysts say it remains to be seen whether SAP's initiative is
successful and they point out that not all user groups are as well
organised as SAP's.
They suggest that in the absence of any guarantees, businesses
should be looking for other ways to get more value from software
support.
Competition
Forrester Research is advocating the introduction of competition
as a way of driving down costs to end-users.
The firm's Ray Wang says the introduction of third-party support
for software from big suppliers could reduce maintenance costs by
half.
Similar cost reductions were achieved in the software and
hardware markets when they were opened to greater competition, he
says.