SAP users may be hit with maintenance cost rise

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...

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%.

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