Cutting SAP maintenance costs on unused software requires hard bargaining

Don't want to pay maintenance on shelfware? Analysts offer strategies for leveraging shelfware to cut SAP maintenance costs and avoid future spending.

SAP customers should look to unused software to cut overall maintenance and future licensing costs, analysts say, pursuing strategies like trading in shelfware for newer, more needed software.

With contract renewals coming up in the fourth quarter and a proposed maintenance fee increase, SAP customers in particular have been looking at license optimization, according to industry analysts. And they have lower tolerance for paying SAP maintenance costs on software that isn't even deployed.

"It's the No. 1 issue for IT sourcing and vendor management groups that I support with my research," said Duncan Jones, senior analyst at Cambridge, Mass.-based Forrester Research. "The maintenance seems like the big target, but it's very difficult to do anything about it."

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Shelfware is a perpetual problem for all IT customers. Companies end up with this software because sales representatives, compensated on how many licenses they sell during one deal, often offer deep discounts on complementary products, Jones said. Not wanting to miss out on a deal, customers take on the additional licenses thinking they'll need them down the line.

While there is no data tracking what commonly ends up as shelfware, Jones has spoken to a number of customers who bought SAP SRM licenses at a discount with ERP software and haven't deployed them. He's heard the same complaints from Oracle customers.

However, there are options for saving money on shelfware.

One option is to "park" those unused licenses, according to Ray Wang, vice president and principal analyst at Forrester Research. Customers can tell the vendor that they want to keep the licenses but can't afford to pay maintenance on them now, Wang said.

Apply a strategic view and use planned purchases as leverage for current discounts, Jones suggested. Explain that when things recover, the company will have more to spend on strategic projects -- and when the company's ready to spend again, it will be considering only those vendors that behave like strategic partners now.

"Give us an allowance now, helping us deal with shelfware and giving us a holiday on products," Jones said. Requesting a year free of maintenance is reasonable on products the company isn't using.

In turn, some SAP customers have been able to delay the proposed maintenance fee increase on their shelfware by proving that they can provide much more business to SAP in the long term.

Pursuing these strategies involves talking to someone higher up in the SAP organization -- someone other than the sales rep -- who can take a long-term view. That might be a client country manager in Europe or a regional manager in the United States, or it could be someone outside the sales organization in the marketing organization.

But the company has to be specific about its plans, and it's therefore crucial to know SAP's technology roadmap. Point to areas like a replacement of BI products in the strategy or projects the company is planning around CRM or SCM. "Set out clearly that technology strategy aligns with what the vendor wants to sell you, and you've got a chance," Jones said.

Focus on software that's needed today

Another option is to swap those unused licenses for software that the company may need more. It's the most common option, as it's the best deal for both SAP and its customers.

"[This] way may be the win-win," Wang said. "You're using it towards something needed, trying to gain more functionality without more spending."

Customers may not cut maintenance costs by swapping licenses but can avoid paying maintenance on both the unused software and new software. And if the company is replacing some legacy products, there's a savings overall, Jones said.

"If you buy extra licenses, swap the maintenance you're paying on the shelfware for the maintenance you're now paying on the new product," he said.

A more difficult option is to try to return the licenses. This is tough not only because the vendor may not take them back but because the company has to carefully consider whether it will deploy the products down the road.

"You've got to do the analysis of when you could implement it," Jones said. "Are we better to pay maintenance on it or buy new licenses when need them?"

Crucial to getting discounts is knowing what's in place and how much that adds up to, Wang said.

This is something Acresso's licensing monitoring software can help with. It's embedded in the SAP software and gives Basis administrators a way to monitor license usage across dashboards and reports, according to Jeff Greenwald, Acresso's senior director of product management.

Acresso can track SAP system users to determine whether there are duplicate users, whether they're using their license to the full extent, or whether they're using it at all.

"If a customer can demonstrate that their use is different from what they're contractually obligated for, they can avoid future cost," Greenwald said. "It's more about cost avoidance than reducing current maintenance."

For instance, one company Acresso worked with was able to avoid a future spend of upwards of $2 million when purchasing new software, Greenwald said. Some of that extra cost involved removing licenses for consultants that had been on the project and still had privileges in the system.

Of course, it's better to avoid ending up with shelfware in the first place.

"My advice is always [that] when you negotiate a big deal like that, secure the discount based on the overall deal making, but don't pay up front," Jones said. "Retain control over when you actually buy those licenses until you're ready to deploy them, or you get stuck with the shelfware."

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