SAP's acknowledgment that it has to prove the value of its new offering has made maintenance more of a negotiating point, according to a recent Gartner Research report. SAP is developing SAP key performance indicators (KPIs) in conjunction with the SAP User Group Executive Network (SUGEN) that will be used to gauge cost increases over the next seven years.
Customers should look to trade in shelfware or for help with shelfware deployment, Gartner advises. In the longer term, customers should themselves monitor and track the SAP KPIs established by SUGEN and SAP in order to get more leverage when negotiating future increases, according to Thomas Otter, Gartner research director.
"This saga has opened the door to negotiate on maintenance, something SAP rarely did in the past," the report reads. "Use the contract negotiation process as an opportunity to negotiate better deals on extra software from SAP."
SAP still has quite a lot of work to do to communicate the SAP KPIs and flesh out how they will be used to measure the success of the SAP Enterprise Support offering, Otter said. Last year, SAP said it would increase maintenance fees from 17% to 22% over the next four years in exchange for a richer offering. But subsequent grumblings by its customer base forced it to backtrack and delay the cost increase. It's now working with SUGEN -- representatives of user groups across the globe – to establish benchmarks with a group of 100 customers by which the increase will proceed.
"[SAP] has to work with SUGEN to create a KPI program that is not window-dressing, and it has to deliver against that," Otter said.
But the SAP KPIs as they are defined now are vague and express value only IT organizations would understand, Otter said. In the past, paying maintenance was just viewed as the cost of doing business. But because the saga has drawn so much attention, more people on the business side of the organization are now involved. The SAP KPIs need to be tied to business issues like cost reduction and increased flexibility, Otter said.
"These KPIs may make sense to an IT leader, but a CFO reviewing them would have difficulty understanding the business value," the report states. "Although CFOs understand total cost of operations, this should be translated into quantifiable and/or full-time equivalent (FTE) savings."
SAP has said it's still working with SUGEN on the KPIs and gathering the 100 customers needed to track them, but it hasn't said when the program will start. Some of the KPIs, which are grouped under the categories of business continuity, business process improvement, innovation and protection of investment, and total cost of operations, include:
While Otter thinks SAP will get the increase in maintenance fees through eventually, it will be a bit more of a disjointed and messy process than SAP would like it to be. The plan calls for a four-year measurement period, and mergers, acquisitions, divestitures and changing business conditions will make benchmarking difficult over that long-term period. This means the results of the SAP KPI process will be negotiated, rather than empirically exact, according to the report. Because there will be a lot of negotiation and discussion around the SAP maintenance issue in sales cycles and projects, customers will be on different maintenance rates. Gartner estimates that by 2014, at least 30% of existing customers will have negotiated SAP maintenance arrangements that will differ by more than 2% from the standard contract.
That's why it's important for customers themselves to follow and conduct the benchmarking exercises that are established by SUGEN and SAP, and not simply rely on the published results. This will help them to determine how much value they're getting from SAP Enterprise Support and will give them more leverage in negotiating with SAP, Otter said.
Users should also require KPIs around shelfware, he said. It'll be an incentive for SAP to help them deploy it. For instance, negotiate that shelfware will drop 30% over three years as a condition of paying increased maintenance.
"SAP wants to demonstrate the value of maintenance, so users should insist that the No. 1 cause of valueless maintenance be addressed, namely, shelfware," the report states. "There is no justification from a customer perspective for paying maintenance on it."
Customers like Day and Zimmermann CIO Anthony J. Bosco, Jr. think the program should result in better SAP maintenance and support services, but they remain cautious.
"I think it will be helpful," Bosco said. "But I think it's going to take a while for the kinks to work out."
One thing's for certain, the stakes are high for SAP; but the reward is great.
"If this process of showing real value is successful," the report states, "it will clearly differentiate SAP's maintenance and support offerings from those of its competitors."