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SAP Standard Support decision hinges on inflation, fees

Customers now have a choice when it comes to SAP maintenance and support contracts, but there's more to be weighed in the choice than simply cost.

SAP customers considering a move back to Standard Support must weigh factors such as the rate of inflation and...

waived fees for extended support on older releases -- factors that could bring the two options to a similar cost over the next few years.

"There is a choice, but because of inflation, the differences between the tiers are not enough to give customers the value they want to see in the Standard Support offering," said Ray Wang, partner at Altimeter Group. "It's not really coming down to those decisions on what products are in place. The real thing that matters here is you're betting with or against inflation."

Direct customers must pick a maintenance and support option by March 15 in order to stay on the graduated Enterprise Support price ramp-up – which will increase fees to 22% by 2016. Channel customers have until April 30.

Standard Support costs 18% of net licensing fees now, but increases will be tied to inflation. A consumer price index increase above 3.5%, which would provide equal fees by 2016, isn't unrealistic, according to a recent Gartner Research note on the topic.

What are the fees for extended SAP maintenance and support on older releases?
R/3 4.6c: Enterprise Support customers won't pay fees for extended support this year. Standard Support customers will pay an additional 4% for extended support through 2010.

R/3 4.7:
Enterprise Support customers won't pay a fee for extended support until 2013. Standard Support customers must pay an additional 4% fee for extended support from 2012 to 2013.

ERP 2004: No additional fees on Enterprise Support until 2013. Standard Support customers will pay 2% for extended support from 2010 to 2011, and 4% from 2011 to 2013.

Source: Gartner Research

Choosing SAP Enterprise Support

Enterprise Support has advantages. Standard Support doesn't have an SLA for response time, said Bob Igou, research director at Gartner. It doesn't include SLAs for critical incidents, custom code review or solution architect support for extending the systems, according to the report. Moreover, Solution Manager will be available for Standard Support, but the functionality will be limited.

On the other hand, Enterprise Support provides a 24/7 dedicated pool of resources. Enterprise Support is both proactive and reactive, looking at where a customer's software environment is going and aimed at continuous improvement, Igou said.

"Standard Support is your basic break/fix technical support. It's aimed at risk mitigation," he said. "Enterprise Support does more proactive support. It's not only focused on the technology, but the business processes."

SAP Enterprise Support makes sense, especially for a company that's implementing SAP for the first time, analysts said. Companies must weigh factors such as whether they are hiring consultants who will come in and leave. How dynamic is the use of technology by the business -- are they bleeding edge? How big is the user population, and how many resources does the company need to handle problems from them?

Enterprise Support also makes sense if a customer is planning to expand its use of SAP in the next three to five years, according to Wang.

Through its KPI program, SAP has done a good job identifying key performance indicators that Enterprise Support is supposed to improve, according to Duncan Jones, principal analyst at Forrester Research. Customers should look at those KPIs when SAP makes them available -- SAP says it hasn't yet decided when or how it'll do this -- and evaluate where they are.

Going with SAP Standard Support vs. third-party maintenance

For more on SAP maintenance and support
Find out what happened with SAP's Enterprise Support KPI program

Find out why one SAP customer is happy with third-party maintenance

But for some companies, Standard Support may make sense.

Companies with a lot of experienced staff on board who can take care of these things are more likely to choose Standard Support, Igou said. If they're going to maintain a particular version for a long time and have grown a staff that is very competent and knows how to handle 99% of the support incidents, Standard Support is a good option.

Customers still have access to upgrades under both of these support models. But for many leaning toward Standard Support, third-party maintenance may make sense, according to Wang.

For customers with stable environments who aren't planning any major upgrades or enhancements, third-party support will be the more affordable option in the long run, he said.

Third-party support firms provide fixes for legacy software, as well as tax and regulatory updates. Firms like Rimini Street promise to support SAP software at half the cost that SAP itself charges.

However, customers must remember that moving to third-party maintenance is only a temporary solution, Igou said.

"At the end of the day, you need to plan for a major software acquisition," he said. "It's only an interim solution. All the customers that enter this market will eventually exit that market."

In turn, there are fees for reactivating usage rights. SAP charges for all of the back maintenance plus one year, and Oracle charges this plus a 50% penalty.

"This acts as an incentive for customers to stay current," according to an SAP spokesman. "In the long term, it is more economical for customers to remain current than to switch to third-party providers and then return to SAP."

Wang believes, however, that it's getting more and more unlikely that vendors will actually do this. A customer on third-party maintenance has given itself a blank slate to choose a new vendor, and vendors are already providing incentives to win new license deals.

"We think the odds are really low that will happen," Wang said.

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