A new report by Cambridge, Mass.-based Forrester Research Inc. details a number of changes in the service provider market over the last two years and what they mean for customers looking to hire those firms -- including SAP service providers. Those changes include increased consolidation in the market and a demand by customers for new pricing models.
IBM and Accenture lead the market in terms of breadth and depth of services, as well as geographic reach, according to the report. However, other strong options include India-based firms such as TCS, Wipro and Infosys, as well as Europe-centric providers such as T-Systems and Logica.
SearchSAP.com spoke to Forrester analyst Liz Herbert, the author of the report, to find out what's driving the changes and what the future holds for the SAP service provider market. Here are some excerpts from that conversation:
What’s the biggest takeaway from the report for SAP customers?
Liz Herbert: The SAP market is saturated with many strong options for companies that are looking to the services provider, but different firms excel in different areas.
You write that the recession changed some service provider pricing models and that’s led to things such as outcome-based pricing, where clients might tie a percentage of a total contract to specific results. What are some of the other economic drivers affecting how customers are paying service providers?
Herbert: So many of our clients tell us that price is one of the key factors to them when they’re looking at service providers or when they’re renegotiating with their existing relationships. But that can only go so far. You can only go so low and still expect to get a good level of service from the provider. At the same time, we see that rates are rising in some of these low-cost geographies like India, where the economy is changing very quickly and salaries are rising. This has all led to several changes in pricing on both the service provider side and also what the buyers are asking for.
Your study focuses on 19 different vendors, all of which have more than $250 million in annual revenues and more than 2,000 individuals dedicated to SAP projects. What did you find?
Herbert: The biggest change from last year’s report is that we broadened the scope of what we looked at. In past years, the report was very implementation-focused. But many of the clients we were working with, even if they’re an implementation buyer, they’re looking at ongoing support, including hosting.
One of the biggest findings from the report is that different providers excel at different components of that lifecycle. Some like PwC [PricewaterhouseCoopers] and Deloitte are excellent at up-front advisory, continuing into implementation services.
Companies like T-Systems, they’re much stronger at the application maintenance and support, and hosting. In fact, they’re one of the largest hosting providers of SAP.
What do you recommend for users thinking about what SAP service provider to use? What questions do they need to ask?
Herbert: The bid team is more important than the corporation. Our report is a good starting point, but we don’t think it substitutes for an RFP [request for proposal] process and actually meeting the team that would work with the client. Experience can vary pretty widely, and you have softer factors like cultural fit that are harder to analyze in a [report] format.
What other trends did the research turn up that most surprised you?
Herbert: The India-based firms are continuing to invest in hiring local consultants throughout the U.S. and Europe that are high-level process consultants. They’ve really risen from their position of historically being a support provider. The multinationals, everyone from Accenture to IBM and Deloitte, they’re investing rapidly in their own offshore capabilities. Accenture and IBM both have more people based in India than the India-based firms.