Recent price hikes for SAP Enterprise Support could once again raise questions about the quality and cost of SAP’s...
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support programs, according to one industry expert.
SAP set off a firestorm of protest in 2008, when it ditched its SAP Standard Support option and announced that all of its customers would be moved to Enterprise Support at a cost of 22% of net licensing fees. After instituting a program that tied Enterprise Support costs retroactively to increases in key performance indicators, SAP returned to a two-tier support structure.
For companies that had signed support contracts before 2008, SAP Enterprise Support was set at 18.36% and has been growing ever since. Next year the price will jump to 19.5% and will hit 22% by 2016. Standard Support is currently set at 18% of net licensing fees.
Over time, the increases will likely cause customers to evaluate what they’re getting in return for their money, including the kind of innovation that support fees are supposed to fuel, according to Jon Reed, an independent SAP analyst and owner of JonERP.com.
“I think in some ways this is a longer-boil kind of issue,” Reed said. “Things are going to boil over time.”
Is anyone leaving SAP Enterprise Support?
While SAP declined to provide specifics on percentages, it contends that the vast majority of customers have stuck with Enterprise Support since the hikes began, according to SAP executive vice president Janet Wood.
“The vast, vast majority stay on Enterprise Support. Few customers switch,” Wood said, adding that most new customers opt for Enterprise Support as well. Those who have switched to Standard have done so because of tight finances, she said, or because of an older system that doesn’t need as much attention.
Wood said she doubts that Enterprise Support hitting 19.5% of total license fees next year will result in greater numbers exiting the more expensive plan. “We track it very closely, and I’m not seeing anything that [would indicate] a change.”
Standard Support’s price hikes are tied to inflationary increases, Wood said. And although there aren’t any planned for the immediate future, those could potentially narrow the gap between the two options, she said.
“We saw it as an opportunity”
One client that’s happy to stick with Enterprise Support is Florida Crystals, a maker of sweeteners and sugar substitutes based in West Palm Beach, Fla.
When the program debuted, Florida Crystals looked at Enterprise Support not as SAP once again trying to find its way into the company’s wallet, but as a way for the company to take its operations to another level, according to Don Whittington, chief information officer. “We saw it as an opportunity,” he said.
Since then, Florida Crystals has taken advantage of some of the performance enhancement services and used Enterprise Support to help migrate the company’s data centers to a public cloud run by Virtustream of Bethesda, Md.
The company considers the extra money it’s paying now a wise investment and won’t be trading down to Standard Support, Whittington said.
“I wouldn’t think of it,” he said.
Happy with SAP Standard Support
The government of the county of Sacramento, Calif., on the other hand, has all it needs with Standard Support, according to Mike Musser, its principal business systems analyst.
The municipality, which has been running SAP since 1998, has a deep bench of IT talent that knows the system well and is only running the core ERP system, Musser said.
“Standard works for us because we’re pretty stable at this point,” he said. Going with Standard has also allowed the government to keep its budget trim in these lean economic times.
Discounts and deals muddy the waters
It’s hard to know what effect the rise in SAP Enterprise Support is going to have on customers, given that different companies pay different amounts for support, according to independent analyst Cindy Jutras.
Back in the early 2000s, for example, ERP software companies were struggling to close deals because many of their customers had purchased or updated their ERP systems to avoid Y2K problems. Many of those deals may have included cheaper support costs, Jutras said.
It also matters whether SAP is charging customers for support based on the current cost of the software or the price that the company originally paid for it, Jutras said, and that also could vary by customer.
“All those questions come into play,” she said, “and they’re not easily answered.”
Another reason to look to third-party SAP support programs?
The issue of SAP support costs makes one wonder why SAP lacks cheaper options for companies or government entities like Musser’s that don’t need much in the way of maintenance, Reed said. After all, SAP has lost more than 50 of those low-maintenance SAP customers to third-party support providers like Rimini Street since the third-party vendor began doing business.
"I’d like to see a scenario where companies that are more self-sustaining [pay less for support] and those that need more pay more," Reed said. "It just makes more sense in terms of customer value to do it that way.”