Mission Linen Supply left SAP support for third-party maintenance provider Rimini Street and used the money it saved to help fuel a new customer portal and make improvements to its customer billing system.
“They’re two pretty major initiatives that we’ve been able to make pretty major headway on,” said Tony Mancuso, Mission Linen’s vice president of corporate services.
Mission Linen Supply is a family-owned company based in Santa Barbara, Calif., that provides the medical and hospitality industries and others linen products and uniforms, as well as apparel, mats and office supplies. The company, which rents the products to its clients and handles the laundering, operates more than 50 facilities in California, Arizona, Texas, Oregon and New Mexico. It employs roughly 2,000 people and has a fleet of more than 700 vehicles.
A longtime customer of SAP’s, Mission Linen went off SAP support and maintenance a little over a year ago, purely as a way to save money on support for its SAP 4.6c ERP. The company had been using 4.6c since 2002 because the old system was still meeting their business needs, according to Mancuso.
“Cost cutting, pure and simple,” Mancuso said. “We weren’t going to upgrade. We were stable and happy with where we are.”
Though Mancuso wouldn’t provide a dollar amount, he said overall savings has been about 50% of what it was paying SAP for support.
Not long after Mission Linen left SAP support, Mancuso went to senior leadership asking for funds to help pay for a customer portal and improvements to the home-grown legacy billing system.
The support and maintenance savings funded the Microsoft software used to build the portal, which is connected to their SAP system using a .net connector, as well as two developers to drive the development and implementation of both projects.
Customers can now use the portal to check invoices and make payments within the portal, which then automatically updates their account, saving Mission Linen and its customers a significant amount of time in the process. Data is more accurate as well. The company just went live with the portal, Mancuso said.
“Right now, someone sends a check into our business, and someone on the other side is taking that check and going into SAP and applying that check to [those] invoices. It’s a huge manual effort."
Although Mission Linen’s customers are only now beginning to use the portal, the company says it was able to develop something it will be happy with at far less cost than if it had built on an SAP portal.
“I don’t know if it could have been any less expensive. We’re talking about an internal employee, no consulting dollars, very little software costs,” Mancuso said. “If we were to have licensed SAP’s portal, it would have been, well, expensive.”
Are you benefiting from SAP’s research dollars?
Going on third-party support and using those savings to fund targeted, company-specific innovations may make sense for some companies if they’re not getting the most out of SAP’s research and development, according to Gartner analyst Duncan Jones.
Those maintenance and support dollars, leveraged with thousands of other customers, can deliver far more value for SAP customers in the form of new research and development than if companies paid for the development themselves.
“However, it is also spread across many products and many industries and may be spent on projects that aren’t your priorities, or on things that will generate new license revenue for SAP rather than maintenance enhancements for customers,” Jones said, noting that SAP spent more on its recent acquisition of SuccessFactors than on research and development last year.
“Do you stay put on your current version, give up rights to future enhancements and free up budget to spend [money] on vital projects, or do you carry on paying money to SAP in the hope that it will deliver what you need?” Jones asked.
SAP is reducing the amount it spends on average on new technology and improvements.
SAP increases its fees for support and maintenance 3% each year on average, Jones explained in his 2011 report Three Key Tips to Optimizing Your Commercial Relationship with SAP, yet the percentage the company has been reinvesting back into research and development has fallen. The amount of support and maintenance revenue that SAP reinvests in research and development fell from 35% in 2008 to 28% in 2010, with most of that funding new products rather than enhancing existing products.