News Stay informed about the latest enterprise technology news and product updates.

Companies leveraging threat of third-party SAP support to cut costs

SAP customers are using third-party vendors to help cut support costs, even if they don't actually end up using them to manage their SAP software.

Some SAP customers are using third-party support and maintenance providers to save money by using them as leverage in negotiations with SAP -- whether or not they end up hiring them, according to a new report by analyst R "Ray" Wang.

In the end, they may choose to stick with SAP support to lock in future enhancements and upgrades or maintain a strategic relationship with SAP.

"You may choose not to. Either way, you should include a proposal [from a third-party support and maintenance provider] as a part of your strategy," said Wang, the CEO and principal analyst of Constellation Research, based in Monta Vista California.

Third-party maintenance and support vendors for the SAP market include Las Vegas-based Rimini Street Inc. and Spinnaker Support LLC, based in Denver. Spinnaker began competing with Rimini Street last May. Until then, Rimini Street had been the only vendor of that kind in the market. Both companies compete for the Oracle market.

According to Wang, even the mere threat of going with a third-party maintenance provider is enough to bargain with software vendors like SAP and Oracle. According to the 149 SAP and Oracle customers that were surveyed, threatening to take their support business elsewhere was worth a roughly 14% reduction average in their software maintenance bills.

Although the survey drew a relatively small sample from the thousands of SAP and Oracle customers, Wang said that most of the companies he interviewed were early adopters more on the cutting edge, as well as those that immediately follow those companies' lead in the market. As such, their openness to third-party maintenance reflects a subtle shift in the market, he said.

The 14% decrease includes savings gained from such concessions as being able to "park" licenses, license recycling and swaps, or lower overall prices for support and maintenance contracts altogether, according to Wang. "You're seeing a variety of techniques that are emerging," he said.

Wang also found that roughly 70% stayed with their primary software vendor -- whether it is Oracle or SAP -- instead of going with the third-party maintenance provider, which Wang said can typically save companies up to half in maintenance costs, a figure also cited by customers of third-party maintenance vendors like Rimini Street.

Companies may seek out third-party maintenance vendors for a number of reasons, including getting less return over time for their support payments as bugs gradually get worked out in the years following a product's release.

Going to third-party maintenance doesn't preclude customers from returning to the vendor at a later date, he said. "It's a place to go when you're trying to decide where to go next and save some money along the way," Wang said.

For more on SAP, licensing and third-party maintenance

Understand why you should, or shouldn't, move to third-party maintenance

Read why some customers find SAP's licensing policies frustrating

What do Rimini Street customers do with their savings?

For example, a company might be stable on its current release and not looking to change anything for three years or so, beyond tax and regulatory updates and bug fixes.

"That's a perfect strategy, because in three years, you're going to save that amount on maintenance. If you wait five years, that's like the equivalent of paying for the original license," Wang said. "It's a lot of money that's being saved, and that gives you options to do other things."

It is possible, but not likely, that SAP could require the company to pay back maintenance fees as a requirement for coming back, Wang cautioned.

"Most of the time it doesn't happen, but it's an option up to [companies like] SAP or Oracle," Wang said.

However, a company that threatens to take their SAP maintenance and support to a third party to exact lower fees must be willing to walk, Wang said.

"You have to be convinced that you're going to leave the vendor or that you're going to re-implement before you do this," Wang said. "That's why it's not for everybody."

Tactic seen as sign of market maturity

The fact that customers are able to use third-party maintenance providers as bargaining chips with large vendors like SAP -- even if they stay with them -- is a sign the market has matured, according to David Rowe, chief marketing officer for Rimini Street.

"I think that our success and the growth and adoption [of third-party maintenance] has made it much more credible, so that when a customer puts the Rimini Street proposal on the table, it's a far more credible conversation now," Rowe said. "It has to be taken seriously. And customers are using it to their advantage."

Dig Deeper on SAP selection and implementation

Join the conversation

1 comment

Send me notifications when other members comment.

Please create a username to comment.

SAP has the most user hostile support system I have ever encountered. From a nearly impenetrable web portal to rude and abusive support personnel. I strongly recommend avoiding SAP products at any cost.