The slowly growing ranks of third-party support and maintenance vendors offer SAP customers an attractive way to cut support costs -- as well as a way to bargain for better terms with SAP itself, according to one expert.
"From a customer's point of view, it's all good news," said Mark Bartrick, a U.K.-based analyst with Cambridge, Mass.-based Forrester Research Inc. "The only people finding it difficult to swallow are [vendors] like SAP and Oracle."
But going with third-party support also depends on a number of factors, including how many tickets a company is submitting in a given year, how important upgrades and future enhancements are to the business, and if the company needs help with code it's previously had customized, according to Bartrick.
Customers sometimes feel they have no choice for support if they have customized the core code and feel beholden to the software vendor for future support, wrote Bartrick in the recent Forrester report Rimini Street Challenges Big Software Maintenance Fees.
According to Bartrick, third-party vendors will support custom and core code for no additional cost. This eliminates having to pay SAP for custom code support and removes some or all of the needs and costs associated with in-house support teams, which makes moving to third-party support a compelling option for CFOs and CIOs.
Rimini Street reports that 65% of all received support calls relate to customized code or data, according to Bartrick's report. This figure makes sense because base code is usually very mature and stable, he wrote, and problems more often occur when customers customize code or modify data.
Eric Robinson, IT director at Color Spot Nurseries Inc., a nationwide distributor of plants, herbs and flowers, said his company switched to third-party SAP support vendor Rimini Street for supporting its SAP system a couple of years ago after concluding it didn't need to upgrade SAP ERP from 4.7 to ECC 6.0.
While the reasons for switching mainly came down to lowering support costs, Robinson said that they've relied on Rimini Street to pinpoint problems that were caused by customizing the code around their order-entry processes, as well as in other areas.
"We created our own bugs by [altering] the software," Robinson said. He explained that the bugs were relatively simple enough that they could fix the problems once Rimini Street identified what they were.
"I guarantee if I had gone to SAP [to solve that problem], they would have said it was a consulting issue," Robinson said.
Apart from cost savings, Bartrick said it's always easy to have one company to go to for help with code support. "Then there's only one backside to kick, so to speak," Bartrick said.
Reasons why third-party maintenance may be a good fit
According to Bartrick, third-party maintenance and support may be a viable alternative to companies' current arrangement if they view maintenance costs as far exceeding the value they get in return. Companies can look at how many calls they've made to Oracle or SAP and then divide that number by the amount paid in annual support.
"You'll often see an eye-wateringly high cost per call, which leads many organizations to question the value of what they’re being asked to pay for," Bartrick wrote. One Rimini Street client that was paying $4 million per year for support looked back at the correlation between what it was paying and the number of severity-one calls made and resolved and realized it was paying $2 million per call on average.
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Many customers may also feel pressured to upgrade when the support for their current software is expiring, according to Bartrick. In other words, they may want to continue using the software in its current state because of its stability and functionality, but don't want to run the risk of using the software without support.
"Instead of feeling obligated to upgrade when vendors tell you to or when they withdraw support on older versions, any upgrade entitlements obtained under your current vendor maintenance agreement can be parked and implemented at a time to suit you, with help from [vendors such as] Rimini Street," Bartrick wrote in the report.
"If you're not doing the upgrades, what's the benefit [of continuing with SAP-provided support]?" asked Bartrick.
One of the biggest reasons a company may want to move to third-party maintenance and support is to cut their support bill, the savings from which can get up to half of what they're currently paying. Many customers use the savings to fund other projects of their own choosing, Bartrick said.
Reasons why third-party maintenance may not be a good fit
Customers may want to avoid going with third-party maintenance if they need or want access to a pending upgrade, Bartrick said.
"All vendors invest some of their revenues in research and development, which often delivers new functionality. While your current maintenance agreement with the vendor will lock in entitlements to any releases [or] upgrades that occur while your vendor maintenance agreement is live, moving to a third party … will cut you off from future software releases and upgrades from the vendor," the report states.
Additionally, companies in the middle of upgrading should just leave well enough alone, according to Bartrick. If a business takes away a vendor's lucrative maintenance contract and gives it to a third party, it can't expect the vendor to provide more than average help in deploying the rollout or upgrade.
Companies should avoid third-party maintenance if they have a multiyear maintenance deal with the SAP which has a termination clause. Businesses should check contracts carefully to make sure there are no onerous fees associated with terminating maintenance and support -- or forbids it outright.
In his report, Bartrick makes the following suggestions when it comes to third-party support:
- Don't assume there are no other options when it comes to software support and maintenance. Smart companies regularly compare different support options, including those from third-party vendors, according to Forrester. While SAP customers looking for third-party support can choose from Rimini Street and Spinnaker Support, customers of other vendors have similar options, according to Gartner. JD Edwards' customers can choose from Spinnaker Support, Netential or netCustomer. Third-party vendors for the PeopleSoft market include CedarCrestone, Citagus, or Summit Technology. For Siebel customers there is Abtech.
- Make sure your software license agreements allow for third-party support. Even though this should be a routine part of any license negotiation, some software vendors may try and limit a company's options by bundling usage rights to protect their intellectual property, according to the report. However, Forrester maintains, third-party support vendors are not looking to illegally sell anyone's software -- just provide cheaper maintenance and support than the vendor does itself.
- Don't make decisions in isolation. Any considerations for third-party support should be made in tandem with key stakeholders so that any risks and rewards can be fully thought through and understood.
This was first published in September 2012