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SAP retreats partially over support cost
Maintenance contract tweaked under user pressure.
By Chris Kanaracus, IDG news service
Published: 09:08 GMT, 07 November 08
SAP has partially retreated in the face of customer pressure and is to extend maintenance for its ERP 6.0 platform until 2017. The company has also sweetened the feature set of its Enterprise Support service,in an attempt to further appease angry users.
The maintenance announcement, which includes ERP 6.0 and any new core applications from SAP Business Suite, is an expansion of SAP's "5-1-2" plan. That system guaranteed regular maintenance on a product for five years, after which customers could opt to pay another 2 percent for an additional year, and following that another 4 percent for another two years. The new plan boosts the five-year period to seven years and adds an optional two-year extension.
Forrester Research analyst Paul Hamerman said that since ERP 6.0 has already been on the market for a number of years, some customers are starting to be concerned about the 5-1-2 window, and therefore, the extension should be welcome.
SAP is trying to ensure that customers can make long-term plans around ERP 6.0, and the move was not made in the hopes of locking down extended maintenance contracts, said SAP spokesman Bill Wohl.
"I don't think there's any other company in the industry that can give customers this kind of planning horizon," he said. Wohl added that even after SAP's maintenance windows close, customers on older platforms can contract for support from SAP on a one-off basis.
SAP had already made it clear that ERP 6.0 would be its strategic platform through at least 2010, announcing in 2006 that all new features during that time frame would come through optional, add-on "enhancement packages." The extended maintenance window for ERP 6.0 could mean the company intends to keep this strategy in place even longer.
"This is where we expect to be for some time," Wohl said. But the company will continue innovating aggressively through the enhancement packages, he said.
As for the changes to Enterprise Support, SAP is seeking to appease users who have protested loudly since July, when SAP announced that all customers would be transitioned to the richer-featured but more expensive offering.
But SAP is making no concessions on cost. Instead, the company is adding new wrinkles to the support offering, such as up to five days of remote advice from software architects each year regarding the potential value of enhancement packages and how they could be deployed.
But in other instances, the company is merely hoping to provide "additional clarification" on Enterprise Support's richer feature set, which includes "continuous quality checks" and a single point of contact for customers.
SAP has also repeatedly said the service is necessary due to increased complexity in customers' environments, and that it will result in a lower total cost of ownership.
A member survey conducted this year by the SAP User Group Executive Network (SUGEN), a group made up of representatives from SAP user groups around the world, found that 90 percent of respondents "have not yet realized the full extent of the SAP Enterprise Support offering, its value and cost justification," SAP said in a statement.
SAP and SUGEN are also going to work together to come up with key performance indicators for Enterprise Support.
The two parties will "jointly evaluate the progress of these KPIs against customer expectations on a regular basis and adjust the continued rollout of SAP Enterprise Support until the quality measures are achieved," SAP said.
SUGEN could not immediately be reached for comment Thursday.
One industry observer questioned the effectiveness of SAP's gesture. "Ultimately, this all seems to be shutting the barn door after the horse has bolted," said China Martens, an analyst with The 451 Group.
In addition Thursday, SAP said it will work with user groups on a migration plan for helping R/3 customers move up to ERP 6.0. Convincing customers to make that shift is a primary goal for SAP today; some 12,800 of its customers are on ERP 6.0, out of a total of 76,000, which includes those gained from acquiring Business Objects.
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