SAP AG(NYSE: SAP) has eliminated one of its lower-priced support offerings, but at the same time expanded ERP maintenance levels to include 24/7 support and support for third-party systems that connect to SAP software.
Previously, SAP offered a basic support package costing 17 per cent of a customer’s license fees and a premium support package that went for 22 per cent. SAP has essentially eliminated both offerings for new customers and replaced them with an Enterprise Support package that costs 22 per cent but comes with a greater level of service.
SAP was criticized by the consulting firm Ovum, which said SAP is trying to “shore up its revenue growth” while customers are in danger of being “over-milked.”
SAP vice-president of strategy Bill Wohl scoffed at the revenue growth comment, saying SAP has achieved 17 consecutive quarters of revenue growth. While SAP can take in more revenue by charging higher rates, it’s also likely SAP will be spending more of that money on customers as it ramps up its level of support.
With its new Enterprise Support, rolled out to customers in February and announced publicly in May, SAP now helps customers identify and fix problems in products which are made by other vendors but work with SAP applications.
“In the past, we didn’t take responsibility for anything beyond SAP software,” Wohl says. “[Now] we’re going to take responsibility across your enterprise for the stuff connected to SAP.”
That means SAP will help fix problems related to Adobe software, the Oracle database, or other products connecting to SAP’s ERP software. SAP can’t solve every problem related to a competitor’s product, obviously, but Wohl says SAP will help customers through the whole process even if it involves going to other vendors for support.
“What we discovered about the services-oriented environment is the support requirements for customers have changed,” Wohl says. “No longer do customers need simple bug fixes. … They want problem resolution all across the network.”
The other major change: 24/7 support. Previously, customers received one named contact during normal business hours only, Ovum notes in its advisory about SAP support changes.
Even premium support customers had to pay extra for 24/7 support, Wohl says. Now 24/7 support will be available to all customers, because the Enterprise Support package is now the minimum offering. Additional support offerings are available to customers willing to pay more than 22 per cent, including MaxAttention, a package that places SAP specialists on the customer’s site full-time.
Existing customers with the basic support package that costs only 17 per cent of license fees are being allowed to stay on that same plan, but new customers will not be offered the 17 per cent rate, Wohl says.
Moving to a 22 per cent minimum fee brings SAP in line with the prices of rival Oracle (NASDAQ: ORCL), according to Ovum analyst Madan Sheina. “Since 17 per cent was seen as a bargain for many companies, we feel this move is akin to SAP giving up a competitive differentiator,” Sheina writes.
Ovum advises customers to take a long hard look at their support contracts. “There’s no better time for SAP customers with expiring Basic support contracts to consider the extent to which they need and use such deep support,” Ovum writes. “Admittedly, companies that have spent millions on ERP software that is mission-critical to their core business will be ready to pay maintenance and support to make sure it keeps ticking. But at the same time vendors are desperate to keep them on board. So perhaps it’s time to haul in your ERP supplier of choice for some serious contract negotiations.”
SAP customers using the R/3 software will have another option in 2009, at which time Rimini Street plans to offer R/3 support at 50 per cent savings over SAP prices. R/3 is a previous generation of SAP’s software, which has since been replaced by ERP 6.0 and the Business Suite.
Ovum further states that SAP should take a lesson from software-as-a-service vendors such as Salesforce.comand NetSuite, which build support fees into the monthly charges customers pay for access to the Web-based software.
Wohl says this is a false comparison, given that SAP software is more complicated and extends into more of a customer’s systems than does a typical Web-based product. The support requirements are “a world apart,” he says.
Wohl also says he’s not worried about Rimini Street posing any threat, given that R/3 customers are rapidly upgrading to ERP 6.0. Worldwide, about 9,000 companies have installed or are installing 6.0, he says.
IDC took a less critical view of SAP Enterprise Support than did Ovum.
“Enterprise customers are demanding a more robust support solution from their support providers — and SAP is answering that call with SAP Enterprise Support,” IDC writes in a research note. “Integrating advanced tools with proactive support capabilities can free support staff to focus on high-value interactions with IT departments and end users. In addition, enterprises are looking for their support services providers to offer end-to-end capabilities for their environments. By including third-party applications in SAP Enterprise Support, SAP will be able to provide a complete software support solution for its customers.”