As many of you may already know, most SAP renewal deals ‘come due’ in December, as they are generally annualized to the calendar year, as are most new SAP license purchases and expansions. SAP is hungry for new licensing revenue, so customers can expect to see increased activity around year-end audits. Now is the time to start planning (and saving), especially if you’re already paying for annual maintenance and support services from to SAP.
If you are ready to go ahead and write SAP another huge check for the upcoming year and are unconcerned about the value you’re getting for these large investments, check your pulse…you may be a software zombie. Just the kind of zombie SAP loves.
Arguments persist about the realistic timeline of SAP’s S/4HANA (its “next generation” business suite of applications – with an entirely new code base, similar to other generational evolutions in SAP’s product history), but even if you believe the wildly optimistic views that something should be ready in late 2020, and even if you have no concerns about being on the bleeding edge of yet another software reimplementation, you have to wonder what value you are getting for investing in SAP product maintenance today.
Let me make this crystal clear: Given the market conditions today, NOBODY should be paying full price for SAP Annual Maintenance and Support Services. Nobody. Not even the undead.
Well, here are just a few reasons:
- You’re not getting the software upgradability protection you paid for.
- SAP has publicly announced that your current maintenance fees will NOT supplement the purchase of S/4HANA. This means, that even though you are paying maintenance on SAP now, and a vast majority of those maintenance dollars are allocated to R&D for enhancements to the product, you will not get the new product, you will instead have to buy it again.
- In addition, SAP has announced that certain product features that will be available in S/4HANA will not be made available in to current versions, meaning that product development for SAP has effectively stopped. If that’s the case, what, exactly, are you paying for?
- If you want some indication of how long SAP *really believes* it’s going to take to get S/4Hana into a steady state for the market majority, look no further than their end of life support date for the current version of SAP, which they extended to 2025. SAP recently extended on premise support for HCM to 2030.
- So, it’s clear that there will be a viable on-premise support environment for SAP at least until 2030, which says to clients that they may have as many as 12 years or more where they can utilize their current licensed assets.
- In 12 years’ time, at 22% of the license cost annually, that’s 264% of the license value you will spend in maintenance, with virtually no discernable value for product upgradability. Said another way, if all you did was go third party support at half the cost for 12 years, you would save more than enough money to completely rebuy the SAP license estate in 2030 and still save 32% off in comparison to simply maintaining those assets in today’s dollars.
- Of the upgrades you do get, much of what you get - you won’t want or need, and some of what you get will introduce problems into your environment that would otherwise not have been introduced if you just didn’t apply them.
- Of the ‘stuff’ you do get that you want and need, that doesn’t cause a problem, there will generally be cheaper, faster, better non-SAP alternatives available on the market.
- Generally, SAP directs about 68% of your maintenance money to research and development (creating new products), and most clients mistakenly believe that most of that money is going to benefit them in some way in the future, but when you consider that every forced upgrade is filled with stuff you don’t want or need, you are likely paying for at least 80% of the development efforts for stuff that you don’t want and need.
- Your SAP ecosystem choices are slowly being determined for you:
- HANA is SAP’s database platform of the future
- Cloud is SAP’s delivery platform of the future
- SuccessFactors for Human Capital Management
- Concur for Travel & Expense Management
- Ariba for Supplier Network Management
- Business Objects for Business Intelligence
- SAP Support doesn’t do what you think they do:
- They don’t support custom code
- They don’t guarantee to get you up and running if you have an outage
- Many clients report that they don’t even provide any answers in a timely manner resulting in clients having to rely on their own abilities to address any issues
- The best you could ever possibly do is to get 14 cents of value on every $1 you spend.
- SAP maintenance runs at a reported 86% profit margin, meaning that even after all their costs of providing support, they make 86 cents of profit on the dollar – not exactly a fair trade of cost for value. Don’t you wish your business ran at an 86% profit margin? If it did, maybe you could trade some of your widgets for some of their services, but other than that, it’s never a good deal.
- You’re not considering all the other charges that are likely coming with the ‘new’ SAP S/4Hana – things like hosting charges, database charges, re-implementation (rapid deployment) charges, etc.
Don’t settle for being just another zombie in the SAP Horde. There are better alternatives to SAP Enterprise support available! For example:
- ‘Standard’ support from SAP (typically 18% cheaper than Enterprise Support).
- Third party support providers (typically half the cost of SAP Standard Support).
- Bespoke contractor support (can be done on an incident or T&M basis – typically half the cost of Third Party Support).
- Self-support (in many cases, this can be done for next to no incremental cost, as many SAP customers have already built their own centers of excellence in supporting SAP, and in fact do so quiet well, typically managing most (if not all) of the problems in the current deployment.
In summary, remember the following:
- The best you can do is get 14 cents of value for every $1 spend on SAP support.
- However, with 68% of the value of support effectively eroded due to your inability to get the S/4Hana upgrade, the best you can do now is really about 5 cents on the dollar.
- And with all the value concentrated on the technical support of the product, with the vast majority of clients seeing little value from SAP, and with other viable market opportunities available at half the cost or even much lower, the best that clients can hope for us to get 2 or 3 cents of value for every dollar invested.
Still, don’t feel too bad if you are still spending money on SAP Maintenance and Support, because it’s not too late to leave the world of the undead, and come back to the living by doing something about it today. Just please don’t fall into the category of an SAP customer that is afraid to rock the boat. SAP expects the call, but they certainly aren’t going to volunteer to show you ways you can pay them significantly less or illustrate how you can stop paying them altogether on one of their highest margin products in history.
NET(net) can guide you through the best alternatives based on your SAP environment as we do for EVERY one of our clients. In the end you’ll pay less, get more value, and have better control over your supplier relationship. 15 years, 2,500 clients, 25k field engagements, and $250 Billion of captured value empowers us to help you solve any supplier question.
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