Putting "Enterprise Support" in Context
By Sam Sliman
President, Optimal Solutions Integration, Inc.
Announced in February, rolled out in May and soon to be mandatory for all maintenance customers, SAP’s Enterprise Support program has created quite a stir. While some customers applaud the enhanced offering and extended coverage, others lambast the mandatory 22%-of-license-cost price tag. So what are SAP customers to make of Enterprise Support?
First, it is helpful to lay out the basic facts:
- End to SAP’s 17% basic support package
- End to SAP’s 22% premium support package
- Only maintenance option for new SAP customers is Enterprise Support at 22%
- Enterprise Support includes:
- 24/7 service level agreement
- End-to-end support (non-SAP network components covered)
- Support for implementing ERP application enhancements and support packages
- All existing SAP maintenance customers will be transitioned to Enterprise Support effective January 1, 2009
- Transitioning of existing customers to Enterprise Support will occur by way of a graduated pricing scheme that incrementally moves customers from their current agreements to the Enterprise Support 22% pricing (8% per year over the next four years starting in 2009)
- One year added to extended maintenance (5-1-2 schedule) for SAP R/3 4.6c and 4.7
- More than 350 customers have currently signed up for Enterprise Support
- All SAP maintenance customers will be fully transitioned to Enterprise Support by 2012
Putting SAP Enterprise Support in Context:
A few industry pundits speculate that the primary driver behind SAP’s new Enterprise Support maintenance program is pressure to improve the company’s bottom-line; more pointedly, that Enterprise Support is a knee-jerk reaction by SAP to eroding profits due to competition from Oracle and the loss of revenue due to the delay of Business By Design.
This assessment is both superficial and shortsighted.
First, Oracle’s chest pounding doesn’t dictate SAP strategy. It never has and it never will. (Although it may please Mr. Ellison to think otherwise) As far as the impact of the Business By Design delay, SAP hasn’t backed off of its goal of reaching 100,000 customers by 2010. More importantly, SAP just this week raised its full-year forecasts for both revenue and margin. To be sure, BBD is important to SAP’s long-term strategy, but it appears that BBD is not hugely significant to SAP in the short-term.
It is more likely that Enterprise Support is a gradual shift in SAP’s strategy that reflects the overall maturation of the SAP suite and the enterprise software market in general.
A more in-depth analysis of Enterprise Support must take into account the considerable progress SAP has made on the enterprise SOA front (á la NetWeaver adoption) and the value proposition SAP has articulated to its R/3 customers for upgrading to ERP 6.0.
As is the case with all significant technology investments, it is important to accurately assess the total cost of ownership (TCO) and include this data in the decision-making process. Traditionally, major pieces of the TCO equation for SAP ERP, over and above the application’s licensing fee and maintenance, have included the costs associated with upgrading the platform.
With its new practice of issuing enhancement packages, SAP has done away with the large-scale ERP upgrades of the past. SAP ERP customers now upgrade incrementally and selectively at a significantly lower cost and with little-to-no business disruption. No other major enterprise software vendor offers enhancement packages, or has streamlined and simplified the upgrade process to the degree that SAP has.
With all of its Business Suite applications successfully migrated to the NetWeaver business process platform, SAP has made SOA a reality, enabling its customers to drive business process innovation today by building new, strategic applications using pieces of functionality from existing applications (i.e., building composite applications from enterprise services).
The upshot of SAP’s SOA progress is greater value from an SAP ERP investment. No other major enterprise software vendor has even come close to matching SAP’s SOA accomplishments (buy as they might).
It is true that with Enterprise Support SAP customers will now pay the industry-standard 22% for ERP maintenance. But the industry standard as evidenced by the maintenance programs of other leading enterprise software vendors certainly doesn’t include 24/7 support and end-to-end coverage, not to mention a graduated pricing scheme to soften the transition and the fact that customers can realize Enterprise Support benefits immediately, even before the January 1, 2009 Enterprise Support kickoff date.
Add to this the fact that Enterprise Support also includes advanced assistance with ERP application enhancements and support packages, meaning customers gain SOA efficiencies and realize greater value from their SAP ERP investment, and a dramatically new formula for factoring maintenance into an ERP’s TCO begins to emerge.
