The order form is your order receipt to subscribe to SAP`s Business Cloud services. It sets the terms and sets the structure of the contract. “Maintenance is the most profitable part of the business,” said Ray Wang, senior analyst at Forrester Research. “Because until the fourth or fifth year of the software contract, for maintenance in the world, there is 60 to 80 per cent profitability.” “Many use it only to minimize the software provider,” says Mirchandani. “But more and more go to a third party like Rimini Street.” (To read an interview with Rimini Street CEO Seth Ravin, see “The Man Behind “Half Off” Third-Party Software Maintenance.) Some software vendors are known to use anxiety tactics to prevent you from changing, including: Nevertheless, enterprise software vendors are hesitant to change any part of this decades-long agreement. (See negotiation of better maintenance terms.) In January 2008, SAP implicitly announced that as of February 1, its basic support offer (which was a good deal with 17 percent for many companies) would expire for all new customers. In short, Wang says, SAP`s approach “reflects their view that software maintenance has become a little more complex.” For example, Mirchandani suggests that there be a category of customers who are satisfied with the current version of the software, who only want patches and application optimizations that come with the basic support and who don`t want to upgrade. They would pay 10% maintenance costs. A second category of customers (calculated from 15 to 17 percent) is the one that plans to stay with the product and make upgrades, as well as get basic support. And a third category (full maintenance rates loaded) is one that seeks high-level support and all bells and whistles – next-generation service software applications (SaaS) and service-oriented architecture (SOA).
So what is the fair value for the maintenance and support of enterprise software? More than half of those surveyed in a Forrester survey (57%) said that fair maintenance costs should fall below 16%. And they`d like to pay, according to Wang. “But if you look at what they paid, it`s about 26%.” A recent forrester survey of 215 business process and application professionals showed that maintenance costs were still too high. The result was not surprising. “We`re hearing a lot more maintenance complaints than ever before,” Wang says of Forrester`s customers. Risk management and cost-cutting costs are two responsibilities of the CFO that intersect in SAP maintenance contracts. SAP charges customers up to 22% of the initial fee per year for support and maintenance, and in some cases, annual increases are included in the automatic renewal clause of the maintenance contract. Those who use SAP for support and maintenance have often felt under pressure to update to expensive new versions or migrate prematurely to HANA. This is known to create a state of permanent instability with limited value for the company. Reducing risk and reducing costs offers short- and long-term benefits to their business. Switching from an SAP maintenance contract to a third-party provider can do both at the same time.