SAP Raises Software Maintenance Fees for New Customers

Market realities, competition from Oracle, and maintenance and support complexity are the reasons behind ERP giant SAP's move to limit service plan choices for new customers of its enterprise software.

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Forrester's Wang notes that the typical maintenance and support cycle has a big drop-off of customers' needs at the end of an application's life. "When you get to year six, seven or eight, when there's really nothing going on—just regulatory updates or patches, maybe some changes to hardware—you really should be paying somewhere between 5 percent and 10 percent then," he says.

The result of "maintenance discontent," Mirchandani writes in an e-mail, is that CIOs have to fight harder for initial license discount, since maintenance is usually a percent of net license cost. Annual maintenance renewals are more contentious—"vendors love to sell multiyear renewals to avoid that scenario each year," he says. And lastly, lots of companies are evaluating third-party maintenance options.

"Many just use it to negotiate the software vendor down," Mirchandani says. "But a growing number are walking away to a third-party provider like Rimini Street." (To read an interview with the CEO of Rimini Street, Seth Ravin, see "The Man Behind 'Half Off' Third-Party Software Maintenance.")

In the end, it's important that IT executives and business leaders remember when they have the most leverage with their vendors. "Use licensing, maintenance fees and provisions for the software licensing contract as part of vendor selection criteria upfront," Wang says. "The only time you have leverage is when you first sign that deal, so how you structure that contract is so important."


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