by Todd R. Weiss

Cut IT Costs for Older ERP Apps With Third-Party Support

Aug 02, 20114 mins
Enterprise ApplicationsERP SystemsIT Leadership

Some large enterprises are looking to third-party ERP support providers to reduce their maintenance and support costs by 50 percent or more rather than sticking with their existing ERP vendors. Rebecca Wettemann of Nucleus Research explains the circumstances in which replacing an existing ERP vendor with a third-party support provider makes sense.

Running big, complicated ERP suites has never been an inexpensive undertaking for large enterprises. As the systems get older, the maintenance and support costs continue to rack up, consuming lots of IT budget dollars every year.

At some point, user companies have to consider whether it’s time to replace their ERP apps with new ones — which is certainly not an option that’s taken lightly — or to find less expensive sources for their ongoing support.

That conundrum is leading a growing number of enterprises to consider bringing in third-party ERP support providers who can help keep legacy systems running while cutting maintenance and support costs by 50 percent or more, according to Rebecca Wettemann, an ERP analyst with Nucleus Research.

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“We are seeing more companies consider third-party support for a couple reasons, including that it’s available for more versions of old applications than it ever was before,” Wettemann says. “Second, a lot of companies are choosing to stay longer on old versions of ERP that may no longer be supported by their original vendor.”

Another key factor that’s driving interest in third-party ERP support options is the growing popularity of SaaS ERP apps, which offer a steady stream of new features and improvements. “Customers are today asking, ‘Why am I paying hundreds of thousands of dollars a year to support an application that doesn’t give me new features every year when I could be spending the same amount of money and getting incremental benefits every year with SaaS offerings,'” says Wettemann.

The support options discussion is popular among companies that deployed an ERP system more than a decade ago to address Year 2000 issues, Wettemann says. For these enterprises, the question becomes whether they should move to third-party support for now so they can save money and be able to afford a modern ERP suite in the future, she adds.

Enterprises continue to look for cost savings in IT budgets and they’re finding that major ERP vendors such as Oracle and SAP aren’t willing to renegotiate contracts to provide lower support and maintenance rates for older applications, Wettemann says. “The business models for the major ERP vendors rely on that recurring revenue stream. It’s not that their support has gotten worse but that companies are starting to question those bills that don’t have a clear benefit for them.”

One of the major third-party ERP vendors in the marketplace today is Rimini Street, which was sued by Oracle last year for allegedly infringing on Oracle’s intellectual property to provide support to customers, according to IDG News Service. Rimini Street denies the allegations, but the case is still in court. Other vendors that provide third-party ERP support include Spinnaker Support and Virtual Tech.

To help determine if third-party ERP support might be a good fit for your company, here are a few questions to ask yourself, Wettemann says:

*What current versions of your ERP application are you running and what is your upgrade plan? If you are running an older version that your ERP vendor intends to stop supporting then you are likely better off looking at third-party support from a total cost of ownership perspective.

*Do end users require much help using your existing ERP system? If your users are not opening a lot of trouble tickets or needing a lot of external vendor support, that might indicate that it’s safe for you to move to a third-party provider to save money. Often third-party vendors can be more responsive than traditional ERP vendors because they have dedicated account managers who get to know customers’ systems inside and out, says Wettemann.

*Do you want to change or customize your ERP system in any way? If there are modifications or customizations that you would like to make that your existing vendor won’t support, a third-party provider may be able to implement the changes you need.

*When does your contract with your existing vendor expire? If you choose to go with third-party ERP support, think carefully about the timing of your new contract. “You want to allow some overlapping support from your existing and new vendors,” says Wettemann. “You don’t want to cut the existing vendor off one day and have the next one start the next day. You want time to ensure the least disruptive transition that’s possible. We find that three months is a good amount of time to have overlapping service.”