Also Sadagopan's views here :Maintenance, direct from most software vendors, is over priced by a long shot. Customers should have alternatives. Just because you bought a Porsche should not mean you go to the Porsche dealer for every service. For peace of mind or better service you may still want to, but you have a choice to also go to your local garage.
I have never been able to get a convincing reply from product vendors on why the maintenance cost structure never changes much. In every other industry with scale, the maintenance charges or for that matter the service charges shall come down-benefits of scale would reach the customer. Strangely, software industry has no such compulsions.
I think the issue with Oracle [ Peoplesoft ] must be due to its maintenance model and the restrictions that they apply for the code or support documents.
In case of SAP, most of the maintenance/support work is still carried out by the 3rd party service providers. However, SAP as a vendor is responsible for resolving the Bugs in its products. And that cost is included in the licensing cost (or possibly + 2%). Updated after Vinee pointed this. Actually, the maintenance fee is +17% and extended maintenance fee is +2%.
- All the OSS corrections, provided by SAP for the product bugs or guidance notes are also available to the 3rd party providers through their customer OSS account / partner account.
- Source code of SAP is accessible to everyone and can also be modified (in exceptional cases but no legal binding). However, the standard code should not be modified unless there is no other suitable enhancement method available.
- For all the product bugs, SAP provides the OSS Note corrections or patches so those corrections can be applied by the 3rd party service providers.
I think more than 90% of SAP maintenance work is done by IT consultancies and not by SAP though SAP does provide this as a service offering.
Further, most of the SAP service/maintenance work is not towards actual product bugs but for correction of configs, data, regular transactions, verification, upgrades, testing, data-loading, monitoring, small enhancements, authorizations, custom-developments issues etc. And these tasks are still carried out by the 3rd party service providers.
I think the issue being faced by Oracle may not appear for SAP. Except, if a 3rd party service provider actually decides to start supporting the obsolete SAP products like SAP 4.6C (After 2009).
I am sure Oracle (including Peoplesoft) is having a different support model compared to SAP. Had Oracle been following the similar model as SAP, then this might not have become an issue. What do you think?
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SAP annually charges its customers (at least ) 17% of license value in support/maintenance. it also charges an upgrade license fee for major new releases. In that sense the issue is the same as Oracle - it is over priced because it does not follow a bell curve - gradual rmp up and ramp down...
ReplyDeleteThanks for the correction. Updated now.
ReplyDeleteI don't think charging for major release is an issue though. You need to pay for the new technology.
" it is over priced because it does not follow a bell curve - gradual rmp up and ramp down"..
Reducing the cost by leveraging the scale can possibly be the option. Around 3000 Support consultants and 6000 developers for backend development [ for don't know how many customers ].
But patch releases or amount of support required does not really follow a bell curve pattern. It depends on when a customer is planning to go for the patch application.
It will be interesting to know if you can really draw the amount of support work done by SAP over a period of 5 years ( e.g. for SAP version 4.6C ) as a bell curve?
From my experience, I don’t think so.
Also, SLAs and quality level can be improved. But I don't think 3rd parties can provide an alternative for fixing SAP's product bugs / new releases. It's not done, neither recommended nor practical. This will end up in converting the product into customised application for every customers.
3rd parties provide major part of the maintenance work but not the bug-fixes for the product.
Thanks again for your time,
Ram
Just for reference - since February new customers are charged 22% of the licence fee as maintenance. The interesting debate will be around upgrades when customers move from R3 to the latest versions, will they be forced to pay more?
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