R "Ray" Wang
R "Ray" WangNews Analysis: SAP and SUGEN Make Progress on Enterprise Support
Since SAP's announcement of its single tier Enterprise Support plan last July, customers have continued to express dissatisfaction. In response to such complaints, the SAP User Group Executive Network (SUGEN) of 12 SAP user groups and SAP have been engaging in discussions around the value derived from this new offering. This morning SAP and SUGEN announced an agreement on three key areas of the Enterprise Support offering:
- Defined list of key performance indicators to measure the results of SAP Enterprise Support (ES) services. As part of the agreement, the value of ES will be measured by through the jointly agreed SUGEN Key Performance Indicator Index (SUGEN KPI Index).
Based on the press release and informal conversations, the four areas covered include business continuity, business process improvement, protection of investment, and total cost of operations. No public details have yet been provided on the specific metrics but there is an expectation for customers to realize value within a four year time frame of the benchmarking program
POV: The four areas measure how choice, value, and predictability of investment come together in the overall maintenance offering. If successful, this represents a unique and transparent approach to demonstrating value in maintenance. In the coming weeks, SAP users will want to seek details of the specific KPI's and determine how those KPI's will be measured on a consistent basis across different types of organizations. - Joint benchmarking program to define and measure how SAP customers may derive value from ES. With agreement on the KPI's in place, a formal benchmarking program will be instituted to provide baselines to quantify value. SAP and SUGEN have agreed on the parameters of the representative customer sample. SUGEN will choose the customers. Importantly, an independent party will validate results will conduct quality assurance and independent validation of the results.
POV: Benchmarking remains the critical factor in this program. SAP customers should pay close attention for balance in the representative customer sample. Key variables include level of internal SAP competency, size of organization, complexity of environment, number of instances, industry, and geographic focus. One can not overemphasize the importance of this program. The results not only impact future maintenance fee increases, but also provide important benchmark data on SAP operations.
- Changes to the 2008 pricing program for current contracts that may will be migrated to ES. Based on the KPI program, SAP agrees to postpone subsequent price increases pending the realization of targeted improvements measured by the SUGEN KPI's. These changes have been made to the 2008 pricing program for ES. Instead of ongoing increases until 2012, the new program ends in 2015. As stated in the press release "Starting in 2010, the price of SAP Enterprise Support for existing customers will continue to increase based on individual contract terms but will not be higher than a yearly fixed upper cap. This translates to an increase average of no more than 3.1 percent per year from 2010 onwards. The price of SAP Enterprise Support will be capped at 22 percent through 2015. "
POV: Two scenarios emerge. Should the value of ES not be realized, then the price increase will not pass. However, customers will more likely face a more gradual price increase to the 22%. This may prove to provide some relief for recession strapped customers.
The bottom line - progress on Enterprise Support issue may result in a win - win for SAP customers
Expect customers to take the news with cautious optimism. Should the benchmarks succeed, customers may gain value. Failure to meet targets meet a freeze on maintenance. In any case, this is welcomed news and provides a hard fought win-win for the customer and the vendor-client relationship. Congratulations go out to SUGEN and SAP for coming to a common ground! This shows the importance of preserving independent user groups and the role active users play in shaping the overall agenda. The one thing left in the choice, value, predictability equation is choice - meaning a tiered maintenance program or access to third party maintenance. With the less than positive Q1 earnings report announced today, let's wait to see how other chips will fall into place.
Your POV
Do you think SAP met its promise to SUGEN? Will this help you with your commitment to SAP? Do you feel SAP has now done the right thing? Send me a private email to rwang0 at gmail dot com. Posts are preferred! Thanks and looking forward to your POV!
For more POV's:
Dennis Howlett - April 28, 2009 "SAP software revenues plummet, announces new deal on maintenance"
Copyright © 2009 R Wang. All rights reserved.