Rising prices are affecting all areas of business operations, and software maintenance is no exception. Both SAP and Oracle customers will be familiar with regular increases to their software support costs, which align with current inflation rates of the country that the business operates in.
While an 8 percent fee rise may be written in the contract for Oracle customers, such a percentage increase can translate into a substantial financial burden when dealing with multi-million-dollar software support packages.
No enterprise is happy with these increases, but many continue to pay the bill. It’s important to remember, however, that the major ERP providers are making a 90 percent margin on their support business. In this context, many enterprises are beginning to question the inflation-justified price increases. With the base level of pricing upon signing the contract, and the routine price increases, enterprises rightly expect exceptional, unparalleled support and maintenance. Unfortunately, the vendors often fall short on delivering this.
The Oracle example
Oracle recently ended mainstream support for its 12.1 database, requiring its customers running this version to upgrade or face being left exposed. Whilst 12.1 will be covered by Oracle’s Sustaining Support, customers will receive no new program updates, fixes, or security patches. Essentially, customers are paying for full Oracle support fees and receiving reduced support.
What are the options? Customers can either choose to upgrade to the next long-term release, 19c, which is currently available on Premier Support until April 2024, or, if they are content with their existing systems, they will need to find a way to keep supporting them.
Upgrading to a newer version of Oracle database will undoubtedly have many benefits for many enterprises, including new and improved functionality and enhanced security features. However, many customers are not completely sold on these features, and upgrade solely to ensure that their systems remain supported.
It’s crucial to note that enterprises will only really see noticeable benefits in functionality for end-users if all the applications in their software stacks are upgraded, too. Getting databases up-to-speed is one thing, but the upgrade benefits can’t be realised if enterprises are still relying on legacy apps and hardware.
With these rising ERP maintenance fees, and no guarantee that systems will actually be supported going forward, many enterprises feel they have no choice but to upgrade, despite the small operational gain.
Before embarking on a software upgrade or refresh, enterprises would do well to interrogate whether it’s really in their best interests. To stay supported – while critical – is not a good enough reason to keep upgrading in line with the vendor’s expectations. If the latest software upgrade doesn’t make business sense, enterprises shouldn’t feel forced into it. A software vendor’s timeline should not have to align with each enterprise’s exactly so that they can get the best out of their software stack.
Instead, enterprises should be able to leverage their support maintenance services to support their exact, individual requirements. A personalised software system that works hard for the business and its users is achievable and should be the goal for every enterprise.
These bespoke support and maintenance packages can even help enterprises with cost-reduction strategies. Gartner revealed that by partnering with third-party support vendors, enterprises can cut the cost of maintaining their legacy ERP systems by as much as a half. These cost savings are significant in the face of economic global fallout from COVID-19, inflationary pressures, and the aftershocks of the invasion of Ukraine. Enterprises everywhere are scrutinising their books, looking for options to cut costs whilst ensuring their operations keep running seamlessly.
Gartner also notes that these financial factors are urging more and more enterprises to leave their support contracts provided by the ERP providers in favour of third-party alternatives. Third-party software support deals made up 45 percent of all technology deals negotiated across APAC, North America, and EMEA in 2021-22 – a rise of 18 percent compared to the previous year.
It’s not just about substantial OPEX savings, either. When enterprises find the right third-party support contract, they’ll be more than just a customer. There are many value-added services on offer such as helping enterprises streamline their budgets, ensuring software works in tandem with transformational objectives, and supporting legacy systems and applications. Investing in third-party software support puts the customer first. Whether the priority is to optimise current operations or to move towards a hybrid software environment, third party support enables that.
Working with a third-party support partner offers enterprises crucial flexibility, providing access to a better range of contract options (no paying for support for unused products), expert advice and consultancy on software upgrade, transformation, and migration options, and specialist maintenance for products that vendors leave unpatched and unsupported.
Vendors shouldn’t be dictating to their customers how to run or manage their ERP systems. Each enterprise should have the authority and autonomy to understand their options, plan their future carefully with stakeholder buy-in, and then make decisions about change, acceleration, and growth. Many more software customers are realising this and are beginning to look elsewhere in the support market as a result.
Every software customer should work with a support partner that asks, “how can our services help you achieve that”, not “when will your enterprise fall in line with our objectives.” When working with a support partner who understands that, enterprises will flourish and succeed.
David McDougall, Chief Revenue Officer, Spinnaker Support
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