EU audit of SAP maintenance

Expensive and inflexible SAP maintenance

Dealing with SAP ERP licenses (on-prem and cloud) and the associated maintenance is an ongoing construction site and challenge for many existing customers, also in view of the pressure to switch to S/4 solutions by 2033. Despite being contractually bound, every existing SAP customer with their own licenses has the basic option of terminating maintenance with SAP and transferring this task to a third-party provider.

It seems like a joke of SAP's history that more than ten years ago, Gartner analysts told every existing SAP customer to keep their own ERP licenses - regardless of what a future ERP strategy might look like.

The main reason for such a strategic decision often lies in the search for alternatives to official SAP maintenance, as customers sometimes criticize deficiencies in service quality and an inadequate price-performance ratio in the maintenance models.

SAP maintenance versus SAP usage rights

While the termination of the maintenance contract releases the existing SAP customer from the annual maintenance fee, the right to use the underlying software, such as ECC 6.0 or the S/4 runtime database, does not expire as a result. The annual maintenance fee, which has historically amounted to up to 22 percent of the list price, has been a reliable and predictable source of income for SAP for many years.

The third-party SAP maintenance market offers companies a very interesting financial option, especially for those users who are strategically phasing out their SAP activities or running very old SAP software products. These third-party maintenance providers specialize in supporting SAP software products and often have in-depth expertise to provide support for periods of 15 years or more after the end of SAP support.

With these third-party companies, customers usually have access to a web portal and a continuously available hotline, with some providers offering stricter service level agreements (SLAs) and even a replacement for SolMan (SAP Solution Manager). It is not uncommon for these third-party providers to combine their support with comprehensive managed services, where they take over the complete operation of the SAP systems.

Mixed doubles without SAP

The EU competition proceedings were also launched because SAP excludes mixed maintenance of an ERP system. It is therefore not possible for existing SAP customers to have the classic FI, AM and CO part of the ERP software maintained by a third-party company and, for example, to have IBP (Integrated Business Planning) serviced by SAP itself as the cloud successor to on-prem APO (Advanced Planning and Optimizing).

At the same time, many external companies also act as a supplement to SAP maintenance by offering specialized services such as application management services (AMS) and hosting (managed services). These partners help to close the gap between standardized SAP support - such as that included in the Rise offering, which is often limited to SAP Basis operations and technical support for the SAP platform - and the individual requirements of customers.

The topic of Rise was also discussed at the PAC analysts' information event in Munich in mid-October. Rise is an SAP service that requires massive user support. An SAP ticket system must be initiated by the existing customer. There is no proactive action from SAP here, which leaves the majority of the responsibility with the user, who in turn needs the necessary knowledge for ERP operation.

Managed service providers (MSPs) often offer more extensive accompanying services that go beyond standardized SAP support. For example, the services of external consultants and system houses include support with implementation, consulting, training and SAP development.

EU criticizes the lack of partial decommissioning of SAP licenses

In addition to changing maintenance providers, the partial decommissioning of SAP licenses also offers significant potential for cost optimization - according to the EU competition authority! Existing SAP customers have a defined procedure for giving up usage rights for ERP licenses that are no longer required, which is referred to as unconditional partial decommissioning. This option can become relevant, for example, when parts of a company are spun off and licenses for processes that are no longer used are left behind.

However, in SAP's opinion, such an unconditional partial decommissioning leads to a revaluation of all discounts in contracts associated with the product families to be decommissioned, as a result of which companies give up usage rights without receiving any direct added value. The EU competition proceedings should also bring clarification in the interests of users, but SAP will put up fierce resistance.

SAP is willing to talk, but only a little

As an alternative to the complete relinquishment of usage rights, SAP offers existing customers so-called extension programs, which enable the partial decommissioning of unused on-prem licenses so that they can be credited to new on-prem licenses or cloud services.

In order to participate in the Cloud Extension Program, the SAP user must, among other things, submit a current audit report that is no more than twelve months old to prove that the licenses being taken into account are actually no longer required. SAP reserves the right to conduct additional license audits after the partial decommissioning to verify compliance with the decommissioning.

The licenses with the lowest maintenance amount per license are decommissioned first. It is also important in this context that no prepaid maintenance fees will be refunded for the retired licenses. This also means that the EU authorities will need to clarify the situation and experts do not expect the EU competition proceedings to end quickly!

The ability to decommission unneeded licenses, in combination with the option to supplement or replace support with specialized third-party companies, could give SAP legacy customers back a degree of strategic agency to address the complex licensing and maintenance challenges in today's ERP landscape. Ultimately, the aim of the EU competition procedure will be to ensure that existing SAP customers have a greater degree of freedom in the maintenance of their ERP systems.

But ultimately, the discussion about maintenance costs, maintenance and maintenance fees is a legal dispute - read more about this from lawyer Dr. Jana Jentzsch in an exclusive commentary in E3 Magazine November on page 12 and on this website. The EU proceedings are relevant because SAP is also threatened with fines of billions of euros and, on the other hand, existing SAP customers may save millions of euros in maintenance fees.