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 challenge for many customers, especially given the pressure to switch to S/4 solutions by 2033. Despite being contractually bound, every SAP customer with their own licenses has the option to terminate maintenance with SAP and transfer this task to a third-party provider.

In a strange twist of SAP's history, more than ten years ago, Gartner analysts advised all SAP customers to maintain their ERP licenses, regardless of their future ERP strategy.

The main reason for this strategic decision is often the search for alternatives to official SAP maintenance. Customers sometimes criticize the service quality and inadequate price-performance ratio of the maintenance models.

SAP maintenance versus SAP usage rights

Although terminating the maintenance contract releases SAP customers from the annual maintenance fee, it does not affect the right to use underlying software such as ECC 6.0 or the S/4 Hana database. 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.

Third-party SAP maintenance offers companies an interesting financial option, especially for those phasing out SAP or using outdated software. These providers specialize in supporting SAP software products and often have the expertise to provide support for 15 years or more after SAP ends support.

With these companies, customers usually have access to a web portal and a continuously available hotline. Some providers offer stricter service-level agreements (SLAs) and a replacement for SolMan (SAP Solution Manager). These third-party providers often combine support with comprehensive managed services, taking over complete operation of SAP systems.

Mixed doubles without SAP

The EU launched competition proceedings because SAP does not allow mixed maintenance of an ERP system. As a result, SAP customers cannot have the classic FI, AM, and CO parts of the ERP software maintained by a third-party company. For example, they cannot have IBP (Integrated Business Planning), the cloud successor to on-prem APO (Advanced Planning and Optimization), serviced by SAP itself.

Many external companies also supplement SAP maintenance by offering specialized services, such as application management services (AMS) and hosting (managed services). These partners help bridge 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 customers' individual requirements.

The RISE topic was also discussed at the PAC analysts' information event in Munich in mid-October. RISE is an SAP service that requires significant user support. An SAP ticket system must be initiated by the customer. SAP does not take proactive action here, leaving the majority of the responsibility with the user. In turn, the user needs the necessary knowledge for ERP operation.

Managed service providers (MSPs) often offer more extensive services that go beyond standard SAP support. For instance, external consultants and system houses provide support with implementation, consulting, training, and SAP development.

EU criticizes the lack of partial decommissioning of SAP licenses

In addition to switching maintenance providers, partially decommissioning SAP licenses offers significant cost-optimization potential—according to the EU competition authority! SAP customers have a defined procedure for relinquishing usage rights for unnecessary ERP licenses, referred to as unconditional partial decommissioning. This option becomes relevant when parts of a company are spun off and licenses for unused processes are left behind.

However, according to SAP, unconditional partial decommissioning leads to a revaluation of all discounts in contracts associated with the product families to be decommissioned. As a result, companies give up usage rights without receiving any direct added value. The EU competition proceedings should clarify matters for users, but SAP will fiercely resist.

SAP is willing to talk, but only a little

Instead of completely relinquishing usage rights, SAP offers customers extension programs that enable the partial decommissioning of unused on-prem licenses. These licenses can then be credited toward new on-premises licenses or cloud services.

To participate in the Cloud Extension Program, SAP users must submit a current audit report no older than twelve months to prove that the licenses being taken into account are no longer required. SAP reserves the right to conduct additional license audits after partial decommissioning to verify compliance.

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

The ability to decommission unnecessary licenses, combined with the option to supplement or replace support with specialized third-party companies, could return a degree of strategic agency to SAP legacy customers to address complex licensing and maintenance challenges in today's ERP landscape. The EU competition procedure aims to ensure that SAP customers have greater freedom in maintaining their ERP systems.

However, the discussion about maintenance costs and fees is ultimately a legal dispute. The EU proceedings are relevant because SAP may face fines of billions of euros, while SAP customers could save millions of euros in maintenance fees.