Third-party SAP support offers migration flexibility
Third-party support providers make a pitch that they can provide greater flexibility at a lower cost, but customers should think things through before making a switch.
SAP support and maintenance is a critical but often overlooked aspect of a customer's relationship with the ERP giant.
SAP customers often sign on to SAP support when they sign the contract for their software and rarely give it a second thought, even if the service is costly. For SAP, support provides a healthy revenue stream; for example, the company reported that software support contributed about 42% of overall revenue in 2021.
But SAP's impending 2027 deadline to end mainstream maintenance for existing ERP products like SAP ECC has led to questions about whether customers should continue with SAP support or move to a third-party support provider.
The two major third-party vendors offer support and application management services that could allow customers flexibility in deciding when they want to move from legacy SAP to S/4HANA.
Analysts said that moving off SAP's support can save customers money and generally does not result in a diminution of support quality, but they also said the decision should be approached carefully.
Business-driven S/4HANA roadmap
Moving away from SAP support provides customers with more flexibility and more time to decide how and when they want to migrate to S/4HANA, said Sebastian Grady, president of Rimini Street.
Rimini Street, headquartered in Las Vegas, began in 2005 as a third-party IT support provider for SAP and Oracle, and now includes comprehensive application management services.
SAP's approach to upgrades locks customers into S/4HANA and is driven by the deadline for mainstream support, Grady said. Rimini Street offers a "business-driven roadmap" that doesn't lock customers into S/4HANA as the only technology or the Rise with SAP program as the only path to the cloud.
Using Rimini Street, SAP customers can continue to run their existing ECC systems on premises or in the cloud, and choose to move to S/4HANA on their timetable, he said. They can also choose to stay on ECC and modernize on the edges with other applications for HR or CRM in an approach that the research firm Gartner calls composable ERP.
"You can move SAP workloads to any cloud hyperscaler without having to go through Rise," Grady said. "You can run ECC 6 on AWS, and you can extract the maximum value of SAP investments, as well as integration [of cloud applications like Workday or Salesforce] along the lines of the composable ERP model."
Rimini Street also covers some of the gaps in SAP's support service, such as covering custom code, according to Grady. He said that SAP often breaks because of ABAP customizations or Z program customizations, which customers need to run their businesses.
"SAP does a good job of testing their products before they become [generally available]," Grady said. "It's once they've been in the wild for a couple years that almost all of the issues in those products will have been found."
Avoiding a vendor-imposed deadline
The reality of SAP's forced upgrade off legacy ERP systems is that the majority of customers are continuing to delay their move to S/4HANA, and a significant number of customers who have purchased S/4HANA licenses still haven't started the migration, said Shawn du Plessis, vice president of SAP global support at Spinnaker Support.
While it's difficult to pin down an exact number of SAP customers waiting to migrate to S/4HANA, a 2020 report by the Americas' SAP Users' Group and the German-speaking SAP User Group indicated that roughly 15% of SAP customers were live on S/4HANA and nearly 25% were in the process of migrating to S/4HANA.
But with its 2027 deadline, SAP is creating a pressure point for customers to make a decision sooner rather than later, du Plessis said.
"The biggest issue here is all these companies are hoping that the business case is going to become easier for them, unless they're forced into it because of the end of mainstream support," he said. "Essentially, it's not a business case anymore -- it's basically a risk mitigation factor."
Spinnaker Support, located in Greenwood Village, Colo., began in 2008 as a third-party support provider and now includes application management and other services for SAP, Oracle and Salesforce.
Like the message from Rimini Street, du Plessis said that moving to Spinnaker Support saves on costs and gives customers breathing room to take their time and make a business case for an S/4HANA migration.
Jon ReedCo-founder, Diginomica
Du Plessis also made the argument that choosing a third-party support vendor would enable customers to retain their core ERP product, such as ECC, while diversifying their stack by bringing in Workday for payroll and HR, and Salesforce for CRM.
"Companies are making different decisions about their footprint, and that process will continue," he said. "So at one point, a company will have some piece on SAP, but not everything on SAP."
Room for improvement
Enterprise vendors like SAP might not like losing customers to third-party support providers because maintenance is a cash cow, but overall it's a valuable option for customers, said analyst Jon Reed, co-founder of Diginomica, an enterprise computing industry analysis firm.
"Whenever you have options in the market for a customer, it's a good thing because it compels all the options to be more competitive and more forward-thinking," he said.
Third-party support vendors, and Rimini Street in particular, have evolved to add services that go beyond support and can now help customers with broader aims such as digital transformation, Reed said.
"Customers who haven't looked at third-party maintenance in a few years might be surprised by how robust some of those services have become, because they certainly have come a long way," he said.
Spinnaker and Rimini Street offer similar services and levels of support, so there's little to choose between the two on a technical level, according to Chip Hanna, IT sourcing and commercial advisory practice director at UpperEdge, a Boston-based firm that advises companies on enterprise application negotiations and selection. UpperEdge assesses that there is also little drop in quality between the third-party vendors' support and SAP's.
The main advantage to moving to third-party support is the lower cost and lack of standard annual contractual increases, Hanna said. Customers also have the advantage of competition among the vendors themselves, as well as SAP, for cost and service agreements.
However, moving off SAP support has drawbacks, he said. For example, third-party contracts can require longer-term commitments, and SAP can impose reinstatement fees if customers return to SAP support.
"SAP will aggressively audit license compliance, both in terms of scope and frequency, with clients who terminate SAP maintenance," Hanna said.
Complex conversation on transformation
The decision to move to third-party support requires consideration for how it affects the customer's relationship with SAP and any future plans for an S/4HANA transformation, Hanna said.
"SAP will not allow customers to migrate from ECC to S/4HANA without support, given the specific contractual process to obtain S/4HANA license entitlements," Hanna said. "In addition, customers cannot purchase any new SAP software without at least one year of support."
Reed echoed the point, saying customers need to think through the support decision and consider their overall transformation or upgrade strategy rather than just considering the costs.
"It's not an easy decision to make one way or the other, and that's why for anything like this you need independent expert advice from someone that isn't working for the third-party maintenance vendor or the ERP vendor to guide you through it," he said. "You need to look hard at what the pros and cons are, because it's not a simple cost-effectiveness exercise -- it's a much more complex decision than that."
ERP support needs to line up with a company's overall future platform and transformation priorities, Reed said.
"You have to have a transformation plan, and your third-party maintenance providers should be able to engage in those conversations with you, and help you see how you're going to reallocate and how you're going to access the ERP data on the back end, if you need it," he said.
Jim O'Donnell is a TechTarget senior news writer who covers ERP and other enterprise applications for SearchSAP and SearchERP.