In July, the European Union (EU) approved SAP’s commitment to allow its customers to split their SAP software landscape into separate parts, permitting them to choose different maintenance and support (M&S) service providers, different levels of support from SAP, or none for each part.
SAP also agreed that customers can terminate their licences and the respective M&S fees if there are changes to the customer’s business leading to a workforce reduction or bankruptcy. SAP also agreed to abolish reinstatement fees and reduce back-maintenance fees charged to customers who return to SAP’s support after a period of absence.
The changes are likely to benefit those SAP customers still running SAP ECC (Enterprise Core Components). Mainstream support for ECC 6 is due to end in 2027, but customers will be able to extend support until 2030.
However, those who have made a commitment to move to the S/4Hana platform can continue to extend support until 2040, as the German-speaking SAP user group DSAG explained, in response to SAP’s commitment.
It said: “Those already working on an S/4Hana system have a maintenance commitment from SAP until 2040. Therefore, it can be assumed that the new possibilities will primarily be used by customers who have previously opted against S/4Hana.
“However, those who remain on this landscape indefinitely will not benefit from the innovations that SAP is developing for S/4Hana, and especially in the cloud environment. Nevertheless, it is possible to continue operating proven core systems and selectively supplement them with cloud ERP components. This allows existing investments to be preserved and innovations to be used gradually.
“The EU decision thus expands the scope of action for companies – but, at the same time, requires an even clearer strategic definition of the target architecture for the coming years. Therefore, careful consideration is needed.”
In effect, if organisations continue to run ECC, they are unable to take advantage of the latest developments coming out of SAP – and this is related to artificial intelligence (AI). The transcript of the company’s latest quarterly earnings call shows that SAP has significantly increased its research and development investments.
CEO Christian Klein said: “In the past 12 months, we invested into new job profiles in R&D [research and development], data scientists, data engineers and invested in full-stack developers for industry AI. But we will now heavily slow down the hiring for the other profiles because AI productivity is kicking in, we see productivity gains of an average of 30%, so there is no need any more to hire additional people.”
SAP maintenance and support changes
During the quarterly earnings call, SAP was asked how the changes to maintenance and support would affect its business plans.
SAP chief financial officer Dominik Asam said the changes reflect the needs of some SAP customers who are “prioritising lower spend over the advantages of maintenance and support. This is an agreement between the EU and SAP to commit to certain mitigations in terms of flexibility on maintenance.
“First, I want to stress that the maintenance is extremely highly valued by the lion’s share of our customers: the value of being current on cyber patches, compliance patches, legal patches and some functional improvements we can bring to the table.”
Asam claimed SAP previously granted flexibility and opportunity to customers enabling them to adjust their software spend based on their needs. He said this practice has now been to some degree through the agreement with the EU.
He said: “We do see quite a nice pickup in returns from third-party maintenance. People try that for a while, tend to be more nervous over time about incidents happening, and then come back.”
“Some of the discussions in that context are about how we deal with the customers who are knocking on our door saying, ‘We want to come back’, and how much back-maintenance fees they need to pay and so on.”
He said those returning to SAP for maintenance often ask how much maintenance they will need to pay in lieu of the time they were not paying SAP. When asked whether SAP customers may now continue to remain on ECC given the changes SAP has made, Asam said: “There might be an impact, but we think we can manage it.”
He added that SAP is also converting customers onto its cloud-based Rise platform, which he claimed is unrelated to the transition from ECC.
The implications are that SAP is hoping organisations on third-party support use its own support instead. But it needs to work out how those returning customers are charged as organisations that have unbroken SAP maintenance and support contracts are generally charged for the continued development of the product, which is something a returning customer has avoided paying.
In a blog post, Stefan Steinle, executive vice-president and head of global customer support at SAP, confirmed that returning customers will not be charged any administrative fees and SAP will limit the back-maintenance fee to the minimum of six months, or 50% of the fees for the time off. The SAP Note 3776551 lists outdated products where there are no back-maintenance fees.
Commenting on the changes, Jon Gill, vice-president of EMEA at Spinnaker Support, said: “The trust of SAP customers has been repeatedly tested over the past decade. A new platform is announced, the business case is made and customers commit at scale. Then, once dependency is established, the terms change to align with SAP’s needs rather than those of their customers.”
Gill also believes SAP’s focus on AI is partly due to challenges it faces moving customers to the Rise cloud-based ERP platform: “To understand why AI now, it helps to understand SAP’s position. Rise migration is slower than SAP needs.
“What customers have been asked to undertake come with a price tag that, for large enterprises, runs into hundreds of millions. Customers who built a financial case for it have largely come back with the same conclusion: the return is not there,” Gill added.
