Enterprise customers should use SAP's commitments to the European Commission to reconsider complex ERP migration timelines and gain leverage in negotiations with the German software giant, according to Gartner. Last week, the European Commission ended an investigation into possible anticompetitive practices after SAP agreed to abolish reinstatement fees and reduce back-maintenance fees, among other concessions.
The case stems from September last year, when the executive branch of the EU launched a formal investigation into SAP's policies for maintenance and support services in Europe, responding to concerns that SAP restricted competition in this crucial aftermarket. In two papers published late last week, Gartner said the agreement represented an opportunity for users grappling with mammoth ERP migrations.
Thousands of large businesses rely on SAP ERP Central Component (ECC) to run core business operations. SAP's mainstream support for ECC ends in December 2027, while customers can opt for extended maintenance until December 2030 by paying an additional two percentage points on their maintenance fees. As well as trying to move customers off legacy software, SAP is pushing them toward the cloud and SaaS through its lift-shift-and-transform migration program RISE with SAP, launched in early 2021 in conjunction with cloud providers and third-party service vendors.
Yet Gartner estimates that the majority of SAP's installed base is still using on-premises software. By 2030, more than 10,000 SAP customers will continue to support major parts of their business with solutions based on SAP ECC, Gartner said. "Premature SAP modernization leads to excessive technical debt and spiraling costs.
The EU ruling fundamentally endorses third-party software support not just as a cost-cutting measure, but as a vital strategic resource to reduce the risks of ECC or S/4HANA migration. Heads of enterprise applications must urgently leverage this newfound flexibility to buy preparation time and avoid being locked into inflexible cloud commitments before they are ready," a recent Gartner research paper says.
In its October response to the Commission's formal investigation, SAP promised to improve "the financial attractiveness for customers who wish to reinstate SAP maintenance and support services." SAP has now agreed to abolish reinstatement fees and reduce back-maintenance fees charged to customers who return to SAP support after a period of absence, the Commission confirmed.
SAP also agreed to clarify conditions that allow customers to choose different maintenance and support service providers and different levels of support from SAP. "Previously, SAP customers faced an unavoidable dilemma: rush a highly complex migration to SAP S/4HANA or SAP private services before 2030, or stay on-premises with limited support and compliance guarantees via SAP's Customer-Specific Maintenance," the Gartner paper states.
"Because this new ruling legally prevents SAP from restricting customers who want to 'mix and match' M&S services from different suppliers, it shatters the historical barriers to utilizing third-party support services (TPSS), providing essential extra options to best manage risk." Gartner recommends users review their SAP ERP modernization timetable in view of the new rules agreed by SAP and the EU, placing less weight on vendor deadlines.
Technical debt, readiness for operating model change, and urgency of new ERP capabilities should instead govern the migration plan. In a second paper responding to the agreement, Gartner says customers can use the commitments to re-evaluate SAP support, optimize costs, and create new leverage in vendor negotiations. "Increased competition gives ECC and S/4HANA on-premises customers greater negotiation power on support contracts and cloud deals.
Customers should explicitly reference the ruling when seeking alternatives to standard maintenance increases," the paper says. SAP user groups, however, told The Register they did not expect a wholesale shift to third-party support. Michael Bloch, licensing expert and board member of German-speaking user group DSAG, said: "It will be interesting to see whether customers will take that choice actively: most of them who are using ECC and may be looking for third-party support will not come back to SAP.
As S/4HANA will still be supported until 2040, I personally do not believe that customers will cancel their support contracts and come back afterwards to SAP while having support until 2040." Conor Riordan, chair of the UK & Ireland SAP User Group, said SAP users had long called for greater flexibility, transparency and predictability. "Ultimately, this should give customers a clearer framework for responding to changing business conditions while evolving their SAP estates at a pace that suits them.
We do not expect a wholesale shift away from SAP maintenance. For most organisations, especially those with complex or business-critical SAP landscapes, extended maintenance remains the lower-risk bridge while they continue their transition planning."
Originally published at theregister.com
