ASUG’s Strange View of How SAP Support Fees Should Be Spent

Last Updated on May 25, 2021 by

 Executive Summary

  • ASUG wrote a strange explanation for SAP support money should be used.
  • We review ASUG’s accuracy.

Video Introduction: ASUG’s Strange View of How SAP Support Fees Should Be Spent

Text Introduction (Skip if You Watched the Video)

It is interesting to find what ASUG believes SAP support fees should be used for. In an article, ASUG provides an extremely bizarre set of explanations about how SAP uses support income. One assertion by ASUG is that support money should go into acquisitions. This is stated by ASUG, without ASUG stating that SAP receives an 85% margin on its support. You will learn how ASUG once again only reflects the interests of SAP and not users in this article that appears to have been written to please SAP executives.

Our References for This Article

If you want to see our references for this article and other related Brightwork articles, see this link.

Lack of Financial Bias Notice: We have no financial ties to SAP or any other entity mentioned in this article.

  • This is published by a research entity.
  • Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department. 

Support Should Not be Used for Development?

In its article, ASUG proposes something quite interesting about using support money.

“Those 22 percent maintenance fees that come with SAP licensing contracts are expected to pay for support and maintenance of currently licensed products, but SAP and other vendors also use that money to upgrade and innovate. In this case, it appears that mergers and acquisitions are also lumped into the innovation pile. That’s an interesting note for customers who are curious as to where those maintenance dollars end up.

Our Analysis

  • Firstly, Twenty-two percent is actually the lowest level that an SAP customer can pay in support. Most customers pay more than this because some support areas are taken out of the base support level. SAP even has much more expensive support levels above this, like MaxAttention, which are normally used for problematic products, and are truly expensive.
  • Secondly, the statement ASUG makes regarding how the support funds are to be used simply incorrect. Part of the support money is to be used to continue to develop the application. But the way that ASUG states it makes it appear as if SAP is being generous by using some of the support money in this way.
  • Thirdly, why are maintenance dollars being used to make acquisitions? Newsflash, an acquired application, will be “sold” to an existing customer of SAP. The customer will not get it for free. So, in that case, why are support revenues used for acquisitions? ASUG (although in actually SAP) makes the case so nonchalantly. However, think through the implications. Customer’s support fees on products they currently own should be used for acquisitions, which customers will then have to buy if they want to use it? Is this pre-emptive support funding?”
  • Fourth, how does it escape ASUG’s attention that SAP has an 85% margin on its support? Another great use of SAP support dollars is to support SAP profits — and in fact, nearly all of SAP’s profits come from its support margin.

SAP’s Declining Support and Its Connection to the Support Margin

As covered in the article, What to do About SAP’s Declining Support, in part because SAP employs many support personnel in countries where SAP pays between $25 and $35 per day per resource, SAP receives an 85% margin on its support. (And SAP’s support has been steadily growing as a percentage of its overall revenues.) SAP’s support has dramatically degraded over the past 15 years, in part because the people offering support barely speak and write the language of the customers that use SAP (most of SAP’s customers are in the US and Europe).

So yes, it would be expected that SAP would use the support money not only to provide far better support than it does (and not gold plated support cost and third world nation capabilities). But also to fund its development organizations. Bill McDermott’s compensation, which is over $50 million per year, and other top SAP executives’ compensation are a significant part of the problem. Bill McDermott’s yearly salary alone would pay for 6,392 support personnel where SAP employs the bulk of its support employees. But does Bill McDermott do as much work as 6,392 people? If so, Bill McDermott must be a very productive fellow.

Conclusion

ASUG has a strange and SAP-centric perspective on what SAP support fees should be used for, which contradicts what SAP has been telling customers for many years.

This article appears to be communicating to customers that they are lucky if SAP takes any of the support money it receives to continue developing its applications. This is yet again evidence of how much ASUG is in SAP’s pocket.

SAP Articles Published Through the SAP Surrogate ASUG, Under the Pretense of Being Independent Analysis

SAP publishes such articles, using ASUG as a faux independent entity to lower customers’ expectations, hopefully without customers realizing it.

The Problem: Listening to SAP Entries That are Controlled by SAP

ASUG’s statements peculiarly match SAP in virtually every instance. ASUG carries repetitions of articles published on the SAP website. This is quite peculiar for an entity that poses as an SAP user group. ASUG looks like they are remotely controlled by SAP because they are remotely controlled by SAP. A perfect example of this control by SAP is covered in the article How Accurate Was ASUG on its S/4HANA Poll?