What This Article Covers
- Should Support Fees Not be Used for Development?
- Pre-Emptive Support Funding
- SAP’s Support Margin
- SAP Articles Published Through the SAP Surrogate ASUG, Under the Pretense of Being Independent Analysis
It is interesting to find what ASUG believes SAP support fees should be used for.
In this article, we will cover this topic as it is stated by ASUG in an article.
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.
- Firstly, Twenty-two percent is actually the lowest level that an SAP customer can pay in support. Most customers pay more than this because a number of areas of support are taken out of the base support level. SAP even has much more expensive support levels above this, like MaxAttention that are normally used for problematic products, and are truly exorbitant.
- Secondly, the statement ASUG makes regarding how the support funds are to be used is simply incorrect. Support money is, in fact, to be used to continue to develop the application. But the way that ASUG states it, makes it appear as if SAP is being magnanimous 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? Is this pre-emptive support funding?”
SAP’s Declining Support
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 a 85% margin on its support. (And SAP’s support has been steadily growing as a percentage of its overall revenues.) SAP’s support has greatly 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 to not only 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 personal compensation, which is over $50 million per year, and the compensation of other top SAP executives is a major part of the problem. Bill McDermott’s yearly compensation 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.
ASUS has a strange and SAP-centric perspective on what SAP support fees should be used for, which actually 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 that it receives to continue to develop 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 in order to lower the expectations of customers, hopefully without customers realizing it.
Financial Bias Disclosure
This article and no other article on the Brightwork website is paid for by a software vendor, including Oracle and SAP. Brightwork does offer competitive intelligence work to vendors as part of its business, but no published research or articles are written with any financial consideration. As part of Brightwork’s commitment to publishing independent, unbiased research, the company’s business model is driven by consulting services; no paid media placements are accepted.
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