More on ERP maintenance costs

SAP’s decision to increase its maintenance fees (which I blogged) seems to have started a discussion among bloggers about the validity of ERP maintenance costs:

Dennis Howlett offers a new model for ERP vendors. In the tradition of academic debate, his proposal could become the first step to developing a new paradigm around maintenance costing. But Dennis’ thesis has some flaws, in particular the points he makes about (1) vendors taking back control of the channel and implementation, and (2) customers having centres of excellence.

1. Perhaps some ERP vendors – SAP, Oracle – could take over their partner channels, but many others, including  Microsoft, don’t have the depth or breadth of resources. There are probably several countries like South Africa where there is more skill in the channel than with the vendors. In this country, when an implementation goes wrong, the vendor typically puts in another partner not their own staff.

2. The concept of a customer centres of excellence can only occur in larger organisation and with a developed IT support group. In developing countries, and in the small and medium size business, those two criteria don’t exist. Many of the companies I come across seem to consider IT as a cost centre and try to keep it as small as feasibly possible. When it comes to the user community, the skills shortage means that people barely have enough time to do the work they should be doing, let alone spend time on software training and certification.

I don’t have any alternative proposals as yet, but I strongly believe that the debate on software maintenance fees needs to be given serious consideration.

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ERP maintenance costs

In July AMR Research reported that SAP had raised the maintenance fees of its enterprise suite to 22% of net licence value – in other words, SAP customers now pay the full cost of their software every five years. In a way that is great for competitors like SYSPRO who are charging 10-12 percent points less.

A recent blog on the IT Project Failures site says that the big ERP vendors are doing this because the complexity of their systems and their implementation puts the vendors in a position to abuse their customers.

If that attitude is correct then it disturbs me, as it reminds me of the phenomenon of the tragedy of the commons – by abusing their resources (customers) now those vendors risk destroying their own eco-system later.