Q: Increased SAP Maintenance Fees?A: Technology Portfolio Management

Thomas Wailgum describes 7 Ways to Get More For Your Increased SAP Maintenance Fees in his Enterprise Software Unpluggedblog for CIO magazine. His blog is based on ERP analyst Ray Wang’s report for Forrester Research. In July, SAP announced that enterprise support would increase from 17 percent to a whopping 22 percent.

All in all, I believe the advice is sound, particularly in light of the current economic downturn.Companies are and implementing cost-cutting measures to prepare for and/or react to reduced revenues in core business and more expensive capital, as born out by successful cost cutting measures by Pfizer.sap_channel

Based on our on experience at 3coast, we’re seeing the same pull-back in IT spending, even here in Houston, where we expect the economic impact to be somewhat muted by the relatively robust local economy.(Although, I am still trying to ascertain at what level oil and gas prices will create severe pain to the energy industry players here)

The 7 tips are:

  1. Fight for a discount
  2. Quantify the value of SAP to your business
  3. Assess the ROI for system support and maintenance, per user and per transaction.
  4. Document the shortcomings of your SAP application
  5. Evaluate alternatives for the long-term
  6. Leverage SAP user groups
  7. Evaluate third-party SAP maintenance alternatives

In my view, numbers 2-7 all support number one, negotiating for a discount. This is a sound tactical approach. More broadly, however, companies should continuously reevaluate their technology portfolio for potential savings.This is one aspect of Technology Portfolio Management – the process of assessing hardware, software and service requirements relative to the agreements in place.

Technology Portfolio Management is actually a holistic approach, proactively considering the evolving and future needs of the business. Unfortunately, most companies only react to the changing business climate or new demands by vendors. This reactive approach is inadequate.

Why? First, the timing of a reactive negotiation reduces potential gains. In addition, companies in reactive mode ignore other areas of potential savings. Moreover, the reactive approach fails to address areas of business risk, where service agreements inadequately support business needs.

I predict that technology portfolio management will receive increasing focus in the coming months.Building an internal capability or using capable experts in technology portfolio management, however, is the more sustainable and better long-term approach.

I’m interested to know how companies are addressing technology portfolio management and whether it has become a new priority. What do you think?

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