News Analysis: Siemens Cancels SAP Maintenance Contract

Potential Announcement of * Siemens cancellation represents a shift in mood by one of SAP's most loyal customers
What's been rumored for the past few months has now publicly been confirmed discussed. (Babelfish Translation in English) *,(Wirtschaftswoche the German equivalent of BusinessWeek) (Babelfish Translation in English) reports that Siemens says SAP Tschüß (i.e. ciao, cheers, bye) in its September 12th posting.

According to the translated report, "Siemens is one of the largest SAP customers, reports the business magazine economic week (Wiwo): Over 160.000 Siemens coworkers used the software of SAP. For maintenance, to the support and regular software actualizations belong, require SAP 17 per cent of the license costs. For Siemens costs add up after analysts estimations each year on a middle two digit amount of millions."

*What should be made clear here is that Siemens appears to have submitted its cancellation papers to SAP.  However, the company will most likely not be doing a rip and replace of its core systems. It's just looking at alternatives for SAP maintenance or even maybe a better counter offer from SAP.
Third party maintenance vendors emerge from the woodwork
Of note, IBM, and HCL have been listed with Rimini Street as contenders for this third party maintenance (3PM) market.  SAP's system integrators traditionally have shied away or have been rumored to be given strong signals not to provide alternative support options for their vendor partners.  To date, this has led to just one public offering from Rimini Street.  While the process requires significant investment in engineering and support resources, the contenders each bring significant capabilities to the table.  And according to some customers, several other providers have already been providing third party maintenance services for SAP in EMEA.
The bottom line - economic pressures will bring more enterprise software customers to consider (3PM)

Almost all SAP customers have end of year maintenance renewal terms.  As these organizations review their maintenance contracts going into 2010, it will be important to consider the role of third party maintenance in decisions.  Customers seek strategies to free funding up so they can address economic shortfalls and/or invest in innovation. But don't expect vendors such as SAP to back off without a fight.  Beware of some tactics some vendors have used to cut customers off from the third party maintenance option:

  • Do not give away your third party maintenance rights. Review your contracts with your legal team for such similar anti competitive language.  Validate any suspicious terminology with the vendor
  • Avoid offers by sales reps to bundle contracts. Once bundled, you will lose the ability to choose what parts of the relationship you wish to change
  • Say "NO" to contracts that tie upgrade rights to current status of maintenance payments. Some blog readers report a new tactic emerging in the field where even after downloading upgrades to a perpetual license, some vendors are claiming you do not have such rights unless you are current on maintenance.  This flies in the face of the spirit and intent of a perpetual license.
  • Eliminate gag rule clauses in your contracts. Make sure you retain the freedom to work with third parties to assist in contract negotiations.  You'll also want to have the right to discuss some benchmarking with peers and other user group members.

Your POV
Is your enterprise software contract up for renewal?  How has your vendor treated you to date?  Do you need assistance with negotiating such contacts?  Wonder why Neelie Kroes and the EU ( yes this is an election year) or the US Anti-trust team have not stood up for your consumer rights yet?  What are your user groups doing to assist you?  Post your comment here or reach me direct at r at altimetergroup dot com or r at softwareinsider dot org.  Put the power of expert contract negotiation advice to work or drop us a line.

Related posts
20090912 Deal Architect - Vinnie Mirchandani "Don't Cry For Me Germany"
20090912 Irregular Enterprise - Dennis Howlett "Siemens Cans SAP Support"

Copyright © 2009 R Wang. All rights reserved.
*Slight changes were made with some factual review input from multiple sources. (18:30 GMT - 8:00)