SAP just announced they will increase the maintenance charges on some of their products by about 22%. And when the vendor who runs your business requires you to pay money, you comply.
I saw the rise of ERP, and SAP, first hand during the last internet bubble, working in or close to Brussels, a major capital of the European Union and of SAP adoption. I saw companies burn millions of euros on moving to the platform, wreaking havoc on established, custom and sometimes highly optimized business processes. I saw a company I worked at, called Home Shopping Europe, crash under the pressures caused by an eternal, over-due & over-budget SAP implementation, diverting enormous amounts of cash and effort into what is virtually a commodity. (I should note here that just like any feature, there were more factors involved in HSE going under, but the SAP implementation most definitely contributed to its decline.)
What angered me at that time was rooted in my developers ethics:
Why use those expensive consultants, using expensive tools to build something that didn’t even really ‘work’ in the traditional software engineering sense, especially when a bunch of marginally competent developers, with some marginally competent business analysts can create a solution at a fraction of the time and cost? Also: aren’t our business processes connected to our competitive advantage? If those become commoditized we will never be able to compete on process.
And then, after working in the enterprise content management space for a couple of years, I stopped worrying, and accepted reality: massive COTS ERPs will be running every corporation in the foreseeable future. And what is so bad about that? Custom development is hard, most processes are commodities and if everyone does it, it cannot be that wrong. I started to learn to love the bomb.
When I read about SAP jacking up the maintenance price this morning, the bomb became scary again:
With an economy slowing down, companies start to reach for their built-in survival instincts. ERP vendors, like SAP, will be forced to offset the decrease in new implementations by increasing the per-corporation licensing and maintenance fees. And companies will have to pay up, or their business will no longer run. Some people will call that corporate extortion, and those people would be correct.
An ERP vendor and its client have a parasitic relationship, which is OK when the economy is fun and games, but can turn ugly quickly, when the going gets rough. I cannot think of any other corporate relationships that are so entangled with each other (except for maybe those Facebook application development shops 
). Another, ironic, example: Supply Chain Management is all about maintaining control over your supply chain, and is usually implemented on a platform that forces you to relent your control.
See you in the fallout shelter.
7 responses so far ↓
Tom // July 19, 2008 at 2:17 am |
Wouldn’t a lot of company’s just skip support for a year or so? Is not like their SAP installation will just shutdown, will it?
It seems most company’s are paying for expensive SAP employees, supplemented by expensive SAP consultants, and then backed up by suddenly more expensive SAP support. Can’t you drop one of the three layers?
miklernout // July 19, 2008 at 5:34 am |
I am not sure you can skip support on a product that runs your financials and accounts for your inventory. That somehow seems like a very bad idea…
Pi // July 19, 2008 at 6:36 am |
Yeah, that sounds like a… racketeering job!
Greg // July 19, 2008 at 6:40 am |
Generally the first thing you have to do if you ever want to reestablish your lapsed support contract is pay up for the years you didn’t pay.
Tom // July 19, 2008 at 7:08 am |
Mandatory support is usually a sign that:
a. Product has a lot of bugs, and you need to obtain updates frequently, just to keep the thing running.
b. Product is so complex (and possibly poorly documented), that it impossible to run without a 24×7 support line for your operations team to call.
There are a lot of new entrants to the ERP game lately, even some that are open-source’ish. While none are currently a match for SAP’s n-tier multi-modular multi-layered extendable pluggable design, it must be bit worrying for the established vendors: there will be little to no growth in the low to mid-range market.
Beth // July 19, 2008 at 9:32 am |
One reason you need support updates is keeping up with the regulatory environment. When accounting rules change, you must update your system to accommodate those changes.
Ardin // July 25, 2008 at 8:10 pm |
Some valid points raised, but then I’m one of the overpaid? consultants and I’m hoping the train doesn’t stop soon!