News Analysis: Siemens Cancels SAP Maintenance Contract

Published on September 12, 2009 by R "Ray" Wang

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.  Golem.de (Babelfish Translation in English) *Wiwo.de,(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)

  • [...] A report in the German publication Wirtschaftswoche early this month reportedly said that Siemens has been considering third-party software maintenance alternatives from such companies as Rimini Street and IBM.  On September 12, on his blog, A Software Insider’s Point of View, analyst Ray Wang referenced the German magazine story. [...]

  • To Jim’s comment – Siemens internal services unit is less than 20% IBM Global services size and not into every type of IT or BPO service. Also, most multinationals who have captives continue to do business with outside firms. IBM, TCS, Accenture and many others do business with different Siemens units.

  • I agree. Rimini Street’s drawback is that they only support typical core R3 modules. No CRM, No APO, etc. Just FI, CO, MM, etc. SAP is completely unwilling to carve out the support for just CRM if you cancel your other maintenance. So unless there is a big legal hammer to nail them with, most customers will be left with the choice of going without support for many modules should they go down this path.

  • I’m very skeptical about the report. Wiwo’s track record on this kind of thing is pretty bad. If Siemens wanted to use a consulting firm to support their SAP systems why wouldn’t they hire their own SAP consulting operation rather than paying a competitor like HCL or IBM. Siemens IT Services has 2600 trained SAP consultants and broad global coverage. Rimini Street is just easing in to the SAP market and Seth is too smart to try take on support for 160,000 employees when the service is still in ramp up.

  • Seimens should be moving some of its systems onto the “open source” arena. Much of what it does today could be developed using an open source platform which would eliminate much of the maintenance costs it faces today from SAP AG.

    S/W development companies would love to brag that they have developed s/w for Seimens. Open source s/w is much less expensive to develop and the open source community would rally to the challenge and opportunities it would present.

    Just a thought.

  • [...] Ray Wang says: 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. [...]

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