Spend Matters welcomes this guest article by Steven Roth of GEP.
Ongoing ERP maintenance and support services are an important component of an organization’s overall information technology infrastructure and data management strategy. Equally significant are the costs of ERP maintenance and support services, which can often account for up to 25% of the upfront license fees on an annual basis. That means organizations are essentially rebuying their ERP systems every 4 years.
A growing trend among many organizations is to move ERP maintenance and support services to third-party vendors, such as Rimini Street or Spinnaker Support. This often allows a better fit with the organization’s needs at a drastically reduced annual cost. Below are some of the benefits of moving such services to a third party, as well as some important considerations for those organizations thinking about making the switch.
Benefits of Using a Third Party:
- Direct access to more experienced support personnel
- Technical support for customized code
- Customized break-fix solutions and patches
- Indefinite support for existing modules
- No upgrade requirements
- Up to 50% savings compared with OEM provider
Important Considerations for Using a Third Party:
- Loss of access to proprietary updates or patches released by OEM provider after the switch. (All currently available upgrades and patches are typically archived by the new support provider for later implementation.)
- Potential financial instability of third-party providers due to outstanding lawsuits
A Note Regarding Legal Considerations
A number of high-profile lawsuits have made many CIOs hesitant to make the switch to third-party ERP maintenance and support providers. The vast majority of these cases have been settled in the past year but a number of cases are still outstanding. Those that are still outstanding have more to do with the specific methods by which support is offered – for example, which entity hosts archived patches and upgrades from the OEM provider, rathrer than with the third-party provider’s right to provide support.
Most providers, like Rimini Street and Spinnaker Support, have already adapted their model to avoid any potential disruption that might occur due to the outcome of these cases. However, it is still important to consider the potential financial impact that these lawsuits might have on a third-party provider, even if the service model itself is no longer at issue. This is a risk that should be evaluated closely in conversations between IT, legal, supply chain and procurement departments as a switch is taken under consideration.
Third-party ERP support and maintenance is an attractive option for organizations that have a mature, stable ERP platform that will not need to be upgraded in the near future. Third-party support and maintenance providers often need 2-3 full months to implement their services and prefer to have service overlap with the OEM provider of at least 1 month to prevent any gaps in service, so it makes sense to begin this conversation with colleagues in your organization well ahead of your support and maintenance contract renewal date.
Given the demands and constraints of your organization, third-party ERP support and maintenance may or may not make sense, but taking time to understand the evolving dynamics of this marketplace is a valuable exercise either way.
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