SAP 3rd Party Maintenance: An alternative for me? – Part Two
Hi, I’d like to share part two of a recent discussion that I had with Martin Schindler, Editor of Silicon.de. See part one here in case you missed it.
Martin Schindler: You indicated earlier that interest in third-party maintenance has increased since SAP wanted to make its Enterprise Support basically mandatory. Is this just excitement or real demand?
Stefan Ried: Yes, interest has increased. We’re also seeing that from the vendor side. In addition to Rimini Street, which already offers maintenance for SAP systems, there is also Aptech, netCustomer, the Spinnaker Management Group, and Versytec, which are today limited to PeopleSoft, JD Edwards, and Siebel. The vendor space has developed further, and the list of SAP-supporting vendors will soon become longer. Finally, it makes sense to ask the larger systems integrators, such as Wipro, Tata Consultancy Services, IBM Global Services, and Siemens (SIS), which are also the largest SAP integrators, to quote for offering SAP third-party maintenance.
Martin Schindler: This is interesting. We’ve read little about such offers.
Stefan Ried: These integrators naturally don’t make a lot of noise about these things, as they also have a partner relationship with SAP, of course. At the end of the day, the demand will be balanced with the supply — and if more customers request SAP maintenance from their systems integrator, they will start to offer it.
Martin Schindler: Is this profitable for integrators?
Stefan Ried: It can be a profitable business if it comes from a company that is big enough and has experience with third-party support. A large systems integrator like Wipro, for example provides significant support for client-specific developments (custom applications). In the framework of large-scale outsourcing deals, banks, telecom companies, and airlines already receive maintenance services for custom-built applications. Having once understood the delivery of maintenance, it is less effort to expand it to SAP applications. With deal volumes above $250 million, you can set up a team of at least 20 people who only take care of the bugs in the application logic.
Martin Schindler: Is SAP software technically suitable for such third-party maintenance?
Stefan Ried: Yes, the SAP business logic is written largely in the ABAP programming language. This is an open system, in which the program sources are copyrighted with a restrictive license, but sources are made available to customers. Please do not mix this up with open source, where the sources are also open, but the license is less commercial. Of course, ABAP sources can be read and also changed, which can’t be done easily with the Java parts of SAP’s software. That’s why third-party maintenance for SAP is technically relatively controllable.
This is quite different from a binary compiled system. For example, no alternative maintenance is possible for an old Microsoft Exchange Server 2000. Technically, this can’t be done, as the bugs can’t be corrected without recompiling it. As Microsoft doesn’t disclose the sources, there are no alternative maintenance offerings!
Martin Schindler: And what about Oracle?
Stefan Ried: With Oracle, third-party maintenance is available for the solutions it has acquired — Siebel, PeopleSoft, and JD Edwards. This is particularly because some clients have the perception that Oracle isn’t developing the application logic any more – no matter what kind of commitments Oracle makes. Again, this fits the pattern of an application landscape that is not changing in an agile manner.
Martin Schindler: And what does this look like for Oracle’s core products?
Stefan Ried: The third-party maintenance model isn’t yet widely used for Oracle’s E-Business Suite. There was one attempt by TomorrowNow; it offered support for Oracle but was bought by SAP. Unfortunately, SAP handled the legal relationship with Oracle ineptly, and Oracle fought back against SAP and won. TomorrowNow had to stop its activities.
Martin Schindler: How do you judge the future of third-party maintenance? Do you think that, sooner or later, SAP could push forward and ban these activities?
Stefan Ried: Long term, software producers have problems if they hold a monopoly. It’s the same as with cars: Manufacturers have to publish the technical service books! The legal authorities in the US and Europe clearly state that you must have the opportunity to have your car serviced by someone else. This is partly already the case for software inside the car. Manufacturers like Daimler must also make the embedded software in the vehicle accessible to other repair shops.
I believe that third-party maintenance for enterprise software will go the same way.
Martin Schindler: Are the first signs of this development already appearing?
Stefan Ried: The strength of the monopoly discussion — as we experienced with SUN/Oracle or with Microsoft — shows that the judges now understand a bit better how software works. And if legislation around software monopolies increases, a wave of maintenance judgments will come. I am not a lawyer, but my prognosis is that the decade of anti-monopoly processes is ending and a wave of maintenance laws will come in the next 10 years. And that, of course, will be interesting for CIOs and will help alternative maintenance companies build a stable business.
Martin Schindler: What does this mean for vendors?
Stefan Ried: SAP isn’t only struggling with the growth of its license revenues. The packaged applications vendors are trying to earn money with services. SAP must do it in a way that retains its partner relationships. SAP will look for services revenues from maintenance, from SaaS offers like BO and Business ByDesign, and also from future SaaS solutions in large enterprises. All three are services and promise continual sales. And SAP will certainly think about how the “know-how” of business processes can be sold as a service. For example, you can imagine commercial communities in which business processes can be “collaboratively modeled.” The fragmentation of business processes and data structures is still a major pain for larger enterprises and makes the integration of commercial partners into business networks complex and expensive.
Martin Schindler: You believe that SAP needs to change?
Stefan Ried: After the decades of the mainframe, client/server computing, and network computing, cloud computing brings a key shift from investment spending to services — also for enterprise software. In the coming era of Smart Computing, users will concentrate much more on the value for their branch than software technology. SAP has to adapt to the new balance in the tech industry to survive.
Martin Schindler: Thank you for the assessment and predictions.
Translated and condensed by Charles Green.