New SAP prices: CIOs need the advise of an SAP license consultant

Heidelberg, 2008/08/19 – VMS helps to reduce the costs of IT infrastructure, with license management costs

VMS, the leading SAP benchmarking company, provides companies with a holistic method for optimizing their SAP environments. As part of that, the consultancy has an ever larger role with respect to licenses. Particularly with respect to SAP’s announced conversion to “enterprise service” agreements, a simple and lean license structure is becoming more and more important. That is because the new maintenance agreements bring improvements in maintenance and support services, but they also include a 22 % price increase, which will be introduced to existing customers. On the other hand, using an SAP license consultant can mean cost savings in expenses for the licenses and maintenance of up to 20 percent.

Companies often underestimate the follow-on costs of IT investments. For that reason, the announcement by SAP of increased maintenance costs was met by many decision-makers with dissatisfaction, but also viewed as inevitable. Because maintenance costs are directly linked to the license costs, the foundation for lower maintenance fees must be made in procurement or in the re-purchase of licenses. Particularly with respect to the often needless license structures, professional license consultants can be of help in avoiding unnecessary additional costs.

“For companies, it is important that they receive customized solutions”, says Ralph Treitz, managing director at VMS. “SAP offers many options with respect to how contracts are set up. In order to conform those to individual requirements, SAP’s customers need a partner with a lot of SAP license know-how. A savings potential of between 15 and 20 percent with respect to licenses and maintenance can be attained”.

The exact effects of SAP price increases on specific companies is dependent on the size of their SAP landscape. It can be assumed that the cost savings will be higher for medium-sized companies, due to their IT structures, than for large companies and corporations.

Medium-sized companies
The proportion of software costs to SAP total costs for medium-sized companies is approximately 35 to 45 percent. Based on that relatively high number, rising maintenance costs, which are linked to the licenses, have an immediate effect on the IT total costs. VMS can be of help here in two ways:

1. A complete analysis of the current status of the system and the future requirements of the company (what the company expects to do) will determine if additional purchases are really required. This is evaluated based on the results of over 1,600 measured SAP systems within the context of “DNA level benchmarks”.

2. If this analysis shows that purchases are necessary, VMS consults with the company with regard to the required modules and purchase negotiations with SAP. That ensures that only necessary licenses are purchased, and that they meet the actual needs of the company.

“It is the medium-sized companies who almost never have the time and opportunity to make themselves familiar with the details of the SAP contracts. They take the SAP price list at face value”, maintains Treitz. “By doing that, they fail to recognize the negotiation options that they have for individually-customized solutions, which is very much a possibility with respect to SAP. We help companies recognize this savings potential and we support them in their negotiations with SAP, in order to achieve that”.

Large companies and corporations
Large companies can also profit from the license consultant’s services. The problems in this segment of the market are, however, different than for mid-sized companies. Because the share of software costs for the larger companies is relatively small (between eight and twelve percent), the added costs are often not directly noticed.

But it is difficult for even smart purchasers to gain a good overview of the options in licensing with SAP, because the purchases are only made on a relatively long-term basis. “The rapid changes to company structures that occur when purchasing other companies, or in splitting up the company, lead to licensing structures that are very hard to get a hold of. High follow-on costs due to maintenance costs are unavoidable. Only transparency can set free the unexploited savings potential”, states Treitz.
Dependent on the system size, savings in the double-digit millions are possible.

About VMS

VMS has been optimizing SAP landscapes since 2002. VMS scans SAP installations from the process-level to the transaction-level and, partnering with CIOs, and identifies strengths and weaknesses. In doing this, VMS works with an integrated concept that comprises the IT infrastructure and the IT and business processes. VMS’ methods are “minimally invasive”, because the work puts only a minimal strain on the client’s resources. VMS offers the collected experience and data from about 2,200 SAP systems that it has measured, and that enables VMS to provide action-oriented advice on optimization and cost management. The structure and dynamics of the IT environment are then reproduced in a final VMS Report, which is used as the navigation system of the SAP landscape.