Businesses are under increasing pressure to reduce overheads, save money and maximise profit; often forcing them to make cuts. These budget constraints are often thrust upon IT departments, placing pressure on CTOs and IT Managers to think of new ways to slash their IT spend.
However, making cuts to an organisation’s IT isn’t always so straightforward. After all, hardware costs are difficult to reduce and specific software is essential for the running of a business. For example, over 420,000 organisations world-wide use one or more of Oracle’s products for the day-to-day running of their businesses.
One often overlooked IT expense is software support where a business will assume just because they have a certain product, they will need to pay for vendor support as an insurance if something goes wrong. Whilst vital to a business, this can be costly, and organisations who choose to receive their software support from vendors such as Oracle or SAP, will find their support bill is often their largest annual fee, costing a minimum of 20%, if not more, of their original licence costs.
With these costs proving too much for businesses to justify, third-party software support has emerged as a more practical and cost efficient solution for companies looking to slash their IT support bills but maintain a fully supported ERP system.
Premier support for less
ERP support from traditional vendors generally costs between 20-22% of a customer’s license bill for maintenance and support fees. Typically, after receiving five years of premier support, businesses are moved to ‘Extended Support’ and in the case of Oracle, unless they choose to upgrade to the latest system, Oracle can increase support costs by an extra 10% for the first year, then 20% for years 2 and 3, so support gets even more expensive.
Switching to third-party support allows businesses to save between 50%-90% on their support costs, without year on year increases or a reduction in support levels. Ultimately, this enables CTOs to receive more comprehensive software support for a longer period of time for a fraction of the cost.
Releasing a new software version approximately every five years and only usually offering support for the latest two versions, Oracle and SAP customers can find themselves having to upgrade their current systems in order to continue receiving support and software patches. This causes businesses to feel pressured to make upgrades to their ERP software which may be unnecessary, can incur costs of hundreds of thousands if not millions of pounds and cause severe disruptions to the organisation.
Third-party support providers have the provision to support older versions of Oracle and SAP software, even if the vendors themselves no longer do. This enables companies to continue using their current software, and allows them to avoid the costs of upgrading with the related disruption to their business.
Only pay for the support you need
Many businesses are paying Oracle and SAP for support on software products that they don’t use or need, as the vendors tend to package their products together. This can make it difficult for CTOs under financial constraints to justify why they are paying 22% of their license fee for support they don’t require.
Third-party support providers charge on a customer by customer basis and therefore can provide a more bespoke service. Businesses are given more control over their software support and are only charged for support on the ERP software they are using, thereby saving a considerable amount on their support bills.
Flexibility of Contracts
Once a company signs a contract to receive software support from Oracle or SAP they are tied into that contract until they leave, which can be many years. Whilst this may not be a problem for most businesses who perceive using the support long-term, for organisations facing significant transitions or changes, expected or otherwise, this can cause cost implications. These organisations may find that they are spending up to 22% of their license fee on support for software that they are not using.
Unlike traditional vendors, third-party support providers are able to offer flexibility of contracts whilst businesses go through interim stages, enabling them to work with their customers as they undergo any changes. This flexibility allows businesses to avoid the risk of wasting money and to adapt their software support contracts to suit their situations.
Custom patches can be created to maximise spend
An organisation’s Oracle or SAP systems are unique to them as they have the ability to add individual customisations and extensions. This can lead to some companies having a backlog of issues that the vendors can’t support as their general patches can’t solve unique problems.
Third-party support providers are able to create customisations to troubleshoot and fix software problems that are individual to each customer. This ensures businesses that their system issues can be resolved in a timely manner at no additional cost even if they have been tailored to suit their needs.
Ultimately, more and more CTO’s are finding it harder to justify paying vendors more than 20% of their license fee each year for their software support. Businesses are eager to find faster, smarter and more cost-efficient ways to maintain their ERP systems and, for many, switching to third-party support is the most practical decision and one that can save a business hundreds of thousands or even millions of pounds each year.