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Buried in software licensing

Robert L. Mitchell | Aug. 13, 2013
The transition to cloud-based services is ratcheting up traditional enterprise software costs and adding layers of complexity.

For Robinson, the last straw came when he decided not to upgrade from Version 4.7 and SAP was about to require Color Spot to transition to its extended maintenance program, which is for users of older versions of SAP software. "At that time, SAP was 20% of the IT budget. It was ridiculous," he says. That's when he decided not to renew Color Spot's maintenance contract.

An SAP spokesman responds that, historically, standard support customers have paid an additional 2% to 6% for extended maintenance.

In general, however, "the way enterprise software is licensed today is just not meeting the needs of many organizations," says Patricia Adams, an analyst at Gartner. Organizations are fed up with the perpetual-license-plus-maintenance approach to enterprise software purchases, and they're tired of running on the upgrade treadmill simply for the sake of keeping their software maintenance status current. Organizations "struggle with the currency of the software," Adams says, "and, when negotiating, they still struggle with finding out how the vendor performed against the contract."

IT shops have been pushing back. When GWU's contract comes up for renewal, Steinour says he plans to look at more cost-effective approaches to enterprise software licensing and maintenance, including a gradual migration to a subscription-based software-as-a-service offering from Oracle or another vendor.

If the university commits to a change, it would consider moving to third-party maintenance as an interim step, he says. That would allow the IT department to continue supporting the software and receive bug fixes as well as tax and regulatory updates for payroll, but no software upgrades. Essentially, the university would freeze its two ERP implementations until it was ready to move off the old ERP system -- and that process could take a long time. "[Users] would be involved in the decision process of the future direction, [and] I am sure they would be supportive of our mission," Steinour says.

For his part, Robinson says he couldn't justify spending hundreds of thousands of dollars to upgrade to SAP Enterprise Core Component (ECC) 6.0 just to keep maintenance costs down. "I looked at ECC 6, and I found nothing that made sense for us," he says. So Color Spot went with Rimini Street, a third-party maintenance provider that offered maintenance and support services for less than half of what SAP was charging -- and it included support for Color Spot's customizations, something SAP didn't offer. "Our maintenance is now 9% of the IT budget; initially it was 20%," Robinson says. And while he no longer receives software upgrades, he says he can still buy additional modules and add users. The software vendors are "still happy to take your money," he says.

 

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