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Thursday, February 05, 2009

SAP and third-party maintenance: good for me but not for thee

This is rich. Ray Wang just wrote, on Twitter:
Hearing from SAP customers that there are new clauses that will force customers to commit to no Third Party Maintenance.
He then followed up with two more tweets:
Large ERP vendors requiring companies to confirm they are not receiving support services except from that vendor. More than 1 vendor.

Suggesting to customers not sign away any third party maintenance rights in new contracts. This is uncompetitive!
SAP's (and other vendors) audacity in this, if true, is at least three-fold:
  • SAP itself, until recently, has been delivering third-party maintenance for Oracle customers through SAP's TomorrowNow unit. So, apparently, SAP thinks third-party maintenance is a good idea when SAP does it for a competitor's products but not when others do it for SAP's products.

  • If SAP's maintenance and support offerings are such a great value, as SAP has been saying lately, why does it feel it needs to contractually bind its customers from using third-party maintenance?

  • Such contractual terms restrict fair competition. If a third-party maintenance provider is misappropriating a vendor's IP rights, as Oracle is accusing SAP of doing, SAP can legally pursue that service provider. Limiting the customer's choice is clearly against free market principles.
Many observers are concerned that the high-end ERP market is already a duopoly. Attempting to restrict fair competition in this way just confirms our worst fears about large vendors' intentions. I continue to believe that these actions should be investigated by the U.S. Department of Justice on the grounds of antitrust.

I thought SAP did a good job in its Business Suite 7 launch yesterday to position its products for the current economic climate. If what Ray wrote is true, SAP is making a big blunder and just lost whatever positive PR value it got from yesterday's event, in my book.

I would echo Ray's advice. Any prospects currently or soon-to-be in negotiations with SAP should be sure that they are not signing away their rights to use third parties in support of SAP products.

Lot's of chatter on Twitter about this as I write. I'll post updates as new information emerges.

Update: Dennis Howlett has a deeper analysis on why SAP may be feeling the need to restrict third-party maintenance. In a nutshell, the days of mega-software deals are over, and to maintain revenues it needs to transform into a service business. Third-party maintenance threatens that strategy. But read Dennis's entire post, as he has much more worth thinking about.

Update: James Governor points to an article in German indicating that the Swiss government is looking into possible actions by SAP to restrict competition. I'm relying on a Google translation of the article, however, and the cause of the inquiry is not entirely clear to me. Perhaps a German-speaker can help.

Update, Feb. 10. Ray Wang now gives more detailed information regarding software vendors attempting to restrict third-party maintenance rights, along with his recommendations for buyers.

Update, Feb 12. Just found this single post, referencing an SAP denial that it is attempting to use contracts to restrict customers from using third-party maintenance. However, there is no reference or link to a statement to this effect by SAP--just an assertion that SAP denies doing so. If any customers of SAP can shed light on this subject, let me now.

Related posts
SAP maintenance fees: where is the value?
SAP under the spotlight for "broken promises"
Mad as hell: backlash brewing against SAP maintenance fee hike
Oracle increases accusations in SAP lawsuit
SAP puts TomorrowNow out of its misery
Legal basis for third-party ERP support industry
Oracle wants to broaden lawsuit against SAP and TomorrowNow

by Frank Scavo, 2/05/2009 10:27:00 AM | permalink | e-mail this!

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