The article below is based on a recent post from Mark Smith, CEO of Support Revolution, who spoke to CBR Online about how IT leaders can sweat their Oracle and SAP assets to power through the pandemic.
In response to the pandemic and global recession, CIOs need to return to their IT roadmaps and prioritise cost savings on existing software.
According to the 2020 Harvey Nash/KPMG CIO Survey, global IT leaders have reported a median additional technology spend of 5% to deal with the COVID-19 crisis as a percentage of the total of their annual IT budget.
However, budget growth expectations for IT leaders for the next 12 months have dropped; just 43% of respondents are expecting their budgets to increase. Taking recent events into account, CIOs would be fortunate to see any significant increase to their IT budget.
IT leaders are caught in the middle of this imbalance between increased spending and unchanged budgets. They are therefore returning to their roadmaps to reprioritise their projection. For many CIOs, the need for digitalisation and development has been superseded by a need to achieve cost savings on existing systems.
Therefore, many organisations are reconsidering their large-scale Oracle and SAP upgrades and reimplementations. Already, many organisations have delayed or even outright cancelled these projects as a result of the pandemic.
Even before COVID-19, CIOs and CFOs were struggling to see the value of these upgrades.
A joint survey from ASUG and German SAP user group DSAG found that respondents’ reasoning for delaying the S/4HANA upgrade was due to cost, uncertainty about functionality, or the simple absence of a business case.
In addition, of the respondents who had upgraded to S/4HANA, only a small percentage of them (13 – 14%) felt that their perception of SAP had greatly improved. That leaves an overwhelming majority of customers who feel disillusioned with the results of undergoing the S/4HANA migration. There is a clear reluctance to move, due to organisations focusing on cost saving or failing to see the value of completing the project. Or possibly both. But even if organisations were prepared to undertake these disruptive projects, priorities have since shifted towards saving – not spending – money.
However, organisations that decide to maintain their existing Oracle/SAP systems in lieu of an upgrade are still unlikely to save money by deferring the project. While they delay the expense of the upgrade, their software is still subject to Oracle and SAP’s support fees and price increases as their products age.
Oracle and SAP’s support and maintenance fees can become a substantial expense. Over time, they can become more expensive than the original cost of the software itself. Oracle and SAP typically charge 22% of the license purchase price for annual support and maintenance, and then apply yearly 4% increases.
Even if organisations upgrade their software, the support costs never go away.
So, even though organisations are saving budget by not upgrading, they are still paying over the odds for their existing support in the meantime. And they will do so, as long as they continue using their vendor’s support.
Fortunately, any organisation that decides to delay its upgrade project, or even cancel it altogether, can choose the alternative to vendor-provided support: third-party support.
Third-party support replaces Oracle/SAP’s support model, meaning it can provide the same or better levels of service as the vendor. This includes bug fixes, security, and legislative patching – the critical functions necessary to keep the software functioning, secure, and compliant.
The key difference is that third-party support providers can support all versions, compared to Oracle and SAP that only provide mainstream support on the most recent versions. Third-party support providers also guarantee to lower an organisation’s previous support cost by at least 50%.
Organisations can then escape their extortionate support fees, extend the lifespan of their software indefinitely, and shelve or even avoid any more large-scale upgrade projects.
Then, they can return to the projects at a more suitable time – if ever at all, depending on their situation – with time on their side, plus the savings made from third-party support.
Already, organisations are benefiting from the third-party support approach.
Reed, the UK-based recruitment firm, wanted to take this approach with its Oracle E-Business Suite running on Oracle Database. Reed’s team wanted to keep the applications running on their current versions, maintaining a suite they knew worked and was tailored to their systems and processes.
Third-party support, provided by Support Revolution, enabled them to achieve this objective, and for less than half the price they were paying for Oracle Support. And unlike Oracle, Support Revolution provided legislative patches that were tailor-made to suit Reed’s systems, and any customisations it had in place.
Reed can use these savings and reinvest towards more vital projects and developments, and more importantly, Reed followed its own IT roadmap and focused on its own priorities.
This is the right attitude to have.
The COVID-19 pandemic and subsequent recession has neatly demonstrated the unpredictable and fragile nature of industry markets as a whole. Normality can collapse without warning, and in challenging times like these, organisations need to find ways to endure.Mark Smith, CEO of Support Revolution
While CIOs deal with increased spending but decreased budgets, they also need to analyse big projects and seek ways of cutting costs, reassessing strategies for existing systems.
Services such as third-party support can be of great benefit to organisations looking to make significant savings without compromise.
Don’t just take our word for it. Gartner are recommending that you investigate third-party support as a way to sweat your legacy IT assets.
Original article published by CBR Online on 19 October 2020.