Siemens challenges SAP over maintenance costs

Manufacturing giant Siemens is locked in a battle with SAP over software maintenance costs.

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Manufacturing giant Siemens is locked in a battle with SAP over software maintenance costs.

Siemens is one of the largest users of SAP software in the world. It has business units in 2,000 locations in 160 countries and around 160,000 SAP seats world wide.

According to German press reports, Siemens had cancelled its maintenance contract with SAP, but ComputerworldUK understands the two companies are involved in tough negotiations on the subject.

Enterprise support has been a minefield for SAP in recent years. It provoked the wrath of its user community in early 2008 by announcing staged price rises for mainstream support, from 17 percent of license fees to 23 percent.

In order to placate customer anger the software giant was forced into a prolonged process of negotiation with its global user group organisation, Sugen. This resulted in a commitment that prices would not rise unless the user organisations were satisfied that the vendor had delivered meaningful extra value to its customers.

The agreement was warmly welcomed by SAP’s user group community and SAP CEO Leo Apotheker said that with the deal, “changes the game” on enterprise support. “We are the only software company on planet that is willing to put on table KPIs that are going to be measured every year by an independent organisation. If they are not met there is financial consequence for (SAP),” he declared.

However, SAP is also embroiled in a legal battle over alleged illegal business practices after it bought TomorrowNow, a third party Oracle maintenance provider.

Oracle filed a lawsuit in March 2007 against SAP and its now-closed subsidiary TomorrowNow, which provided lower-cost support for Oracle's PeopleSoft, JD Edwards and Siebel applications.

Siemens is not only a massive user of SAP systems, but it also offers outsourcing and system integration services based on SAP software. It is highly unlikely, despite some press speculation, that the negotiations over maintenance contracts are a precursor to it ripping out its own core systems.

Siemens’ move will focus other SAP users’ attention on the prospect of moving to a third party maintenance supplier or winning a lower price from SAP itself, said Ray Wang partner for enterprise strategy at Altimeter Group .

One third party vendors, Rimini Street is claiming it will customers running older versions of SAP products at least 50 percent of their current SAP support bills.

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