When organizations embark on ERP system replacements, most do not think about the longer-term implications of maintaining the software. Simply managing the initial implementation alone can be challenging enough to project teams and executives, so ongoing maintenance is not typically on the radar of implementing organizations.
However, maintenance is a key component for ERP software success and a key driver of overall cost. Some of the common challenges with ERP system maintenance include high annual fees, difficulty upgrading the software when there has been customization and dependency on a third-party to provide those maintenance services. Without a proper maintenance and support plan, and as outlined in the graphic below, an enterprise system can become misaligned with operational needs of the business rather quickly. For this reason, companies often elect to bring maintenance in-house or, at the very least, look to third-party support providers other than their ERP vendor.
Just as is the case with most ERP implementation decisions, there are pros, cons, risks, and tradeoffs associated with bringing ERP system maintenance in-house. Here are some of the variables to consider:
Cost. One of the challenges with the ERP industry in general is that companies often purchase more ERP software licenses than they need or use, which escalates both their initial investment as well as their ongoing annual support and maintenance costs. As the business and technology misalignment outlined above becomes greater over time, this increased cost may not be justified by the diminishing benefits of maintaining a system that simply isn’t a good fit for the business. Companies often will look to third-party maintenance providers such as Spinnaker Support and Rimini Street, both of which provide SAP and JD Edwards maintenance and support. Alternatively — and more unconventionally — some organizations opt for handling support and maintenance internally without the help of an outside service provider. It is worth noting that this path is often not a feasible option.
Complexity of customization and upgrades. Unfortunately, most organizations customize their ERP systems more than they should. In fact, our 2012 ERP Report shows that, in our extensive study of ERP implementations across the globe, 89-percent of ERP implementations have some degree of customization, meaning that only 11-percent of companies implement vanilla, off-the-shelf software without customization. Not only does this make ERP implementations more costly, difficult and risky, but it also can create complexities when it comes time to upgrade the software. In general, each customization needs to be rewritten or readdressed each time there is an upgrade, so the value of an organization’s ERP support largely depends on whether or not it is able to improve or upgrade the software without worrying too much about the effects on its customized components.
Legal considerations. There have been a handful of lawsuits involving third-party support and maintenance providers, which can cast a cloud of uncertainty on the long-term viability of support providers. In a case that’s set to go to trial in 2013, for instance, Oracle has alleged that Rimini Street has infringed on its copyrights by providing third-party support. This kind of press can serve to make some of their potential customers nervous. As a potential customer, it is important to understand the vendor viability of an ERP software vendor. The same can be said for the viability of potential third-party maintenance and support providers. When organizations enter into long-term maintenance agreements with these providers, they want reassurance that the contracts and levels of support can be legally upheld in the event of legal complications.
Although it can be argued that third-party support is not for everyone, not everyone is particularly happy with the cost or benefit of the support provided by their ERP vendors either. The feasibility of third-party support often depends on specific ERP vendor in question, as well as the needs of the implementing organization. By evaluating your support and maintenance needs via the above three variables, you may start to get a better sense of what path is best for your organization.
Learn more about Tier I, II, III and cloud ERP providers (and their specific offerings) in our proprietary ERP database. And, as always, contact us to discover how Panorama can help your firm achieve both fiscal and operational ERP success.