The Third Party Approach to ERP Software Support Services

November 6, 2015 Russell Smith

How Moving Your ERP System Support to a Third Party Provider Can Deliver Considerable Savings

Most companies buy their ERP software products, licenses and software maintenance/support services from the same ERP software providers. Yet an emerging market of Third Party Support Service Providers is starting to claim the Maintenance and Support services element and deliver these services themselves at a much lower cost than that charged directly by the software providers. In a recent study, Elemica analyzed this marketplace and the benefits Third Party Support Service Providers can bring to companies in the short term. 

Maintenance and Support Services provided by ERP Software Providers

ERP software providers gain most of their profit in the first five years of their contract with a new customer and most of this comes from the purchase of the Product and User licenses. Product and User licenses are charged at a standard list price and combined to create the ERP software product package cost per year. 

Maintenance and Support services are charged at a standard percentage fee and calculated against the total ERP software product package after customer discounts are applied. This is usually a standard percentage provided to all customers by the software provider and will remain fixed for a predetermined period. However it is likely the fee will increase year on year.

As implementation of the ERP software progresses within the customer, customizations are made, issues are fixed and the need for direct Maintenance and Support reduces.

It is this increasing fee for a level of Maintenance and Support no longer necessary after five years that is driving more companies in Europe to move their Maintenance and Support service requirement to long established Third Party Support Service Providers.

Maintenance and Support Services provided by Third Party Support Service Providers

Third Party Support Service Providers employ industry professionals proficient in all versions of the most used ERP systems on the market and can provide faster issue resolution in some instances than directly via the software provider themselves. Companies can maintain a normal working relationship with their software provider for any new licensing but are not obliged to stay for any maintenance and support services. Transferring the licenses, data, templates, tax and legal information etc from the software provider to the Third Party Support is called ‘Onboarding’ and can take between 30 and 90 days depending on the complexity of the customer.

But there is more; In some instances these Third Party Service Providers can provide the Maintenance and Support services at 50% the cost proposed by some software providers.

So how do the Third Party Service Provider services compare to those of the software providers?

Customers receive all of the normal support services previously provided by their software provider together with all of the following additional services:

  • Support from a highly Experienced Support Team 
  • Assigned/Dedicated Senior Engineer
  • Customization Support and Fixes
  • No Forced Upgrades
  • Proactive Support Calls
  • Initial response times for major issues are dealt with in less than 30 minutes.

Elemica Recommendations

Elemica recommend moving to a Third Party Service Provider for a short period only – 3 years max. This is still an emerging marketplace and vendor support models are still evolving. Some software providers are very unhappy about the lost maintenance revenue and will fight to win your business back and potentially offer a better customer discount in the future. 

Most ERP software providers will not be releasing a new operating system for many years yet and new software licenses can still be purchased via the software company even when contracted to a Third Party Service Provider. 

There is some risk of missing out on the latest software provider product enhancements but these should be minor and not critical to your business within a three year period. It is tempting to have customizations made to meet your needs but over-customization can make it challenging to migrate to a more advanced release in the future. Try to control the amount of business critical customizations and try to find work-arounds wherever possible.

Termination notice of 90 days is required by most software providers before the end of the contract or your organization risk being locked into a further 12 months paying more than you need to for your support services.

Would you like to know more about how you can benefit from Third Party Support services? Please contact Elemica today using russell.smith@elemica.com.

 

 

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