AMCs a pet peeve or real CIO concern? - CIOL Feature

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AMCs, a pet peeve or real CIO concern?

They should be a fixed amount and not weaved into licenses, feel some CIOs

Tuesday, June 16, 2009

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PUNE, INDIA: "AMCs are exorbitant." It's time that AMC (Annual Maintenance Charge) model is delinked from the license percentage base. The reason being that this component of an ERP investment could in all possibility turn a well-packaged ERP into an annual budget headache. This is what some CIOs feel.

"AMCs should be nominal and not on a percentage basis, and absolutely not on license. If I as a CIO pay Rs12 lakh for an enterprise solution, that comes with 17 per cent maintenance charges, that surely translates to about Rs two lakh that I have to shell out every year on maintenance. That amount is almost a good system operator's salary. And this cost is exorbitant," says Arun Jain, director, Premium Bars, a manufacturer of TMT steel bars that produces over 450 tonnes of steel per day.

It has just undergone a transition from a legacy environment of a mix of Tally and MS-Excel to implementation of SAP BI.

He suggests that licenses should not be mixed with AMCs and there should rather be a standard fixed cost earmarked for AMCs. "That way upgrading licenses won't be painful."

He is happy overall with the choice of SAP and tells how he zeroed on this after evaluating a number of software in the market. "Most of them were not standard products and a few that were, turned out to be too expensive. Also other vendors did not have a good base. We wanted a good sales service back-up and the partner back-up by SAP, was a good point."

So, is it right that AMCs are a highlight among CIO concerns and affect their IT investment appetite? We tried to check with SAP on their view on restructuring of the license and maintenance pricing model in context of that? We also asked - Would a fixed annual cost format work? If not, what is your reasoning?

Here's SAP's take on the issue.

"SAP Enterprise Support is a holistic support offering designed to help companies take full advantage of the integration of SAP and non-SAP solutions. The offering combines Run SAP methodology, end-to-end solution operation standards, mission-critical support and our global support backbone to enable our customers with the tools and methods for achieving business innovation while reducing risk and total cost of operations."

According to SAP, the offering contains features like 24/7 Support Advisory, Service Level Agreements and SAP Solution Manager, enterprise edition.

SAP says it is confident that SAP Enterprise Support delivers unparalleled value to all customers as it represents a significant step from reactive problem solving to proactive management and improvement of a customer IT landscape, including end-to-end solution operations for the entire application lifecycle.

"Through SAP Enterprise Support, SAP is not only the role model for the evolution of software support, but stands alone among the competition in providing transparency into how the value of our support can be measured for our customers."

Interestingly, in November 2008, SAP and SAP User Group Executive Network (SUGEN) formed a task force to quantify the value of Enterprise Support. This task force was charged with the establishment of Key Performance Indicators (KPIs) that can be used to measure value and benchmark SAP Enterprise Support.

"Benchmarking provides the opportunity to quantify improvements over time for customers by exercising the benchmark on a regular basis and benchmarking will give SUGEN members the opportunity to better understand their individual situation relative to peers and other companies," a company response explains.

It added that SAP has also agreed to deliver on specific KPIs defined by SUGEN before we adjust future pricing for our Enterprise Support services.

So it looks like AMCs are at least coming into the spotlight, be it CIOs or vendors.

©CIOL Bureau

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