July 16, 2019 | Larry Goldman | Senior Director, Product Marketing
Our ongoing “Roadblock” blog series describes the tactics favored by SAP and Oracle account managers as they attempt to dissuade inquiring customers from switching to third-party support. Here, in the final installment, we’ll discuss the baseless threat of punishment for leaving.
Real Tigers or Paper Tigers?
“If you leave me now, then we’ll never be good friends again.”
You likely heard this taunt in grammar school. You may hear a similar refrain from your Oracle or SAP account manager after you broach the topic of third-party software support. As we noted earlier in this series, annual Oracle and SAP support revenues measure in the billions. They are not happy to lose even a drop of this profitable cash stream and certainly don’t want current customers to jump off the software publisher roadmap.
What Oracle and SAP know – but will not say out loud – is that a portion of the customers who successfully switched to third-party support eventually return to their support, most often due to changing business circumstances. You can’t stay away forever, especially when you’ve decided to upgrade or migrate to the software publishers’ latest cloud applications.
The average period an Oracle or SAP customer stays with a third-party support vendor exceeds four years, as most companies see it as a gap service. When our customers do return to Oracle or SAP, it’s usually due to:
- A desire to replace their current on-premise licenses with next-generation XaaS cloud product.
- A merger or acquisition, where the new parent chooses to fold the acquired company’s license agreements into their existing master agreement.
- A change in executive leadership, opting to get back on the vendor’s roadmap to next-generation – even if service level is lower and fees are higher.
Still, knowing that you could easily return to the vendor, your account manager wants that revenue and may resort to the “Humpty Dumpty” warning: your relationship, once broken, may not fit back together again. “Actions have consequences,” as your grammar school teachers warned you.
The “Penalties” of Leaving Vendor Support
For IT, this can be inferred as losing a “preferential status” enjoyed by longer-term customers or the threat of time-consuming license compliance audits in the near future. Wrong! No such status has ever been enshrined in contracts, and a recent survey of our customers has shown that most have not been audited more frequently while off publisher support.
Procurement and finance professionals will care that penalties can include a loss of financial incentives – no cloud migration credits, no license discounts – or straight out punishment through future fees. From both publishers, you might hear about reinstatement fees should you return:
- For Oracle, the reinstatement fee is 150% of the last annual technical support fee you paid for the relevant program, prorated from the date technical support is ordered back to the date technical support lapsed.
- For SAP, you will be invoiced the accrued SAP Standard Support Fees associated from the time period you have been off, plus a reinstatement fee.
To date, we know of no Spinnaker Support customers who ever paid back or reinstatement fees. Everything is negotiable. In fact, when returning to Oracle or SAP, you’re treated as a new customer (see below for why) in a better future negotiating position than if you had stayed current on SAP or Oracle support. We recommend negotiating with the license sales rep and not the support sales rep to get the best possible deal.
Goodbye Is Not Forever: A Case Study
Regis Corporation is the largest hair salon chain in the world with over 10,000 locations. During their long stint using Oracle-provided support, Regis endured annual support fee increases while service level continued to diminish for their version of the JD Edwards software. They switched to third-party support in June of 2013.
After significant cost savings over a four-year period with Spinnaker Support, Regis returned to Oracle at the end of 2017 to purchase Oracle cloud HCM licenses, initiating migration away from on-premise software. Oracle welcomed Regis back with open arms, with no support penalties enforced because of having moved to third-party support.
Returning to Oracle and SAP Will Be Amicable
Our customers report that when they revisit with Oracle or SAP to discuss new software licenses and purchases, the conversations were far more pleasant than they had expected. In part, this is due to the excitement of the sales opportunity. It may also be because, given the rotation of account managers, you are meeting with fresh faces with no past relationship or desire to penalize your past actions.
And it is about the shining future. Oracle and SAP very much want your business, especially if they can lock you into their new cloud products and subscription pricing. The long-term revenue for the new licensing will far outweigh any reinstatement fees for them. According to our customers, the vendors are more than willing to make a new deal, providing you with ample leverage for price negotiations.
Moving away from Oracle and SAP support does not damage or end your overarching relationship with the software vendor. You remain an active customer, but one that has chosen an alternative support method. The publishers will always welcome you back should you want to upgrade or migrate – with no back penalties. Don’t let these empty threats fill your team with concern.
Be bold. Contacts us today to discuss our practices and how we can assist your support needs.