On September 10th, Gartner published their first 'Market Guide for Independent Third-Party Software Maintenance (TPSM) for IBM, Oracle and SAP Software.'
This Market Guide analyses the trend of increasing software and maintenance costs which is, in turn, compelling Sourcing, Procurement and Vendor Management (SPVM) leaders to consider the option of third-party maintenance so they can reorganize their budgets across the business. TPSM’s enable management leaders to maximise their restricted budgets, through significant cost savings whilst freeing up funding for essential projects.
“Rising software maintenance costs are driving sourcing, procurement and vendor management leaders to explore the independent third-party maintenance market for IBM, Oracle and SAP software. To optimize costs, use this guide to evaluate alternative technical maintenance and support service offerings.”
The core findings from this Market Guide is that:
“Third-party maintenance is one of the options that procurement should always explore as a cost-savings opportunity. The direct cost savings realized from these lower-cost third-party software maintenance alternatives can be easily measured to calculate the direct cost savings for current year budget impact, as well as future-year cost savings and cost avoidance.”
“Sourcing, procurement and vendor management (SPVM) leaders who neglect to assess all opportunities for cost optimization related to third-party software maintenance and support subject their organizations to missed savings and budget reduction opportunities.”
“Comparing the third-party software maintenance (TPSM) offerings to the maintenance and support policies and contract terms governing the IBM, Oracle and SAP products reduces the risk of selecting a third-party provider that has lower pricing but insufficient service offerings.”
“SPVM leaders reduce cost and operational risk when they obtain references from the TPSM providers and arrange demos, trials, and proof of concept (POC) engagements for the providers to showcase their service offerings and technical support capabilities.”
The flourishing TPSM market is amplifying as a result of organizations needing to lower costs so that with the same budget, they can fund alternative and additional projects across the business. The market is thriving as a result of offering organizations more cost-savings, value, consulting and customization service offerings. Independent TPSM providers have no affiliation with the forerunner manufacturers of independent software vendor, and as an outcome “cannot access intellectual property, software updates, firmware updates or security advisories, or obtain OEM/ISV Level 3 or backline support.”
TPSM IBM, Oracle and SAP alternatives are beginning to look more and more attractive to SPVM, as they now are beginning to see the benefits of lower contract costs, no enforced upgrade cycles and an agreement that places your business in charge of its own IT.
According to Gartner, the main reasons you should use TPSM is as follows:
1. “Reduce software budgets, specifically software maintenance P&L expense. The average annual savings is at least 50% when comparing TPSM services costs to the annual maintenance pricing models and policies of IBM, Oracle, and SAP.”
2. “Customize contracts for increased flexibility. Organizations look to third-party providers to increase flexibility in their software maintenance and support contracts, allowing them to opt out of new and future version and release upgrades if these are unnecessary for the business.”
3. “Receive special services to support customized code and modifications, as well as unique product-specific support requirements. In addition, to receive a higher level of support and improve SLAs.”
4. “Customize agreements for shorter duration terms than the typical annual commitment maintenance policies of IBM, Oracle and SAP. TPSM providers are often willing to offer short term and month-to-month support for special product-specific needs under customized service arrangements and contracts.”
More and more organizations are beginning to explore the option of TPSM but other than just cost savings these are the main 5 reasons why companies are moving away from their current vendors:
“Cloud Migration” – During a migration to cloud, TPSMs facilitate continuous use of perpetual licenses for the IBM, Oracle or SAP software which is part of the migration plan.
“Migration to an Alternative Vendor or Solution” – When new vendors or alternate solutions are selected to replace on-premises software products, TPSMs can assess if it is viable to use the current entitled version software with perpetual licenses until migration is completed.
“Low Value Maintenance Evidenced by Low-Frequency Technical Support Tickets/Incidences - The historical volumetric analysis of all help desk and service desk technical support and incident tickets should be analysed every six months.”
“End-of-Support Announcements/Notifications by Software Vendor” – When older-version business-critical software support is being ceased by IBM, Oracle or SAP; TPSMs facilitate this support without complicated and expensive customized support agreements.
“Absent of Expiring Maintenance Increase Caps for Price Protection in Contracts – In some cases, no price protection exists for ongoing maintenance and support in vendor contracts.”
To discover if third-party is suitable for your organization, read the full ‘Market Guide for Independent Third-Party Maintenance for IBM, Oracle and SAP Software’ here.