The support an ERP vendor provides is critical to running a successful manufacturing operation. If a software provider is slow to respond to customer issues or the system is unstable or full of bugs, the company workflow can be brought to a screeching halt. Furthermore, high annual ERP maintenance costs can increase the total cost of ownership significantly over the life of the system. Manufacturers should expect these minimum levels of ERP vendor support:
- Easy access to vendor support personnel from both an application and technical standpoint
- Software bug fixes and patches
- New software functionality at no additional charge
- Upgrades to keep the package compatible with new technologies from third-party vendors
- Access to system documentation
Software support is a big revenue stream from most ERP vendors, so it is important to negotiate favorable maintenance terms before purchasing the software package.
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The following are tips to get the level of ERP service required from the vendor, while still managing the total cost of the support.
- Insist that the ERP vendor waive the first-year annual maintenance fee
Many vendors will waive the first-year fee as part of their normal sale terms or when it is necessary to close a software deal with the customer.
- Do not pay the list price for annual ERP maintenance
When a company purchases the ERP software outright, annual fees can be more than 25% of the software licensing cost. At this price, companies end up paying the full price of the software again in just four years. It is not unheard-of to negotiate annual fees as low as 15% of the licensing cost.
- Limit annual fee increases
Allowing annual ERP maintenance cost increases of no more than 3% or no greater than the consumer price index is reasonable.
- Longer maintenance agreements can mean deeper discounts
Some ERP vendors offer discounts for longer contract periods. This is usually advantageous from a financial standpoint only if the payments are prorated over the contract period -- that is, the total amount is not due upfront.
- Support should cover software set-up questions prior to system go-live
If this is not specified in the contract and there are questions later about configuring the application, the vendor might state that support only covers software bugs or technical issues prior to system cutover. In other words, see your implementation consultant. The help desk should assist with software setup questions or provide documentation that may help the customer.
- Question the need for dedicated support personnel
For an additional fee, some vendors offer dedicated support personnel assigned to each account. While this may provide an added level of comfort, I have yet to see how the premium price for dedicated support is worth it in terms of the timeliness and quality of issue resolution. A good vendor should be able to address problems in a timely fashion without asking their clients to pay more.
- Get the support for third-party products from another vendor
Even for systems hosted internally by the customer, some ERP vendors offer maintenance services outside the scope of the ERP software and into routine system administration functions for related products. This may include preventative maintenance, system tuning or other services for third-party infrastructure products such as databases, operating systems and hardware. If this type of support is required from an external source, it is likely that other vendors can provide the same level of service for a fraction of the cost. Many of these third-party products are commonly used within industry.
- Return of software and licenses
Of course, the right to cancel all support should be in the contract. But short of this, ensure that the agreement provides the ability to decrease the number of licenses or drop support for any module, particularly if the module is not used. The customer should be permitted to exercise these options at any time. This includes a prorated refund, considering the contract period and the maintenance fees paid in advance.
- Eventually use third-party support for the ERP software
For some companies, there comes a time when the high cost of support from the ERP software provider can no longer be justified from a business standpoint. This can be the case when the software is technically stable, but the prospects of implementing a new software release are slim. This may be because new releases are not available from the vendor or do not address business needs or because the release would be difficult to implement due to extensive software modifications by the client. Many third-party support vendors can provide for bug fixes and technical expertise for significantly less than the ERP software vendor.
- Additional cloud considerations
The rise of Software as a Service ERP has opened up new realms of software support. In fact, it is not just about software support any longer, since services often also include the IT infrastructure to run the ERP application. In these cases, the contracts should address many of the traditional IT management concerns. These may include data backups, security, disaster recovery and service levels for system performance and availability.
About the author:
Steven Phillips is an ERP professional with more than twenty-seven years of implementation experience. He is the author of the book Control Your ERP Destiny, available at Amazon, Google Books, Barnes & Noble and many other international booksellers.
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This was first published in April 2013