Top Hidden SAP Support Expenses - The Finale

Last week I discussed SAP support costs #3-5 focused on employee training & productivity. This week I will be covering the final hidden costs in my series. Recognizing these risks upfront or mitigating them during current SAP projects is crucial to running a successful SAP system.

#6: Recruitment & Retention Costs

One very large issue that has faced SAP customers since R/3 arrived in the US in 1993 is the ability to keep and retain the best resources possible to support their SAP systems. SAP talented people are journeyman at best and like the adventure of implementing new versions or modules to increase their marketable skill sets. SAP staff that does not have this drive are by default not very productive (see number 4). 

Everybody has recognized (even in these tough economic times) that when a large company in your local area starts implementing SAP, IT employees and SAP super users migrate to these new implementations. These larger companies have a strategy that it's cheaper (even if they offer more then you are paying) to take away the talent than to hire "big 3"-type consultants for all the positions needed. This leaves the smaller companies looking for replacements that could be less talented and in most cases they have to hire outside recruiting firm to help them find the talent. This again is a very large cost of support depending on how many times employee turnover occurs.

SAP talented people continue to be marketable (see number 3) and require significant base salaries. In order to keep them engaged, companies have to come up with different perks or incentives - possibly including cash bonuses. The answer is obvious but many companies do not want to deal with the fact that if their budget for SAP ongoing support is more than $500K per year just in people costs, they need to look at alternatives for support for less headaches of managing a moving target.

#7: The Local Corporate Giant’s “Big Project” 

Even if all steps are taken internally to manage SAP support costs, there remains one big wild-card—an SAP project undertaken by a large corporate giant that happens to reside in the same geography. When that firm undertakes a major SAP project such as an installation or an upgrade, everyone in that local market is affected (see number 6). With most major IT projects, there isn't a lot of external impact—it’s just part of the day to day activity happening within another firm’s four walls.

However, SAP is a different story. Whenever a Fortune 1000-type company launches a major SAP initiative, they take up much of the available local talent, and costs as a result are driven upward by the insatiable demand for qualified people. Some firms find their entire SAP staff wiped out—hired by a desperate corporate giant looking to make sure their deployment project is fully resourced. The basic laws of supply and demand apply: when one firm is willing to pay above-market salaries, it tends to result in everyone having to offer the same salary.

In addition, that enterprise project reflects a professional opportunity to improve skills by working on the latest release. I outlined roughly the same issue in number 6. However. this is more about how demand can drive up salaries and when going back to the market how it can cost you more money to replace a resource. The SAP marketplace is global in reach but still a relatively small market when it comes to people knowing what is going on and what they should be making compared to their counterparts down the street. This alone would have any company look at an out-tasking strategy to make sure they can meet the demand of the business and support SAP while controlling the expense.

Conclusion

While companies cannot eliminate all of their SAP support or upgrade costs, there are flexible alternatives to reduce the ongoing support and upgrade costs that can be identified as on-going but not necessarily mission critical.

Of course, the biggest challenge for most companies is realizing that the ongoing support could be running at two to three times the level necessary to keep SAP supported on a daily or monthly basis. To capture these savings, companies must first recognize that these costs exist and decide to take the necessary actions to reduce or eliminate them. Then, they must find where those costs are hiding in the organization and take corrective actions to overcome them. SAP support costs can be reduced with on demand, targeted and flexible solutions that many visionary SAP organizations are using today.

I appreciate all the readers out there! If you have any comments (in agreement or disagreement) I would love to hear your thoughts and I'll be sure to respond quickly!

- Mike Kerrigan, Managing Principle, ERP Services