SAP extends life of R/3 ERP again – at cost

Manufacturing enterprise software giant SAP appears to have bowed to its user group’s demands for extensions to the more ageing R/3 ERP releases. R/3 releases 3.1I to 4.6b inclusive, which have already had extensions on regular maintenance contract to December 2003, are available with cover to December 2004 for the maintenance fee plus 2% on a ‘per application requiring cover’ basis. Sean Liberty, SAP’s UK support manager, told MCS that this is absolutely not a revenue generating opportunity for the company, as cynics have suggested. “The fee is to cover our administration costs of keeping those releases alive,” he says. “We’re giving our users every opportunity to squeeze the last ounce out of their R/3 implementations … because we want happy customers,” he adds. He insists that SAP understands that for many manufacturing organisations that have older releases “there is no business advantage to an upgrade” if the functionality in the latest 4.6c or R/3 Enterprise is not on their requirements lists. And similarly, SAP understands the importance of stable, familiar systems that cost companies dear at the time – and that would cost considerably, in terms of money (software and hardware extensions) and business effort, to upgrade. Indeed, he points to SAP’s arguably very good track record on keeping software releases alive – no less than six and a half years for 3.1i, for example. Meanwhile, SAP’s accounts are looking al;most incredibly good. The firm’s preliminary fourth quarter figures show all-important licence revenues of around eur950 million, slightly down on last year’s Q4 eur1.3 billion. That being the case, the firm predicts 2002 full year revenues to be up slightly on last year, with operating margins also “at least one percentage point over the 20% achieved last year.” That’s well in excess of most analysts’ predictions, and makes its avowed goal of 25% operating margins much more achievable than many felt. It’s also considerably better than many of its competitors, including arch-rival Oracle which is reporting falling licence revenues. With software vendor viability much higher on manufacturers’ assessment criteria, it’s yet more good news for users and SAP. Final results will be announced on January 30.