Fixed Price or Flexibility

SAP AMS: The Right Pricing Model Drives Efficiency

There’s no doubt that outsourcing SAP Application Management to specialized service providers offers significant advantages to companies. However, to unlock the full potential of SAP Application Management Services (AMS), it's crucial to choose not only the right pricing model but also the most suitable outsourcing strategy – whether nearshore or offshore.


What Pricing Models Are Commonly Used for SAP Application Management Services (AMS)?
 

  • Time and Material:
    In this model, costs are based on the time and resources used by the AMS provider. It offers flexibility and transparency, as clients only pay for the services actually rendered. This model is particularly beneficial when the required service volume is unpredictable or frequently fluctuates. 

    However, the downside is that AMS costs can become difficult to predict, complicating budget planning. To manage this challenge, close collaboration and ongoing communication between the AMS provider and the client are essential. Detailed reporting and regular updates are also recommended to maintain cost visibility.
     
  • Fixed Price:
    With a fixed-price contract, a defined scope of services is agreed upon in advance. This ensures cost control and budget certainty, as expenses are clearly outlined from the start. However, it requires careful planning and a precise definition of deliverables to ensure all client requirements are covered. Any changes or additional requests may incur extra charges. 

    The fixed-price model also motivates the provider to work efficiently and complete tasks within the agreed time and budget. For the client, this means fewer surprises and a clear, predictable cost structure.
     
  • Hybrid Model:
    This approach combines fixed-price and time-and-material concepts. The client purchases a so-called “inclusive volume,” which covers a certain range of services at a fixed cost. If support needs exceed this volume, additional work is billed on a time-and-material basis.   
    The hybrid model is especially suitable for companies with a baseline AMS requirement they want to secure under a fixed rate. It also allows the flexibility to handle support spikes as needed.  
SAP AMS: The Right Pricing Model Makes the Difference
Different pricing models allow clients to unlock the full potential of SAP AMS


What Role Do Nearshore and Offshore Models Play in AMS Pricing?

In addition to pricing structures, outsourcing strategies such as nearshoring and offshoring play a key role in application management support.

Nearshoring: 
Nearshoring involves outsourcing SAP AMS to neighboring countries, often within the same or a similar time zone. This proximity enhances real-time communication and collaboration. Cultural and language barriers are typically minimal, which simplifies integration into the client's SAP operations. Nearshoring offers moderate cost savings compared to onshore solutions and is ideal for companies seeking close cooperation and quick response times.    

Conclusion: Compared to onshoring, nearshoring offers cost benefits due to lower labor expenses while maintaining geographic and cultural proximity for smoother collaboration.

Offshoring: 
This strategy involves outsourcing AMS to more distant countries, often across multiple time zones. Offshoring provides significant cost savings and access to larger talent pools. It’s especially attractive for companies needing 24/7 support or specialized expertise. However, cultural and language differences, along with time zone coordination, can present challenges.   

Conclusion: Offshoring is typically very cost-effective due to lower labor rates in target countries, making it especially beneficial for large-scale, standardized tasks.

How Can XEPTUM Support You in Choosing the Right Pricing Model and Outsourcing Strategy? 

The most suitable pricing model and outsourcing strategy for your business depend on various factors, including the scope and nature of your AMS needs, your overall corporate strategy, and your specific requirements. Considerations such as your company’s need for planning security or its risk tolerance also play a key role in the decision-making process.

In any case, it’s essential to carefully weigh the pros and cons of each pricing model and outsourcing approach and develop a solution tailored to your needs.

With XEPTUM, you have a seasoned SAP AMS provider at your side – supporting you efficiently and expertly through every phase of your project. We begin with a thorough analysis of your specific support requirements in a dedicated workshop. From there, we design and deliver an AMS solution with a pricing model and outsourcing strategy precisely aligned to your needs.

Take advantage of our proven SAP AMS offerings based on top-tier Service Level Agreements (SLAs) – meeting the highest international standards!

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