There is no doubt that outsourcing SAP Application Management to specialized service providers brings significant benefits to companies. Those who wish to unlock the full potential of SAP Application Management Services (AMS) should also ensure they choose the right pricing model and the appropriate outsourcing strategy – whether Nearshore or Offshore.
Which pricing models for SAP Application Management Services (AMS) are commonly used in practice?
- Time and Materials Billing:
In this model, costs are calculated based on the time and materials expended by the AMS provider. It offers flexibility and transparency, as the client only pays for the services actually rendered. This model is particularly advantageous when the scope of required services is difficult to predict or fluctuates frequently. However, this can come with the disadvantage that AMS costs may be unpredictable, complicating budget planning. To overcome this challenge, close collaboration and regular communication between the SAP AMS provider and the client are essential. Additionally, detailed reports and regular updates are recommended to keep track of ongoing costs. - Fixed Price:
With a fixed-price contract, a specific scope of services is defined in advance. This offers planning certainty and budget control, as costs are clearly defined from the outset. However, this model requires a precise definition of the scope of services and careful planning to ensure all client requirements are covered. Changes or additional requirements may incur further costs. Furthermore, the fixed-price model offers the advantage of incentivizing the service provider to work efficiently and complete the tasks within the agreed budget and timeframe. For the client, this means fewer surprises and a clear cost structure. - Hybrid Model:
This model combines fixed-price with time and materials billing concepts. For this, the client books a so-called inclusive volume, which covers a specific scope of services at a fixed price. If additional support is required beyond this, the SAP AMS provider calculates the incurred costs according to their time and materials expenditure.
The hybrid model is particularly advantageous for companies that have a certain basic need for AMS and wish to secure it within an inclusive volume. However, since some clients experience recurring peak demands, the hybrid model offers them the necessary flexibility to obtain additional support services at any time.
Through various pricing models, clients can unlock the maximum potential of SAP AMS
What Role Do Nearshore and Offshore Models Play in AMS Pricing?
In addition to the aforementioned pricing models, outsourcing strategies such as Nearshoring and Offshoring also play an important role in Application Management Support.
Nearshoring:
With Nearshoring, SAP AMS are outsourced to nearby countries, often within the same or a similar time zone. This proximity of the AMS provider to the client enables better real-time communication and collaboration. Furthermore, cultural and linguistic differences are usually smaller, which facilitates the integration of support services into the client’s own SAP operations. Compared to onshore solutions, Nearshoring offers moderate cost savings and is ideal for companies that desire close collaboration with the AMS provider and fast response times.
Conclusion: While Nearshoring offers the advantage of lower labor costs compared to Onshoring, clients benefit from the geographical proximity and cultural similarity of their AMS provider.
Offshoring:
With this outsourcing strategy, SAP AMS are outsourced to more distant countries, often across multiple time zones. Offshoring offers significant cost savings and access to larger talent pools. It is particularly attractive for companies requiring 24/7 support and specialized professionals. However, cultural and linguistic differences, as well as coordinating collaboration across different time zones, can pose challenges.
Conclusion: Offshoring pricing is generally very competitive, as labor costs in target countries are often significantly lower. This enables substantial savings, especially for high-volume and standardized tasks.
How Can XEPTUM Support You in Choosing the Right Pricing Model and the Appropriate Outsourcing Strategy?
The appropriate pricing model and outsourcing strategy for your company depend on various factors, including the type and scope of AMS, your corporate strategy, and individual client requirements. Crucially, factors such as the required planning certainty or your company’s risk appetite influence the decision-making process. In any case, it is important to carefully weigh the advantages and disadvantages of each pricing model and outsourcing strategy for your company and to develop a tailored solution.
With XEPTUM, you have an experienced SAP AMS service provider by your side, efficiently and competently supporting you in every project phase. This begins with a thorough analysis of your individual support requirements within a workshop. In the next step, upon request, we provide you with an AMS solution whose pricing model and outsourcing strategy are entirely tailored to your individual requirements. Benefit from our proven SAP AMS based on Service Level Agreements (SLAs) at the highest international level!
