Wednesday, April 29, 2009

SAP postpones its maintenance fee price hike

Well, well, well. SAP announced today that it is deferring its scheduled increase in maintenance fees. The price hike, from 17% to 22% of software license fees was scheduled to kick in as SAP moved all of its customers to its high-end Enterprise Support program.

The rationale provided by SAP is that it has not yet met the improvements in key performance indicators that it worked out with its user group executive network to "measure and verify the ongoing value of SAP Enterprise Support." My understanding was that these measures should have already been reported.

Still, SAP has good reason to back-pedal:
  • Current economic conditions are no time to be raising prices for customers. Due to the vendor lock-in effect, SAP might get away with it short-term, but at the risk of long term customer relationships.
  • SAP was already forced in December to let its customers in Germany and Austria stay on on their current maintenance contracts through 2009. This was a crack in the dike, as so to speak as customers in other geographies wonder why they should be different from Germany and Austria.
  • Other customers have been exercising contract rights to limit maintenance fee increases. I know of at least one customer here in Southern California who was thrilled to discover that his consultant had negotiated such a limit in his original contract.
  • In the larger picture, there are growing signs that some providers, especially the SaaS vendors, see excessive maintenance fees as an opportunity to adopt a low-price-leader strategy, something that is long overdue in the enterprise software industry.
My guess is that SAP is looking for a way to soften or modify its forced-march toward one-size-fits-all Enterprise Support. I don't know what the answer is, but I'm hoping it provides greater flexibility and choice.

Dennis Howlett gives his take. He writes, "I’m convinced SAP had no choice but to take these steps as a way of mollifying a very unhappy and increasingly vocal customer group. Even so, it is good to see that SAP has finally bent to the inevitable and now has an opportunity to put this fiasco behind it."

Related posts
Enterprise software: who wants to be the low-cost leader?
Attacking and defending software vendor maintenance fees
Crack in the dike for SAP maintenance fee hike
SAP maintenance fees: where is the value?
Mad as hell: backlash brewing against SAP maintenance fee hike

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