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Thursday, January 14, 2010

Flash: SAP backs down on 22% maintenance fees

SAP has finally thrown in the towel on its fight to unilaterally increase maintenance fees from 18% of software license cost to 22%.

According to SAP's press release:
SAP...today announced a new, comprehensive tiered support model that is being offered to customers worldwide. This support offering includes SAP Enterprise Support services and the SAP® Standard Support option and will enable all customers to choose the option that best meets their requirements. Additionally, in response to the financial challenges organizations continue to face, SAP also announced that its 2010 fees for existing SAP Enterprise Support contracts will remain unchanged from 2009 levels.
Translation: We tried and failed to move all customers to Enterprise Support at 22% but the blowback has been so strong that we're giving up.

I would like to think that SAP's decision had something to do with the focus that I and other bloggers, such as Vinnie Mirchandani and Dennis Howlett, along with many other independent voices, brought to this issue. (See related posts, below) But ultimately, it was SAP customers, who finally said enough is enough that tipped the scales.

The move speaks well of SAP, which remains the leading enterprise software provider globally. Nevertheless, the basic question remains: what is the value of SAP's maintenance and support offerings? If moving all customers to 22% was too much, what's to say standard support at 18% is the right number? Again, SAP customers will need to decide.

Other analysts are already weighing in on the announcement and what it means for customers. An early post by Amy Konary is worth reading. Forrester's Paul Hammerman also has good analysis.

Update, 12:30 p.m. Vinnie weighs in, suggesting that if two tiers of pricing is good, three tiers is better, with a bare-bones support option at 8-10%.

Update, Jan. 15. Hmm. David Dobrin takes a little time to run some numbers on SAP's new tiered pricing and finds that the new arrangement may not really be a price reduction, as SAP is now stating it will increase pricing for standard support based on some yet-to-be-determined annual cost of living increase. His conclusion: "Whatever SAP is doing, it is not a U-Turn, and it is not a rescission of the price increase." Read the whole thing.

Update, Jan. 19. Dave Dobrin continues his analysis by looking at the results from SAP's KPI measurement initiative (done with the SAP user group SUGEN) and the fact that there is less there than meets the eye. An excellent piece of work, Dave.

Related posts
SAP postpones its maintenance fee price hike
Enterprise software: who wants to be the low-cost leader?
Attacking and defending software vendor maintenance fees
SAP and third-party maintenance: good for me but not for thee
SAP maintenance fees: where is the value?
SAP under the spotlight for "broken promises"
Mad as hell: backlash brewing against SAP maintenance fee hike

by Frank Scavo, 1/14/2010 08:52:00 AM | permalink | e-mail this!

 Reader Comments:

Great comments/thoughts about 3rd party support.

But if you are a CIO and your IT team stinks and Remini failed to help you and SAP won't take your support call, you won't last very long.

Also, the lower % means it makes the IT department staff appear most $$$. I am not sure that's the situation a CIO wants to be in.
SAP Poland has confirmed to us that the standard support base will be increased each year in line with inflation (CPI) and there will be no protection to stop the cost from climbing even higher than the equivalent ES cost at each stage of the ramp up.

So they are planning to ramp up the fee anyway. The only thing they are cutting back on is the level of support, not the fees. It is incredible that they have the nerve to announce this as something positive and it's sad that the media has allowed them to get away with this scale of deception when reporting their press release.

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