Enterprise System Spectator blog: ERP and enterprise system vendor evaluation, selection, and implementation.

The Enterprise System Spectator

Monday, February 08, 2010

SAP top management changes: impact on maintenance fees?

SAP pulled a surprise change in its leadership team over the weekend, with Léo Apotheker out as CEO and replaced by Bill McDermott, head of the field operations, and Jim Hagemann Snabe, head of product development, who will now share the top job. At the same time, SAP elevated Vishal Sika, chief technology officer (CTO) to the SAP Executive Board.

Analyts and bloggers have been buzzing about the news for several reasons, not least of which is the fact that SAP announced the switch in a press release over the weekend, following up with a somewhat terse conference call this morning by co-founder and chairman Hasso Plattner.

Joab Jackson and Chris Kanaracus have an excellent write up at Computerworld, including some contents from an internal email from Apotheker to SAP employees. In it he refers to the results of a recent SAP employee survey, which found a dramatic loss of confidence in senior management, according to a Financial Times report.

In the conference call this morning, Plattner sounded a humble note on SAP's unilateral decision to increase its software maintenance fees, in the midst of a recession. As reported by Computerworld:
He addressed head-on one of the most heated issues in SAP's recent history: Its 2008 decision to move customers to a richer-featured but more expensive Enterprise Support service. The plan rankled users worldwide, particularly those with older, stable systems and little need or desire for additional support.

"I was part of the decision that we had to raise maintenance fees," he said. "That is not something we can put in Léo's shoes. This was done by SAP. We made a mistake and we have to change course here, and regain trust from the customers who were more than upset. Unfortunately, the head of the company takes the blame, whether it was just or not."
Implications for SAP maintenance fees
I normally do not pay a lot of attention to management changes at software companies, as I find them to be more of interest to insiders and financial analysts. But I've been convinced by a couple of my fellow Enterprise Advocates that this switch matters because of what it means to customers.

If the issue of the maintenance price-hike is one of the main issues behind Apotheker's departure, what does it mean for maintenance fees? Last month, SAP appeared to be backing off its decision to unilaterally migrate all customers from Standard Support (typically at 18% of license fees per year) to the more expensive Enterprise Support (at 22%). But a more careful analysis by David Dobrin revealed that SAP's apparent reversal was no reversal at all: in fact, by invoking cost-of-living clauses in many of its customer contracts, SAP might actually be raising fees for Standard Support above 22%!

So, if Plattner is now expressing humility on the maintenance fee issue, does that mean SAP might be backing off its enforcement of cost-of-living increases? One can only hope so. After this morning's conference call, it's hard to imagine SAP's sales force turning around and playing tough guy with cost-of-living increases.

Other voices
Fellow Enterprise Advocate Dennis Howlett, who reads SAP tea leaves more closely than I, has been all over the story. He reports on SAP's need to rebuild trust with customers. At the same time, he feels now is the time for SAP to beef up its technology with some targeted acquisitions of firms such as Software AG and TIBCO.

Vinnie Mirchandani views the leadership change at SAP as not addressing the real issue of the total cost of ownership for SAP and its ecosystem partners. He writes:, "Bill McDermott and Jim Snabe, the new co-CEOs are good solid, likable executives – but they represent more of the same."

Finally, for those interested in SAP "inside baseball," former SAP executive Helmut Gumbel has a good post.

Update, Feb 9: Bob Evans has a very good piece in InformationWeek on SAP's failure to put its customers front and center, including this zinger (emphasis, mine):

I think it helps to paint a picture of a company that is dangerously out of touch with what its customers do and want and need, and with how those customers rate and reward IT vendors in these days where it's essential to do a great deal more with a whole lot less.

Speaking in broad strokes about trust and the need to rebuild it, Plattner said this: "What SAP has to re-establish is that we have trust between all involved parties: the [SAP] Supervisory Board, [SAP] Executive Board, the co-CEOs, the management team, the employees, the works council, the partners, the customers, and the employees working for our customers." Setting aside that bizarre customer/customer-employee split, look at where customers rank in the great chain of being constructed by Plattner: dead last. Almost an afterthought. What good does it do SAP to have gushers of harmonic convergence among its own employees if the company's customers feel alienated, unfairly treated, and unwilling to trust anything SAP says? I just don't get that—again it's a degree of tone-deafness that is hard to fathom.
Read the whole thing.

Update, Feb. 10: Bob Evans has another excellent piece in InformationWeek: An Open Letter To SAP Chairman Hasso Plattner.

Related posts
Flash: SAP backs down on 22% maintenance fees
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?
Mad as hell: backlash brewing against SAP maintenance fee hike

by Frank Scavo, 2/08/2010 04:18:00 PM | permalink | e-mail this!

 Reader Comments:

Post a Comment

Powered by Blogger

(c) 2002-2018, Frank Scavo.

Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

About the Enterprise System Spectator.

Frank Scavo Send tips, rumors, gossip, and feedback to Frank Scavo, at .

I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.

Selecting a new enterprise system can be a difficult decision. My consulting firm, Strativa, offers assistance that is independent and unbiased. For information on how we can help your organization make and carry out these decisions, write to me.

My IT research firm, Computer Economics provides metrics for IT management, such as IT spending and staffing benchmarks, technology adoption and investment trends, IT management best practices, IT salaries, outsourcing statistics, and more.

Go to latest postings

Search the Spectator!
Join over 1,700 subscribers on the Spectator email list!
Max. 1-2 times/month.
Easy one-click to unsubscribe anytime.

Follow me on Twitter
My RSS feed RSS News Feed

Computer Economics
IT Spending Ratios by Industry and Company Size
IT Spending as a Percentage of Revenue by Industry, Company Size, and Region
Outsourcing Statistics
IT Spending and Staffing Benchmarks
IT Staffing Ratios
IT Management Best Practices
Worldwide Technology Trends
IT Salary Report


2014 Best Independent ERP Blog - Winner 2013 Best ERP Writer - Winner Constant Contact 2010 All Star Technobabble Top 100 Analyst Blogs

Key References
Strativa: Business strategy consulting, strategic planning
Strativa: IT strategy consulting
Strativa: Business process improvement, process mapping, consultants
Strativa: IT due diligence
Strativa: ERP software selection consulting and vendor evaluation
Strativa: CRM software selection consulting and vendor evaluation
Strativa: Project management consulting, change management
StreetWolf: Digital creative studio specializing in web, mobile and social applications
Enterprise IT News: diginomica

Spectator Archives
May 2002
June 2002
July 2002
August 2002
September 2002
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
April 2003
May 2003
June 2003
July 2003
August 2003
September 2003
October 2003
November 2003
December 2003
January 2004
February 2004
March 2004
April 2004
May 2004
June 2004
July 2004
August 2004
September 2004
October 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
September 2006
October 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008
October 2008
November 2008
December 2008
January 2009
February 2009
March 2009
April 2009
May 2009
June 2009
July 2009
August 2009
September 2009
October 2009
November 2009
December 2009
January 2010
February 2010
March 2010
April 2010
June 2010
July 2010
August 2010
September 2010
October 2010
November 2010
December 2010
January 2011
February 2011
March 2011
April 2011
May 2011
July 2011
August 2011
September 2011
October 2011
November 2011
December 2011
January 2012
February 2012
March 2012
April 2012
May 2012
June 2012
July 2012
September 2012
October 2012
December 2012
January 2013
February 2013
March 2013
May 2013
June 2013
July 2013
September 2013
October 2013
December 2013
January 2014
February 2014
March 2014
April 2014
May 2014
June 2014
July 2014
August 2014
September 2014
October 2014
November 2014
December 2014
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
September 2015
October 2015
November 2015
February 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
January 2017
February 2017
May 2017
June 2017
October 2017
January 2018
April 2018
May 2018
January 2019
February 2019
Latest postings