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

The Enterprise System Spectator

Monday, February 04, 2013

SAP Goes Back to the Well for a Maintenance Fee Hike

Jarret Pazahanick alerted me to an email that went out this morning to SAP partners, announcing a unilateral price increase on standard support, for new maintenance contracts signed after July 15, 2013.

The email reads, in part,
To be able to provide the same level of support in the future, we will change the maintenance rate for new maintenance contracts with SAP Standard Support from 18% to 19%, effective July 15, 2013.

This moderate adjustment does not apply to any existing maintenance contracts for SAP Standard Support closed before July 15, 2013. We also want to be respectful about budgets being planned for 2013. Therefore, we encourage you to take advantage of the opportunity to place purchase orders with SAP Standard Support ahead of this change at the existing 18% rate until July 14, 2013.
I would point out that this is not a 1% increase in maintenance fees: it is a 5.5% increase (1/18 = 5.5%).

If I were an SAP customer, I would have four questions for SAP:
  1. What improvements in SAP support will SAP deliver to justify this 5.5% price increase? Can we expect our internal costs to drop by at least 5.5% as a result of SAP's improvements in its support program?
  2. What is the gross margin on SAP's maintenance business today, and how will that change after this increase is in effect? Maintenance is the most profitable segment in SAP's financial performance. Why should it become even more profitable? 
  3. How have SAP's cost of support increased to justify this increase in my maintenance fees? Normally the cost to support mature products decreases over time, as issues with the program code are resolved. Offshoring of application support and deflection of support activities to SAP's user and partner network also have introduced support efficiencies. Shouldn't SAP be considering a reduction in maintenance fees rather than an increase?
  4. Since SAP uses some of its maintenance revenue to fund development of new products as well as make acquisitions, will SAP provide these new products to customers at no charge? It seems SAP charges customers for new products twice: once, when it charges maintenance fees, and again when existing customers buy those new products. 
Several years ago, SAP customers fought back SAP's attempts to impose a maintenance fee increase by forcing all customers to move from standard support (at 18%) to enterprise support (at 22%). After a great deal of public outcry, SAP backed down.  Now SAP appears to be trying to impose a smaller price increase, with no apparent improvement in service, in hopes customers will not notice.

The only good news in this announcement is for providers of SAP third-party maintenance, such as Rimini Street.

Update: Chris Kanaracus at IDG News Service reports on the SAP maintenance fee hike. Larry Dignan at ZDnet also chimes in.

Update, Feb 5: Dennis Howlett has a deeper dive, and he gets clarification from SAP on several issues. 

Related Posts

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

Labels: , ,

by Frank Scavo, 2/04/2013 10:30:00 AM | permalink | e-mail this!

 Reader Comments:

Great questions Frank on an important topic for SAP customers. By all accounts this only affects a small amount of customers given that a "majority" are on Enterprise Support but wondering why SAP would stir up a hornets nest on maintenance and the value it brings.

I know that SAP HCM customers will be upset with ANY increases as many would like to see a decrease given SAP's strategic direction that for several key areas of HCM that SuccessFactors is where the innovation will be going forward and obviously it comes with additional licenses.

I thought Jon Reed summed it up very well yesterday on Twitter:

"SAP (+ other) on-prem vendors need to rethink support pricing/come up w/ smart new options,they're milking an aging cow"
what is the chance of a customer-owned (ala Vanguard for personal investment/retirement accounts) or non-profit foundation type of organization (ala The Document Foundation for LibreOffice), providing an open source ERP/SCM/CRM software suite at "at-cost" (ala Vanguard) pricing?

Are the top "Global 2000" CXO execs so "religious"/zealous in neo-liberal ideology, that 5% of these companies don't see the screamingly obvious ROI of each contributing 1% each to create & fund such an organization? Or perhaps these companies next-quarter extremist orientation prevents them to making investments that are obviously great ROI in a 5 yr timeframe?

Is it too idealistic to hope that such an organization would be a legitimate competitor to the SAP/Oracle oligopoly by 2020?

Mr. Scavo, would enjoy hearing your take/response to my questions in this comment.

Your questions are really relevant. I would also like to point out some of the simple steps which can be taken for reducing first of all the license cost :
1. Locking users for inactivity on a regular basis
2. Making sure users are classified across all the system by proper license type
3. Having the the same first and last name in all the systems
4. Turning on the parameter so users cannot have multiple logons
SAP Audit |SAP Controls| SAP Security Audit


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