Sort of. Over the last few months, SAP and its customers have made the news by signaling changes in the way the software giant licenses its product and prices maintenance. The most recent news has SAP experimenting with flat-rate pricing and extended payment plans for its largest customers, clearly in response to lagging license salEs. While interesting, these models are nothing new in the software world, even though they may be new to some SAP customers.

In early October, Information Week reported that SAP is trying out what used to be known as “site licenses,” a flat-rate, fixed price for unlimited access to SAP software. According to comments by an SAP representative in the German magazine is report, SAP believes that such a move would focus customers on the value of the software, rather than on price. This scheme would also enable SAP to sell entire software suites rather than engage with clients in individual product negotiations, which lead to piecemeal implementations. With the site license approach, customers know their costs in advance while SAP can better project revenue. Neither the original article nor the InfoWeek piece indicated how widespread this trial is.

As many PLM companies have found found, site licenses carry enormous risks, perhaps not during the initial term of the license but in negotiations in subsequent years. It is very difficult to upsell, as customers feel entitled to new versions and new products — and at the same pricing — as part of their original agreement. This could lead to problems having the client recognize the full value of the products should SAP ever try to change its license structure in the future.

The other licensing “innovation,” allowing SAP’s largest customers to spread the initial license payment across multiple years, is a cross between vendor-provided financing and a lease. SAP’s Q3 earnings call cited the obvious: large deals are very hard to close right now, requiring a very long signature process that often gets derailed. As a result, said SAP CEO Leo Apotheker, “We are driving more multi-year agreements … This model is good for both SAP and our customers… Customers want to buy a continued software based on our long term strategic roadmap over several years. We are now taking this concept down to the next 500 from the 80 largest customers. We expect this to open up tremendous opportunities for growth going forward. We believe this model of continued software over multiple periods that we are driving is an important trend in our industry.” Reports indicate that SAP will allow select customers to spread their upfront fee over five years; users speculate that maintenance may also be rolled into the same payment structure.

In this model, the risk is mostly financial. The move from large-and-lumpy upfront payments to a smaller-but-more-repeatable lease business depresses total revenue in the current period but creates a larger cushion for future periods: a tough sell for some investors.

Both strategies show that SAP is trying to find ways to stay relevant to its customers — and that a notoriously inflexible company is working hard to change its business model to adapt to economic stresses. From a competitive standpoint, this can only be good for SAP as it takes on Oracle: it makes SAP seem more willing to bend to its customers’ needs.

What do you think? If you’re a vendor, the transition to a lease model is tough — but may be just the thing your company needs to attract new customers. If you’re a buyer, would a 5-year payment plan sway you to consider an alternate to your current supplier? Email me at monica AT schnitgercorp DOT com.