Update: SAP Isn’t raising maintenance – yet

Through much of 2009 SAP wrangled with customers over a proposed increase in maintenance fees. In December, the software giant announced that the hike was on hold until at least early 2010 as the company awaits results of benchmarking by SAP and user groups to determine the value of the maintenance program. To quickly recap, SAP had planned to roll out a 30% increase in maintenance, to 22% of the initial purchase price, through its customer base by 2012. The 22% fee matches that charged by Oracle and is actually less than many companies pay for other software platforms but the magnitude of the increase stunned customers and a revolt ensued. Many argued that the maintenance fee is too high as it is, since software quality has improved markedly since the introduction of the 20%-30% range years ago and so the fee should actually be declining rather than increasing. Software vendors, of course, see it differently, and use the highly profitable maintenance stream to fund next generation product development. Caving to pressure, SAP agreed to work with users to benchmark selected customers’ use of the expanded maintenance and support offering to measure its actual value in areas such as total cost of operation, business continuity and process improvement. On December 1, 2009, SAP said that the study so far has shown the “clear value” SAP customers get by buying maintenance from SAP, but that it wants to “reach out to customers and user groups to continue and enhance the ongoing dialogue and incorporate their feedback in order to maximize customer value from SAP’s entire support offerings. SAP plans to provide the outcomes of the task force [at] the beginning of 2010. Until then, a decision on pricing for Enterprise Support has therefore been postponed.” It’s interesting that SAP has now twice retreated from the proposed price increase. Clearly, it is facing continuing pressure from its largest customers and user groups to keep maintenance where it is — or even lower it. SAP felt the price increase was justified since the new maintenance strategy included new diagnostic tools and service level agreements that promised 24×7 support. The timing of the original announcement could not have been worse however, as the recession led to increased scrutiny on every dollar spent and likely caused the customer backlash. The timing of the December 1 announcement is important, too, as many companies set their IT budgets for 2010 in late 2009. By announcing that it was holding off on a price hike, SAP may have forestalled some defections to less expensive third party support options. The importance of ultimate outcome of this battle can’t be overstated. A giant software company vs. its customers. OEM maintenance vs. third parties. The value of maintenance in the first place. All have implications for every single software vendor out there as both vendors and customers watch closely to see how SAP and its customers resolve maintenance pricing. 2010 is going to be interesting.