SAP blinks, delays maintenance hike

You just gotta love spin: “In a demonstration of its commitment to customer satisfaction, SAP [on January 14] announced the introduction of a comprehensive, tiered support model” that leaves 2010 pricing at 2009 levels. Recall that SAP tried to move all customers to a more expensive maintenance offering. Customers revolted, then SAP and its user community agreed to create key performance indicators (KPIs) to see what benefits are actually seen by customers. A few weeks ago, SAP said it was still working on new pricing … Last week, SAP caved to customer pressure by changing its maintenance offering and delaying price increases for a year. According to company materials, customers worldwide will be able to choose either Enterprise or Standard support, with additional a la carte options. Standard support is the basic model (updates, bug fixes, etc.) while Enterprise includes additional offerings tied to the KPIs of the earlier SAP/user group benchmarking process and is more proactively intended to business process improvement. Enterprise pricing depends on how long ago a client entered into a contract with SAP. Clients who signed up for the Enterprise offering before July 2008 will see maintenance grow from 18.38% of the initial license fee in 2010 to 22% in 2016. Newer Enterprise clients are already paying 22%, the current list price. But the biggest part of the announcement is that all customers will now be able to select the Standard offering, which had been available only to customers in Germany, Austria and Switzerland. Standard support customers will pay an 18% maintenance fee in 2010, with SAP “retain[ing] the right to adjust SAP Standard Support fees for inflation on an annual basis, starting in 2011.” Enterprise customers can switch to the Standard level at the beginning of each calendar year, and will pay the current going rate for Standard. [Note that SAP also said that the company will honor specific contracts that include lower pricing than just announced.] From a pragmatic standpoint SAP did the only thing it could in the face of so much bad publicity and customer frustration. The company gave its customers a way to save 14% on their maintenance tab if they opt for the Standard support level plan and increased the value proposition for the Enterprise offering to make it more attractive and, in theory, worth the price premium. SAP seems to think customers will prefer the Enterprise plan but I’d bet many companies will opt for Standard to save money, which will cause SAP’s maintenance revenue stream to decline. We’ll have to see just how much pressure that puts on SAP. This announcement will also cause ripples through the software industry as buyers pressure other vendors to trim maintenance prices. But maybe the most important lesson isn’t about products or pricing: is this latest from SAP too little, too late? Are their customers already looking at alternatives beyond which level of support to buy from SAP?