SAP to hike Standard Support fees on new contracts
- 04 February, 2013 20:26
SAP is planning to impose a higher price on its Standard Support software maintenance offering later this year, with the increase applying only to new contracts.
"In order to ensure the same high level of quality 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," SAP said in a statement released Monday. "This adjustment does not apply to any existing maintenance contracts for SAP Standard Support closed before July 15, 2013."
"We want to inform our clients early to enable a better budget planning and adjustment for 2013," SAP added. "Therefore, we encourage customers to take advantage of the opportunity to purchase new licenses with SAP Standard Support ahead of this change at the existing 18% rate until July 14, 2013."
SAP also offers a higher-end Enterprise Support service that costs more money than Standard. The enterprise service was the subject of much controversy several years ago after SAP announced that all customers would be transitioned over to it. After an outcry from user groups around the world, SAP made some pricing concessions and also restored the Standard Support option.
The standard support pricing change announced Monday doesn't apply to SAP's Business One application, according to a statement. Nor is Enterprise Support affected, SAP said.
But SAP long ago tacitly signaled a Standard Support price hike could come this year. An official company presentation dated March 2010 states that Standard Support's list price would be locked in until the end of 2012, compared to the end of 2016 for Enterprise Support.
It's not clear how much additional money SAP stands to generate from the Standard Support increase, as SAP CFO Werner Brandt has said that some 95 percent of customers have adopted Enterprise Support.
Still, SAP's announcement could rankle some users.
Customers should ask SAP a number of questions, wrote analyst Frank Scavo, president of IT consulting firm Strativa, in a blog post.
For one thing, the 1 percentage point uptick actually works out to a 5.5 percent price hike over the 18 percent rate, Scavo noted.
"What improvements in SAP support will SAP deliver to justify this 5.5% price increase?" Scavo wrote. "Can [customers] expect [their] internal costs to drop by at least 5.5% as a result of SAP's improvements in its support program?"
Like with other software vendors, maintenance already provides huge profit margins to SAP. "Why should it become even more profitable?" Scavo wrote.
"How have SAP's cost of support increased to justify this increase in my maintenance fees?" Scavo added. "Normally the cost to support mature products decreases over time, as issues with the program code are resolved." To that end, SAP should be considering a cut in maintenance fees, not a hike, according to Scavo.
The announcement will also allow third-party software support vendors such as Rimini Street a fresh opportunity to draw contrasts between vendor-provided support and their own offerings.
Rimini Street and its handful of peers say customers can realize deep cost savings compared to vendor support, while receiving superior service. However, they cater to customers with no interest in upgrading their systems, as that is only legally possible through vendor support.
Oracle is suing Rimini Street, saying its business model essentially duplicates one conducted by a former SAP subsidiary, TomorrowNow, which provided support for Oracle software.
A previous lawsuit filed by Oracle in 2007 led SAP to shut the unit down and produced a large damages award for Oracle, although the case is still not fully resolved .
Rimini Street has denied wrongdoing and characterized Oracle's lawsuit as an attempt to head off competition.
Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com