SAP on Monday announced that it is planning to impose a higher price on its Standard Support software maintenance services.
The increase will go into effect later this year, with only new contracts having to pay the hiked price.
“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 percent to 19 percent, effective July 15, 2013,” SAP said in a statement. “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 percent 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 on Monday does not apply to SAP’s Business One application, according to a statement. Nor is Enterprise Support affected, SAP said.
But SAP long ago tacitly signalled 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 is unclear 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 percent price increase?” Scavo wrote. “Can [customers] expect [their] internal costs to drop by at least 5.5 percent 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.
