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Risk

1/15/2010
08:41 AM
Bob Evans
Bob Evans
Commentary
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Global CIO: SAP Blows Huge Opportunity With Timid Support Changes

SAP is overblowing its new support plan, which gives customers only marginally more choice.

Business is all about opportunities, and SAP just blew a big one. After summoning the institutional will to address its ancient pricing structure in light of today's dramatically different customer requirements and desires, SAP missed a golden opportunity to establish itself as the clear market leader over Oracle as SAP chose to make only minimal changes in its support pricing.

Yes, SAP deserves some credit for offering its customers and prospects a second option for support and maintenance—any alternative, however humble, is far more than Oracle's one-size-fits-all approach. But after all the melodrama of the past several months—user-group revolts over SAP's earlier plan for monolithic price increases, followed by peace talks that promised KPI-driven price changes to be announced in December, followed by a postponement for a month so that SAP could reconsider its reconsiderations—it's hard not to feel underwhelmed by SAP's new plan.

That new plan involves two versions of support: the company's traditional and much-loved Enterprise Support, and the newly arrived but clearly unloved stepchild called Standard Support. I say "clearly unloved" because if SAP itself can't be excited about the product, how the heck can it expect customers to get all whipped into a lather? To prove my point, check out this less than ringing endorsement for Standard from the SAP executive whose team is responsible for it:

"Standard Support is really a reactive offering for our customers; if they've got a problem, we'll fix it," said Janet Wood, vice president of maintenance.

Steady there, Janet, steady—you keep pumping up your products with that type of passionate enthusiasm and the customers will be beating your door down. (And for extensive background on SAP and its support policies and corporate strategies, please be sure to check out our "Recommended Reading" list at the end of this column.)

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You can learn the full details of the announcement in this excellent news analysis by my colleague Doug Henschen, who's editor-in-chief of our sister site Intelligent Enterprise. Doug's analysis includes the above comment from SAP's Wood, who went on to contrast the "reactive" Standard option with the "proactive" Enterprise option:

"Standard Support also includes enhancement packages and new releases but the Enterprise Support offering is proactive, so it's about working with customers to see issues before they experience a problem," said Woods.

In addition, Doug offers this insight about what the new SAP support offerings mean for CIOs:

Bowing to customer complaints about economic hardships, SAP also has frozen prices for existing Enterprise Support contracts at the 2009 level of 18.36%. The plan to gradually increase that rate will resume in 2011, bringing Enterprise contracts to 22% by 2016 instead of 2015, as previously planned. . . .

The change is a victory for SAP customers, user groups and the many who complained bitterly about the application vendor's July 2008 decision to increase maintenance and support fees from 17% to 22% over five years. But it's not a complete victory in that the Standard Support option—which was available only in Germany, Austria and Switzerland in 2009 but will be reintroduced worldwide—is set at 18%, a 1% increase from 2008 rates. What's more, Standard Support will be subject to inflationary price increases—a common practice but one that does not apply to Enterprise Support through 2016.

Those numbers underscore my contention that this minimalist approach allows SAP to put a check-mark in the box that says "customers say they want more support and maintenance options" without really advancing the long-term interests of its customers. Technically, SAP now offers tiered support options; practically, customer options are extremely limited.

It's as if McDonald's rolled out a new soft-drink policy along these lines: "We now have two and only two drink sizes and prices: Sumptuously Supreme and Not As Good. Here are the descriptions:

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