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Risk

12/1/2009
07:54 PM
Bob Evans
Bob Evans
Commentary
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Global CIO: Will SAP Move To Tiered Maintenance Fees?

SAP's intentions are always difficult to discern, but it might be on the verge of revising the support/maintenance fees its customers love to hate.

"The price increases concern single accounts and therefore are a mixture of price reductions and, in part, price increases." Now I don't know about you, but if I'm faced with a price increase and can choose whether that increase comes across as a price reduction or a price increase, I'm gonna go with lower price 100 times out of 100. It would be a huge mistake for SAP to try to hide behind the fact that it's a German company, and therefore can't really coordinate its messages for the German market with those for the U.S. market. That's a lot of nonsense: its customers are global, its partner ecosystem is global, its pricing and fee structures have to be global, and it shouldn't be too terribly difficult to have its communication be globally consistent as well.

THE UPSHOT: Is SAP raising fees or isn't it? Is it offering flat-rate pricing or isn't it? With SAP, it's hard to tell. At that meeting two months ago at SAP headquarters, I asked the very helpful and professional PR team about a different news story in a German magazine that had a member of SAP's extremely powerful executive board saying that the company was going to offer customers flat-rate pricing. The SAP PR folks said that the article stands on its own, and declined further comment. So is the company going to offer flat-rate pricing? One executive board member says yes, but the company overall says no comment. That is of course every company's right, but it makes it kinda tough for customers when they don't know if prices are going up, down, or sideways. You can read about that here in "Global CIO: SAP Is Testing Flat-Rate Pricing For Large Enterprises". It seems to me that SAP has some good things to tell its customers, and it would be good for everyone involved if SAP would just come out tell those things in clear, globally consistent, and unambiguous terms.

4) One of the best enterprise-software analysts in the world, Ray Wang of the Altimeter Group, wrote in a blog post called "SAP Should Still Be Given Credit For Undertaking A Huge Endeavor" that SAP's moves took foresight and courage. Referring to SAP's attempt earlier this year to unilaterally raise support fees, Ray's blog says in part, "Despite attempting to raise maintenance fees in the middle of one of the worst global recessions, the SUGEN agreement with SAP is a good faith gesture and a step in the right direction. While this is not a legally binding agreement, the deal calls for SAP to limit increases until demonstrable results from the KPI’s have been achieved. This is not an easy challenge but a few props should go out to SAP because: (1) SAP’s embarking on a risky but unique program to show value; (2) Benchmarking 100 global customers against 10/11 KPI’s creates data consistency challenges; and (3) Agreeing to present results in the face of public opinion takes courage."

THE UPSHOT: There's a time for all things, and the time for anger and pushback was early this year, and SAP customers expressed their feelings plainly and clearly. And the big thing is, SAP was at least willing to step back and, it would appear, to listen—that's a good first step. An even better second step would be to continue seizing the initiative and begin building out a flexible and customer-centric tiered support system—if SAP does that, then the anger will be forgotten and it will be celebration time for CIOs around the world. And it will also be time to watch Oracle closely: if SAP claims this first-mover status, can Oracle afford to stand pat?

5) In counterpoint to Ray Wang's take on the SAP announcement, Strategy Analysis CEO and SAP expert Helmuth Gumbel casts a skeptical view over the SAP announcements and says they reflect ongoing internal confusion and disarray, as well as lingering detachment from customers. Here's part of the analysis offered by Helmuth in a recent post: "Today, both SAP and DSAG, the German SAP user group, issued press releases. Both on Enterprise Support. While SAP talks about significant progress with the KPI-project, DSAG expresses hopes for more realistic definitions and broader samples. The two are just no more on the same page. SAP recognizes the impasse and hopes to fix it next year. Until such time, all pricing decisions have been suspended. DSAG expects that there may be room for a total revision of the SAP support offerings--even down to standard support. This is a clear win for the users. However, it leaves those users in an uncomfortable state who have either agreed to price increases or opted for Enterprise Support. Clearly, they have been too fast to give up."

THE UPSHOT: Helmuth knows SAP and its team and its methods extremely well so it would be unwise to discount his skepticism. And he's right that there's a lot of messy details to address, and that some customers will feel tricked for having moved too soon while others will feel trapped for not having moved soon enough. But with many thousands of customers, there's no clean and precise way for SAP to move on this, so I think Helmuth is seeing this glass only half-empty.

One final thought: a few weeks ago, I spoke for about half an hour with SAP global chief communications officer Herbert Heitmann. In the course of our conversation, one of the things he said was, "We know that we at SAP have not always done a good job of communicating with the public about who we are and what we are doing. We are working very hard to change that."

I hope Heitmann succeeds, because SAP's customers have a lot—a whole lot—riding on SAP and its future directions. And when SAP can't or won't clearly and plainly articulate its plans and decisions, it sure doesn't make it any easier for those customers from all over the globe to plan for the future and have confidence that SAP will be a force of positive innovation for them going forward.

In that respect, January's announcements from SAP should be extremely interesting—and I hope the company's communication about those announcements doesn't end up leaving customers wondering whether the news is good or bad.

RECOMMENDED READING:

Global CIO: Will Oracle Or SAP Blink First On 22% Maintenance Fees?

Global CIO: An Open Letter To SAP CEO Leo Apotheker

"Global CIO: SAP Is Testing Flat-Rate Pricing For Large Enterprises"

Global CIO: Have Oracle And SAP Hit Tipping Point With 22% Fees?

Global CIO: Oracle And SAP Race For Mid-Market Opportunities

GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

To find out more about Bob Evans, please visit his page.

For more Global CIO perspectives, check out Global CIO,
or write to Bob at [email protected].

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