There is a lot of hype about the increase of SAP's annual maintenance from 17% to 22%. Although the increase is gradual it is a very hard pill to swallow. At 20% annual maintenance, companies are essentially buying the software again every 5 years. Many IT executives and other corporate executives are upset about the increase. This increase in IT costs hits at a time when companies are trying to reduce their costs to regain some margins that have eroded in their industries. To make it even more frustrating, SAP plans to stop enhancing R/3 and ECC in the next few years. So as the maintenance increase over the next 4 years, SAP will stop enhancing the product. Instead, they plan to spend that money to develop new products to sell to their customers and then collect additional maintenance on these new software products! If SAP is not going to spend the revenue collected from maintenance on R/3 and ECC on updates for those products, they why should customers pay for maintenance on them. Isn't that the whole idea of what maintenance fees are all about? Software maintenance fees are supposed to pay for updates and enhancements to the software you already purchased.
As an SAP customer, the maintenance increase not a pleasant thing to deal with, but if you step back and look at it from the outside, it makes perfect business sense for SAP to do this - especially because their competition is already charging 22%. I think SAP should have come in just under Oracle (at maybe 20% - 21%). This would give their customers the idea that they still want to remain competitive and customers would still have a price advantage from being an SAP customer vs. an Oracle customer. If SAP had done that, I think there would be a less backlash from their customer base.
One thing that I think SAP did well was setting expectations. I think, at least in the US, SAP has been conditioning their customers for this for quite some time. I remember my SAP Account Executive telling me this was coming back in 2004. Since then, each of my other three SAP Account Executives have echoed the same. I am told that SAP's Account Executives do not get paid on software maintenance, but they have dedicated a lot of time discussing this issue with their customers. Plus a Senior VP of SAP met with me and my CEO to let us know we would be getting official notification a few weeks ahead of time. I don't know any SAP customer in the US that did not know this was coming. In fact, I am surprised that I did not see much about this in ASUG forums ahead of time. Reading about the European SAP User Groups, it sounds like they were not given as much warning. Who knows?
Your comments on the subject are welcome.
In my next entry, I plan to write about SAP's attempt to explain the benefits of their new Enterprise Support.
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