According to announcements from both the German and Americas SAP Users Groups, SAP has begun to modify some of its software maintenance policies to allow customers some flexibility in retiring older software licenses related to on-premise installations.  This is good news, even though the terms are complex and dependent on individual circumstances.

A posting on ASUG News (Americas SAP User Group) indicates that SAP will now allow customers to terminate on-premise licenses in order to buy new cloud-based software. According to the ASUG posting: “In effect, customers can eliminate maintenance payments on the software they are no longer using and use that money to pay for cloud software.” Specific customer needs will be apparently taken on a case-by -case basis, implying that SAP Sales and Services teams will maintain control of the negotiations, in essence, assuring that any changes ensure a net positive outcome for SAP. The posting reinforces that the one caveat is that new cloud-based subscriptions which include either SAP’s newly developed HANA applications, or offerings from Ariba or SuccessFactors, have to add-up to more than the customer is currently paying in legacy maintenance and support for the eliminated on-premise software.

A later ASUG News posting informs of another option, the ability to terminate an on-premise software maintenance plan to buy a new on-premise plan, or to terminate some licenses without a new purchase of software.  Again, these policies are highly dependent on existing contract terms and customer related discount structures and include lots of fine print.

On the newly formed start-up  digitnomica web site, veteran SAP observer and sage Dennis Howlett opines that these new maintenance licensing policies are indeed complicated to understand and interpret. Howlett notes SAP’s history of giving customer benefit with one one-hand, only to take-away with the other. Howlett opines: “The message is clear: while customers always welcome initiatives that provide more bang for the buck, they also want a much simpler pricing landscape. It is worrying to see customers becoming annoyed to the point where I am receiving inquiries about 3PM from what I also see as SAP only shops. SAP won’t want to see that become a trend, especially in light of the fact that SAP’s on premise business is looking over a fiscal cliff of its own.

Supply Chain Matters highlights these changing SAP software maintenance policies because by our observation, SAP supply chain management applications often feature many unused seats or applications that were placed on-the-shelf for later implementation, and remain in that state.  The takeaway message for supply chain functional teams is that your IT or technology procurement teams now have some flexibility in the ability to modify the ongoing cost burden of the unused or not widely deployed supply chain applications.  Again, as noted above, there are lots of caveats and SAP obviously is attempting to provide its installed-base customers the economic justification to upgrade to the newer cloud-based software offerings. For SAP Supply Chain Management Suite customers, that applies directly to consideration for the adoption of Ariba’s broad B2B supplier connectivity applications or SAP Business Suite Powered by HANA applications that directly support supply chain business process needs. There are also SAP customers that might have acquired licenses to the entire SAP Supply Chain Management suite, including SAP APO that really did not widely deploy these applications because of other business needs or disruption concerns.  Your IT team may now have some flexibility to consider a non-SAP cloud based application without the excuse of the SAP maintenance costs already budgeted, forcing you to make do with previously acquired but unused software.

As many software industry watchers have pointed out these past months, enterprise software customers are no longer willing to tolerate high legacy software maintenance costs which are perceived as a burden with marginal upside business benefits. Customers are pushing back with their collective voices, and vendors such as SAP are responding, albeit in a conservative, highly controlled manner.  The good news is that other enterprise vendors are bound to follow, and supply chain functional teams will gain added flexibility in their needs to plug-in process automation capabilities such as more predictive supply-chain decision-making support. In essence, SAP is dealing with customer realities and supporting the financial ability to adopt cloud-based options more readily than before. 

Bob Ferrari