ERP software customers have gained a renewed sense of power with last week’s announcement from SAP AG that the company would step back from its previous plans to move all customers to Enterprise Support contracts priced at 22%. According to an article featured in InformationWeek, SAP will instead adopt a two-tiered system that reintroduces a Standard Support option priced at 18%, which is 1% higher than 2008 rates.
This move is a victory not only for SAP customers, but others as well, including Oracle’s ERP customers. The issue of increased maintenance fees concerning SAP dates back to a July 2008 decision to increase software maintenance fees to 22% over the next five years. SAP’s European customers, specifically Germany and Austria were the first to cry foul, and ever since, more and more of the worldwide SAP customer base have been pushing back. The revised plan is to gradually increase support rates starting in 2011.
The current challenging economic times have forced many companies to slash costs and preserve cash. While most employees and suppliers were often asked to give concessions, the major ERP providers persisted in raising overall software maintenance fees. As most IT professionals would explain, software maintenance is double-edged. Companies must not only pay the annual fee, but must also expend efforts to remain current with new software releases or upgrades, or upgrade IT headcount and infrastructure to maintain current release levels. What can be even more frustrating is when the ERP supply chain module is not even being used, or lies “on the shelf” because functional teams have lost interest or focus in the application.
To present both sides of the issue, the ERP providers argue that maintenance revenues provide the means to keep new enhancements and technology flowing to installed base customers, along with insuring that the software will be supported when a problem occurs. Those arguments do not hold much value with today’s more empowered customer base. To no surprise, companies are also turning to other non-ERP technology alternatives including hosted or software-as-a-service providers, or even third-party maintenance providers.
I agree with the consensus that credit should be given to SAP for biting the bullet and finally listening to the voice of its customer base.
In April of last year, Supply Chain Matters called attention to an open letter blog entry penned by Bob Evans of Information Week, which at the time was directed to Oracle CEO Larry Ellison. That letter challenged some fresh thinking regarding Oracle’s 22% maintenance fee. Evans correctly noted that rather than a fee, the name should be changed to “innovation and development funds“. Others chimed in, utilizing other terms such as “M&A capital raising activities” or “user tax”. With this development concerning SAP support, Oracle customers should feel more empowered to exert their voice of protest as well.
A lot of commentary regarding the new decade reflects on the notion of “reset”. In the case of ERP and perhaps the entire installed customer base of enterprise-level software, that reset is underway.