SAP co-CEO: We're working to fix software licensing, pricing complexity

IDG News Service - SAP is aware of widespread user discontent over the complexity involved with licensing rules and pricing for its software, and is working to remedy the situation, co-CEO Jim Hagemann Snabe said in an interview Wednesday.

Earlier this month, the U.K. and Ireland SAP User Group released details of a member survey that found 95% of respondents believe SAP's licensing policies are too complicated. The survey also revealed that 67% of users have found it more difficult to track license usage as the vendor's product portfolio grows.

"We now have multiple products in five categories," Snabe said, referring to SAP's range of cloud software, mobile technology, HANA in-memory database and other offerings. "That puts you in a more complex situation. What we're trying to do is come to a solutions approach."

In other words, SAP wants to combine its various products into bundles, including industry-specific ones, "that have high value for the customer, Snabe said. In this way, "we can simplify the pricing," Snabe said. "We want a more solution-oriented price list."

He noted that SAP has already begun going down this path with its series of Rapid Deployment Solutions, which combine software, services and specialized content for fast, albeit focused projects. Now, SAP is now looking to extend the concept further, and is working with user groups to do so, Snabe said.

A major announcement regarding these efforts won't come "in the foreseeable future," but SAP does recognize the problems users cite and is working on them, Snabe added.

Even as SAP moves toward the "solution-oriented" approach, customers will still be able to buy everything it sells in stand-alone form, he said.

Snabe's remarks are of interest for a number of reasons, but also don't address the full spectrum of customer concerns, said Jon Reed, an independent analyst who closely tracks SAP.

The total price of software includes consulting services and support, not just license fees, Reed noted. "What that tells me is he's feeling pressure from customers about not just the software, but the services piece."

If SAP moves more heavily into "solutions" such as Snabe discussed, it will potentially take business away from its consulting partners, who should pay attention, Reed added.

Meanwhile, although SAP has gotten better over time offering public pricing for its midmarket and small-business offerings, "they really seem attached to not publishing price lists for large enterprises," Reed said. That's because SAP wants to preserve all its leverage for negotiation during such deals, rather than be tied to a public price, he said.

But as SAP consolidates its online software storefronts and adds more products to them, it will be forced to become more transparent, in Reed's view.

It might be easier for SAP to lower the complexity of its licensing models, however, Reed said. "There's different categories of licenses. One thing making it harder is, how do you incorporate mobile consumption?"

"If I'm a company I want simple licensing scheme," such as a three-tier system composed of super users, regular users and "lightweight" users who rarely need to touch the system, Reed added. "SAP hasn't fully addressed that yet. I think there's a lot of work to do there."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com