SAP Slows Price Hike on Forced Support Switch

Bowing to pressure from user groups, SAP AG last week agreed to slow the pace at which its software support fees will increase under the mandatory Enterprise Support program that the vendor launched last year.

SAP and representatives from 12 user groups also announced a series of key performance indicators, or KPIs, that they have agreed upon for attempting to measure Enterprise Support's financial value to customers.

The forced switch to Enterprise Support has been a bone of contention ever since it was announced. In an initial attempt to appease angry customers last fall, SAP sweetened some of the program's features and extended the regular maintenance period for its core business applications from five years to seven. But the company didn't make any cost concessions then.

And last week, SAP said the ultimate price of Enterprise Support will still amount to 22% of software license fees annually. The company charged a 17% fee for its Standard support program, one of two lower-cost offerings that it eliminated.

But instead of applying the increase in four annual steps ending in 2012, SAP will now extend the phase-in period to seven years. As a result of the change, SAP said, support costs for migrated customers will rise by an average of 3.1% each year, instead of the 8% that users originally faced.

Reducing the annual rate of increase was one of the demands made by SAP's user groups. The list of KPIs that SAP and the user groups agreed on resolves another demand: finding a common way to assess the value of Enterprise Support.

SAP claims that the price increase will be justified by improved services, but the user groups want proof. To try to get it, the KPIs will be used in a joint benchmarking program, with the results to be examined by an independent auditor.

The deal isn't perfect, said the Francophone SAP Users' Club. But the group added that it is satisfied with the price-increase compromise. It also said that the agreement on the KPIs shows a willingness on SAP's part to go where no other software vendor has ventured before.

During a conference call on SAP's first-quarter results last week, co-CEO Leo Apotheker made a similar point and maintained that Enterprise Support "will become a competitive advantage" for the company.

Copyright © 2009 IDG Communications, Inc.

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