July 25, 2008, 9:32 AM — SAP has sparked a growing backlash with its announcement of sharp cost increases in its maintenance contracts for enterprise software.
The UK & Ireland Sap Users Group today spoke out against a 29.4 percent price hike that "is proving to be a particularly difficult area to accept," said Alan Bowling, the group chairman.
"The mandatory nature of this change along with the increase in cost has received hugely negative feedback from our membership to date.
The backlash has been growing since SAP's announcement on 16 July to customers that Standard Support, which is currently included in all licensing and maintenance contracts, would be replaced by Enterprise Support.
The pricing will increase from 17 percent of contract value to 22 percent of contract value, immediately applicable to new customers and introduced in a phased way for existing customers. In real terms this is a 29.4 percent increase in the support element of the contracts over the next four years, said the user group.
According to SAP the Enterprise Support product includes new support that is not currently included in the Standard Support product.
Bowling said it appeared to offer good value, "but is yet to be fully proven". The Enterprise Support product "looks good and for organisations needing the extra level of support that it offers it will no doubt provide value," said Bowling.
"As a user group we understand that if SAP is to provide more comprehensive support then it has to charge more for it," he added. However, many of our members may not want or need this extra level of support and therefore are reacting negatively to having a new support product and the associated increase in costs forced upon them. "
Janice McGinn, Research Director of the CIO Practice at analysts The 451 Group, said, "CIOs looking at the hike in support costs can and should object to this mandate by SAP.
"It serves no one well except SAP. There is only one SAP but there are real-world choices when it comes to SAP support. A more cost-effective approach is to shop around and negotiate cheaper terms and conditions elsewhere."
The UK user group, together with its German sister organisation (DSAG) say they are sceptical that the Enterprise Support is sized appropriately, in particular for many small and medium-sized enterprises. SAP, like other enterprise software companies has been trying hard to move its products into the SME area.
Bowling also noted new a SAP pricing structure has a category of large enterprises "which will not be taking a price increase, although this exception only seems to apply to the very largest of SAP's customers."
The user group is making representation to SAP about the price hike, and Bowling called on SAP users to make their feelings felt to the company.
"I'd encourage all organisations impacted by these changes to examine the potential value of the offering and to contact SAP to provide their feedback on this price increase," he said.
"I'd also encourage SAP to reconsider this mandatory price rise so that organisations not requiring the extra level of support provided in Enterprise Support do not have to pay for features they do not require."
