SAP pulls the trigger on higher support costs
SAP has announced that it plans to transition all customers to its new Enterprise Support offering from January 1st, 2009. SAP is pitching this as a service that adds customer value but in reality it means a cost increase. According to the press release, SAP will incrementally ratchet support costs up to 22% by 2012: "For example, subject to specific contractual limitations, a typical customer paying 17 percent of maintenance base for SAP Standard Support in 2008 will pay a rate of 18.3 percent of maintenance base for SAP Enterprise Support in 2009."
While SAP is claiming this as an enhanced offering, it is difficult to see how it will be able to justify this level of fees for customers whose deployments are complete or which do not wish to upgrade. Right now it is focusing attention on the benefits of SOA as a way of extending core functionality into what it calls composite applications.
Despite the carefully worded press statement with paid support from IDC analyst Elaina Stergiades and enthusiastic hand waving by Mike O'Dell, American SAP User Group chairperson, SAP is only claiming to have brought 350 of its customers on board in the first six months since the program was launched. That's up from 'nearly 200' announced at SAPPHIRE in May. With a user base of 47,800 customers, I would not be surprised to see SAP customers considering alternatives like RiminiStreet.
Earlier in the year, RiminiStreet's CEO Seth Ravin made clear that he is going after SAP's customer base but would not be acquiring TomorrowNow, SAP's troubled maintenance alternative for mostly Oracle customers. In an interview with SearchSAP.com, Ravin correctly predicted:
"They've said [Enterprise Support] is only for new customers, but everyone can read the writing on the wall," Ravin said. "It puts SAP in the most expensive maintenance pool."
RiminiStreet offers to cut maintenance costs by 50% and still claims it can make a decent profit. That's hardly surprising when you see the profits being made by Oracle from this segment of the business.
Assuming SAP is successful in signing most up by January, 2009 then based on the numbers so far released for 2008 and the company's projections going forward, the price hike should yield approximately $60 million in additional revenue during 2009. Not shabby when you think that most is likely to drop through to the bottom line.