Another chapter starts to unfold in the SAP maintenance story

More details are emerging about the difficulties SAP is experiencing in imposing its maintenance price rise, managing to annoy yet another group with recent proposals. More marquee customers are named as renegotiating terms. It's not getting any better for SAP.

Claiming an exclusive, today says it is receiving reports that SAP is looking for price increases from those customers who are not on Enterprise Support by reference to the never before used cost of living index clause that is tied to inflation in the German wages index. This is not a new story. Helmuth Guembel has raked this over a couple of times, most recently noting that:

Maintenance will increase to 20.7% for all agreements dated 2000 and earlier. Agreements closed in 2008 will carry an increase of  .315%.

Customers can cancel their maintenance agreement by December 31st within 2 weeks after receiving the “love letter.” Customers who receive service through SAP partners can cancel within 4 weeks after ther partner has received said letter.

The article broadly retreads Helmuth's position but adds more color about the number of companies likely to be affected and, more importantly, naming more companies coming out the woodwork on contract negotiations.

According to the article, some 400 companies are likely to feel what amounts to an arm twisting increase up to 20.8% instead of the Enterprise Support figure for 2010 of 18.4%. Andreas Oczko, deputy chairmen of the German SAP user group (DSAG) regards the move as "unfair" and described members as "annoyed."

Earlier in the week I was fielding emails from Wall Street analysts looking to tweak their SAP year end closing models. One was insistent that on the basis of their calculations, SAP has to push the proposed price increase through. That may well be in SAP's best interests. But increasingly I and colleagues are finding that customers remain far from convinced they will see value from the KPIs agreed between SAP and SUGEN. These represent the way customers assess value delivered and against which SAP expects to see maintenance price increases.

If SAP is successful in this latest move, it would accelerate some maintenance revenue. On the other hand, believes that overall maintenance and support revenues will fall by 4% or around €200 million ($298 million.)  Given that the German based Raad Research believes only 24% of customers have signed up for Enterprise Support, that €200 million number might well be in the right ball park. At 90-95% margin, it's a big number to drop out of the profit and loss account, implying SAP will have to run another slide rule over its headcount in early 2010.

Earlier we heard that Siemens had canned and then re-negotiated its maintenance contract with SAP at a much lower price. Now is naming other marquee customers: Nestlé, Daimler and Tchibo as in negotiations on this line item. None of these companies provided public comment. Crucially, none were denying the veracity of's claims. Siemens set the benchmark, others will surely follow.

It strikes me that despite all the behind the scenes negotiations, SAP cannot seem to understand that customers are not in a position to readily accept either the cash cost drain nor the value proposition that SAP espouses. It's a double whammy.

Like so many things one sees at SAP these days, this is a company that is struggling to issue public statements that makes sense either to jittery investors or unhappy customers. There are plenty of people inside SAP who question what's going on, not just here but in other parts of the business. But then there is that 1990's arrogance when SAP could charge $10K and up just to have them turn up and put on a PowerPoint demo. At times it seems that SAP is the only one who doesn't 'get it' on certain issues. In the long run, that continued blindness to market reality (as opposed to Wall Street wishful thinking) will hurt the company much more than it may realize. In my mind it is playing with fire and that despite its massive brand attractiveness.

Third party providers like Rimini Street on maintenance, Cognizant on BPO, under the radar Indian providers doing both and others will offer a lower cost haven for those distressed customers unwilling to pay SAP's maintenance tax. As things stand today, the 3PM companies have almost no downside unless SAP does yet another about face.

In the meantime, Helmuth is doubling down on the Sapience conference he ran in Europe earlier in the year. This time in Cambridge MA overlapping SAP's annual Influencer Summit just down the road in Boston. Coincidence? Go figure. Enterprise Advocates Vinnie Mirchandani and Ray Wang are slated to appear as are former SAP execs Paul Wahl and Matthias Meuller-Wolf. Other industry heavyweights like Craig Conway (ex-CEO PeopleSoft), and Jan Baan (ex-CEO Baan Corp) contribute to an impressive line-up. It will be interesting to see which event generates more 'ink' and how reports vary. I'm already sharpening my digital pencil.