The above video shows two interviews I made earlier today. One is with Alan Bowling, chairman SAP user group UK and Ireland. The second is with Ray Wang, VP at Forrester research.
SAP's UK users are struggling to understand the price hike in maintenance costs. Users I spoke with at the annual SAP UK and Ireland user group conference were unanimous in their view that they don't see value in the new offering. Reasons vary but some I spoke with want to see the core application more stable before SAP talks about upgrades and enhancements as the way to derive value.
Bowling said that while customers remain less than hapy, they are getting a better understanding of value. He is hopeful that the initiative to jointly develop KPIs against which enterprise support is measured is a first that customers should welcome. However, he admitted that defining the KPIs will not be easy: "No-one is pretending this will be easy." Ray Wang joined with Bowling in agreeing that this is a knotty problem and that it will take time for customers to understand what the support service means for them.
My concern runs deeper. Jointly developing KPIs sounds like a noble cause and I congratulate the two sides for getting this far. However, SAP is a formidable negotiator and you can be sure that nothing will be agreed without SAP board approval. According to Forrester, only 15% of what customers pay for maintenance/support generally, goes back into value delivered. This makes maintenance a highly lucrative business. Given we are operating in times where new licenses are hard to come by, it is no surprise that the enterprise applications industry is pushing hard to get customers signed up for as high a rate as they can get. Whatever happens, SAP won't give up profit easily, especially as it sees Oracle nudging 43% margins.