SAP’s Big Freeze

In response to customer complaints, SAP, which invented and now leads the market for enterprise software, has decided to stabilize the core components of its R/3 ERP software suite, which it will call R/3 Enterprise, for at least five years. Customers can upgrade to the newest SAP components, such as its APO supply chain product or its CRM software, without having to touch R/3. In the past, SAP upgrades have required replacing all components of the software each time.

Of course, SAP’s new policy also means that R/3 users cannot expect any significant new functionality. They must also pay a license fee for the new components, such as supply chain and CRM. SAP argues that these components require a significant investment to develop and represent technology that is outside traditional ERP functionality. Such enhancements merit new license fees, even from existing customers (who get a credit for the R/3 software they’ve already purchased), says Arne Schmidthals, vice president of product management for R/3 Enterprise. But Schmidthals acknowledges that customers have argued that the APO supply chain product, which is heavily integrated with and reliant upon the core ERP software, should be included in R/3 Enterprise.

In a sense, SAP is a victim of its own success. It blew away its competitors by combining a bunch of formerly standalone products for different functional areas of the company (finance, HR, manufacturing) into an integrated package. So should every new software component it develops be lumped together in the traditional way? Schmidthals thinks not. Still, it’s a shift from the days when customers that paid their yearly maintenance fees got new functionality free in the next release. As all the major ERP vendors move to “componentize” their products?in part to make it easier to upgrade individual pieces rather than the whole package?the “maintenance fee buys all” philosophy is vanishing.