SAP’s Tough Choice: Maintenance Revenues or Happy Customers?

SAP’s plan to restructure how much customers paid for software maintenance and support has had customers and analysts angsting and debating for months.

In the end, when all the arguing over SAP’s increasing support fees, the forced move to Enterprise Support, the KPI brouhaha, the user group discontent, and the Siemens flare up was finally over, SAP made a choice to offer another choice for its customer base.

The result, announced Thursday, was a two-tiered maintenance and support model for new and old customers: the high-end Enterprise Support plan (at 22 percent) and a welcome return of good ‘ole Standard Support, the SAP support plan formerly known as “Basic,” at 18 percent. (See SAP’s website for a detailed breakdown of the new pricing and fee structure.)

No doubt, it must have been an unenviable, agonizing decision-making process for SAP CEO Leo Apotheker and the executive board at the German business software giant: Maintenance and support fees are the vendor gift that keeps on giving all year long—to Just Say No to those future millions in fees must have been difficult. (Just ask Oracle: During its last quarter, its maintenance and support fees delivered $3 billion in profitability; the rest of the company’s operations lost $800 million.) 

SAP’s own financials have suffered as of late. Executives pre-announced earnings on Thursday: a 9 percent drop in quarterly revenues and a 16 percent plunge in software revenue. In addition, for a year or so, customers (especially those in Europe) had not been shy about voicing their displeasure with the single, more expensive maintenance and support plan that SAP was ushering everyone toward.

All along, SAP execs simply echoed the catchphrase of Dr. Frasier Crane: “Hello, customers, we’re listening.” But were they really listening?

So it was in this most challenging environment that SAP weighed its decision: raise support fees, keep milking the maintenance cow and appease shareholders; or, offer customers another option? SAP, wisely, chose the latter.

Many industry analysts and customers are lauding SAP for taking a positive step in affirming the customer-vendor relationship.

To some skeptical industry analysts and customers, however, the step will be more of a baby step: Why not three or four options that offer lower rates for those customers not needing much hand-holding at all? “The good news is SAP has listened to a growing vocal customer base to at least offer a tiered level of support,” says Vinnie “Maintenance” Mirchandani, a long-time critic of non-tiered maintenance fees and founder of Deal Architect, which helps companies during the software buying process. “The bad news is it is missing one to two more tiers that call for more basic support at 8 percent to 12 percent. I guess those customers will have to be just as vocal in the coming months, since SAP does listen if you scream loud enough.”

Others will point out SAP’s shrewd timing of the announcement—that the vendor was trying to get out in front of its sour quarterly results with a PR-friendly move.

Blogger and software industry consultant Frank Scavo concludes in a post, “Ultimately, it was SAP customers, who finally said enough is enough, that tipped the scales.”

SAP must have looked long and hard at its two options when it made its final decision: customers or shareholders. For today, at least, the customers won the day.

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