Analysts warn SAP users of likely maintenance price hikes

Forrester say SAP's new Enterprise Support program eliminates the company's pricing advantage over rival Oracle

SAP's move earlier this year to create a single maintenance offering for new users could lead to significant price increases for current users of its Basic Support plan, analysts said this week.

The software vendor in February launched the new Enterprise Support program for new users of SAP, Business Objects and third party software, who no longer can choose to buy the company's Basic Support options. The new program carries an annual price tag of 22 per cent of the customer's yearly license fees, the same price as the current Premium support program. The Basic Support program is priced at 17 per cent of annual license fees.

The new program will be rolled out in the second 2008 quarter, SAP said.

In a report issued this week, Forrester Research said that new customers forced by SAP into the Enterprise Support program will "overpay for services" which it predicts will ultimately be underutilized. In fact, the research firm is warning clients already using SAP software that the vendor will likely soon increase the price of existing Basic Support contracts to the Enterprise support level. Forrester suggests that SAP users "negotiate hard" to lock-in current Basic support prices.

Ray Wang, an analyst at Forrester, said SAP's the Enterprise Support program eliminates the company's pricing advantage over rival Oracle which currently charges 22 per cent for maintenance and support. Further, Wang said SAP risks driving away its customer base which he contends is growing increasingly frustrated with licensing and support strategies of software vendors.

"In many contracts, SAP reserves the right to raise maintenance [costs] by certain percentages," Wang said. "It may very well be they will try to harmonize their maintenance to 22 per cent across their customer base - this is why [Basic Support] customers should be careful about that," said Wang.

He added, "If they're about to make an upgrade to the next release, and this is a show stopper; it gives them pause as to whether they want to stay with SAP or not."

SAP spokesman Bill Wohl contended that the new support program is not a price hike, but a way to "provide customers the level of support they've been telling us they want. It's priced higher than Basic support was in the past, but that's a reflection of what they've said what they want."

Wohl said SAP will work with new customers who don't want all the features in the new program. He also said forcing current users of the Basic Support to move to the new level "is not in our plans right now."

According to a recent Forrester survey of 215 business process and applications professionals, more than half said a fair maintenance fee should be below 16 per cent. Approximately 21 per cent of respondents said that maintenance costs should hover between 10% to 12% of annual license fees.

SAP notes that the Enterprise Support program offers upgrades from both the Basic and Premium Support options. For example, the new offering replaces a single support advisor with a pool of full-time available support staff. The support package also includes an upgraded version of Solution Manager and RUN SAP to boost operational processes.

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