SAP Makes Support Contract Concessions in Austria, Germany
SAP will allow customers in Germany and Austria to keep their previous software maintenance contracts if they choose, instead of accepting the company's fuller-featured but more expensive Enterprise Support, the company said Tuesday.
SAP announced plans in July to move all customers to the new support service as of Jan. 1, prompting widespread outcry from user groups, particularly in Europe.
"Changes to existing contracts are based on the legal regulations in each individual country and laws differ from country to country," SAP said in a statement Tuesday. "Due to the laws in Germany and Austria it became necessary to terminate existing contracts to facilitate the switch to SAP Enterprise Support. ... In all other markets, SAP is moving forward with its SAP Enterprise Support plan."
A source close to the company said the act of terminating signed support contracts was considered a major affront among German and Austrian customers, and SAP has offered them this choice in an attempt to assuage such wounds.
However, some will surely see SAP's decision as the vendor partly caving in to customer dissatisfaction over Enterprise Support, which costs 22 percent of a client's license fees, compared to 17 percent for standard support.
SAP has maintained that customer IT environments are becoming more complex and the improved support offering will actually help clients lower their total cost of ownership. SAP also plans to phase in the price hike over a number of years. More recently, the company announced it will work with user groups to develop key performance indicators for Enterprise Support.
Customers in Germany and Austria must make a decision about their contracts before March 30. Those who remain on the previous ones would be subject to a price increase, based on the Labour cost index, that would go into effect on Jan. 1, 2010. Enterprise Support would come into play for any new or future maintenance contract.
SAP spokesman Saswato Das insisted that Enterprise Support will end up being more cost-effective for many customers.
That said, SAP stands to gain more revenue by raising maintenance fees, which due to high profit margins have become an increasingly strategic part of the software vendors' income.
But now that German and Austrian customers have gained some relief, customers in other areas are sure to ask for concessions as well. Das declined to comment on that scenario.
The company would no doubt have liked to see the debate finally go away after six months of controversy, one observer said.
"Just when SAP thought the whole thing was dying down," said Bruce Richardson, an analyst with AMR Research. "Now there's probably a grave sense of panic. 'Oh crap, there's three weeks left in the year and the bills are going out, and this is going to happen."