SAP isn’t the only enterprise software provider contending with questions these days from recession-strapped customers about the value of software maintenance programs, the cost of which in the long run far exceed initial software license charges.
“We hear a lot of questions about the value of maintenance,” said Bob Corrigan, director of established accounts at SAP competitor IFS North America. “We are asked to justify that expense and demonstrate value every day.”
So far, however, competitors aren’t moving to match SAP’s recently announced unique KPI benchmarking program under which the vendor has agreed to defer maintenance fee increases until it can document cost and operational efficiencies enabled by the company’s new Enterprise Support program.
SAP and the SAP User Group Executive Network (SUGEN), a federation of 12 SAP user groups, recently announced an agreement under which they will collaborate to benchmark 100 customers’ use of SAP’s new Enterprise Support program. Using 12 agreed-to key performance indicators, SAP and SUGEN will measure reduced costs and other efficiencies that 100 SAP customers around the world receive from Enterprise Support in domains such as business continuity, total cost of operations, and business process improvement. SAP has committed, over the life of the four-year benchmarking program, to document benefits commensurate with the 30% increase in maintenance prices that will accompany the Enterprise Support program.
At the same time, SAP committed to delaying by three years full deployment of the Enterprise Support price increase. Previously expected to kick in gradually through 2012, the increase in SAP’s annual maintenance charges — from 17% of software license changes to 22% — will now be rolled out through 2015, assuming SAP demonstrates the value of Enterprise Support through the benchmarking program.
SUGEN Board Member Mike Stoko, in an interview with Managing Automation, called the KPI benchmarking program a breakthrough and something that SAP implementers can use to explain to their organizations the value of software maintenance and the increased cost of SAP’s Enterprise Support.
SAP is hoping Stoko is right. Specifically, the company hopes that the KPI benchmarking program shifts the discussion among its customers from the cost of Enterprise Support to the value it delivers.
“When we brought out Enterprise Support, people did get focused on the price increases, and there were a lot of questions raised on that,” said Bill Wohl, vice president, global field communications, at SAP. “We needed to change the discussion from one on price to one on what customers need and what’s the value that customers are getting out of maintenance services.”
SAP may be successful in shifting that discussion, but competing enterprise software vendors aren’t following suit. While several have tweaked maintenance pricing in an attempt to help cash-strapped customers, none is going so far as to launch a value-based benchmarking program such as SAP’s. In part, experts said, that’s because others aren’t attempting to raise maintenance prices in the middle of a deep recession.
“Why would you offer the same thing [as SAP] if your customers aren’t complaining as much?” asked Ray Wang, a vice president at Forrester Research.