Earlier this year, Bob Evans wrote an open letter about software maintenance fees to Oracle's Larry Ellison. Now he's turning his attention to SAP CEO Leo Apotheker.
Dear Leo:
Congratulations on your recently announced commitment to work more closely with customers on not only lean application development but also some terms involving your annual maintenance fees. You've clearly had to think hard about these issues because, as my brainy colleague Mary Hayes Weier has pointed out in her insightful coverage of SAP, you've got to balance the demands of two very different but very insistent constituents: customers whose businesses and IT budgets have been hammered in the global economic downturn, and stockholders who expect you to find a way to fight your way through the downturn without cutting profits.
With regard to the shareholder group, I can't really speak to that issue except to ask this: Please name for me one company whose shareholders are happy but whose customers are not. That is, without ongoing and increasing customer value, you cannot maintain and increase shareholder value. But you're the CEO and you surely know that.
So let me focus more on the customer side of the equation. Again, I'm aware of the recent moves SAP has made to soften the big maintenance-fee increase announced late last year, and you and your company are to be applauded for that open-mindedness. But look at the overall context surrounding that message as perceived by your customers: In a huge InformationWeek cover story by Weier published in January and seen in print and online by more than 1 million IT executives and managers, here's how SAP positioned its decision to jack up maintenance fees by 30% on cash-strapped customers around the globe, from a 17% annual fee to matching Oracle at 22%:
Bill McDermott, president of global field operations at SAP, makes no excuses for moving all of SAP's customers to a 22% maintenance contract within the next few years. "The real criticism you can make is, 'Gee, Bill, why did it take you guys so long to increase the cost of customer support, because you were five points below the industry benchmark of 22% all that time, and giving up shareholder value?' " McDermott says. "That's a fair criticism I'll accept with open arms."
Now, Bill McDermott is an outstanding executive and his accomplishments and leadership at SAP speak for themselves. But, were it not for an equally stunning comment made by a counterpart at Oracle at almost exactly the same time (which I'll get to in a moment), McDermott's ham-handed rationale of "we shoulda hammered our customers a long time ago" would have won him the Tin Ear of the Year award by a landslide. Again, think about that comment from the perspective of the hundreds of thousands of customers and prospects who read it, and tell me if this hypothetical reaction from a CIO is unreasonable: "Hmm -- McDermott is saying that my job as an SAP customer is to keep the his shareholders fed, watered, and happy regardless of how brutally this economy is treating me and my company. And he says he's kicking himself for failing to raise our maintenance fees a long time ago not because we customers would be getting more value in return, but because that would have given SAP's shareholders more value. Is that really how SAP thinks of me?"
