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11/6/2008
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SAP Outlines Updated Maintenance Fee Plan

A troubled economy, tight IT budgets, and pressure on software companies to deliver healthy profits have created a perfect storm for change to ERP software fees.

SAP announced Thursday a new software maintenance plan that will keep contract prices for its newest ERP software at current terms for a longer time period. It also added some new features to its support program and said it will use new metrics to track customer-satisfaction levels for its service.

The changes come following customer complaints about SAP's plans to raise maintenance fees. SAP said in July it would eliminate its Standard Support offering, and those using it -- who pay a maintenance fee of 17% of the price of the software they've licensed -- must move to the more extensive, yet expensive, Enterprise Support offering, priced at 22%. They'll pay 18.3% starting in January, with gradual annual increases until they pay the full 22% per year in 2012.

Customers new to SAP as of about March 2008 were immediately put on the Enterprise Support program and already pay a 22% maintenance fee.

The plan announced Thursday doesn't affect those rates. However, it keeps maintenance rates at the same level for the next seven years, or until 2015, for those using SAP ERP 6.0 and any releases that follow. If customers aren't ready to upgrade in 2015, they'll have the option to pay an additional 2% per year, for a total of 24%, to extend maintenance support until 2017.

Previously, SAP set maintenance contracts at the base percentage rate for five years, raised them 2% for one year, and another 2% for two years (its "5-1-2" plan). The new 7-2 offering is intended to let customers keep the initial rate longer and give them the flexibility to stick with their ERP platform for a total of nine years before upgrading to new software and signing a new maintenance contract.

Still, it doesn't change the fact that many SAP customers will see their annual maintenance contract costs rise by several percentage points within several years, with all of them paying 22% by 2012. SAP communications VP Bill Wohl said in an interview that while "no one likes to pay more," SAP's Enterprise Support program has been designed to bring more value to customers than the Standard Program so that they can focus their attentions on their businesses, and not ERP support.

It's unclear how receptive customers will be to the latest twist in SAP maintenance. But there's no question some users are unhappy about ERP software maintenance fees, and SAP isn't the only one under fire.

Some customers of Oracle, the world's second-largest ERP vendor after SAP, also have complained about maintenance costs and the value they get for them.

A troubled economy, increasing pressure on IT budgets, and pressure on software companies to prove to shareholders they can deliver healthy profit and revenue growth has created a perfect storm, with big ERP vendors and their customers quarrelling in the middle of it.

A Forrester Research survey of SAP customers supports rising concerns about maintenance costs. The push for quarterly profits "is coming at the expense of the clients, especially as we are on the fringe of an economic crisis," analyst Ray Wang wrote in response to an InformationWeek blog post in September about SAP and Oracle maintenance costs.

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