SAP Puts Off Software Maintenance Price Hike

Published: December 7, 2009

by Timothy Prickett Morgan

Here's something you don't see every day: an enterprise application software vendor under the gun to increase revenue and profits that decides to hold off on doing a maintenance price hike. At least for now.

Last week, German software giant SAP put out a fluffy statement thanking the global federation of a dozen SAP-related user groups--known as the SAP User Group Executive Network, or SUGEN--for participating in an enterprise support program, which apparently is a means for them to grouse about SAP's software and support in a formal way. In typical bureaucratic fashion, SAP says that it has formed a task force "to reach out to customers and user groups to continue and enhance the ongoing dialogue and incorporate their feedback in order to maximize customer value from SAP's entire support offerings." Yeah, yeah, yeah. That's what they all say. Here's the interesting bit. SAP is going to listen to what the task force has to say in early 2010, and until then it has postponed a decision on pricing for its enterprise support. Given the economy and the fact that software support never gets cheaper, it looks like SUGEN just played chicken with SAP on a proposed maintenance price hike in 2010--and won.

"With this, SAP once again demonstrates that it takes the concerns of its customers seriously and also recognizes the ongoing pressures bearing down on IT budgets in the current economic environment," the company said in a statement.

If SAP's support costs are rising and its sales are flat or falling in the new year, it will have no choice but to raise maintenance and figure out some way of letting some employees go. There is no indication that this is the case, but it is far easier for SAP to hike prices than to make employees in Europe redundant. They have some pretty stiff rules about how you let go of employees on the other side of the pond.

As The Four Hundred previously reported a month ago, for the third quarter ended in September, SAP booked €2.51 billion in sales, down 9 percent from the year-ago quarter, and software license sales fell a staggering 31 percent to €525 million. Services revenues (including software support and subscription-based software sales) declined only 3 percent for SAP in Q3, to €1.94 billion; software subscription sales rose by 23.4 percent, to €79 million, and software support revenues rose by 14.2 percent to €1.33 billion. It looks like SAP customers already helped prop up 2009 a fair bit with increased support fees. And they had to, since consulting revenue was down sharply by 21.6 percent to €484 million, and training revenues plummeted by 42.9 percent to €60 million; other services sales were down 23.1 percent to €20 million. Net income rose by 14.5 percent to €435 million.

While SAP may want to pad its bottom line more than this, it might be best to hope for better business conditions in 2010 and not drive customers into the, er, loving arms of Larry Ellison and his software empire.

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