In a letter to customers, SAP has announced it will be raising maintenance fees by up to 3.3% due to changes in the macroeconomic environment of high inflation rates reflected across regional price indices.
Due to higher energy and labour costs, as well as increasing expenses for third-party services, SAP said it had decided to adjust the support fee for existing support agreements for SAP Standard Support, SAP Enterprise Support and SAP Product Support for Large Enterprises, based on the respective local Consumer Price Index (CPI).
“In line with standard business practice worldwide, the terms of our agreements allow for an annual adjustment of the support fee after the initial term and first renewal term. Consistent with the terms of our agreements, SAP will moderately increase the annual support fee for the aforementioned SAP support agreements by a maximum of 3.3% (or the local CPI rate, if lower), effective January 1, 2023.”
The company pointed out that this upcoming increase would be the first time in nearly a decade that it has needed to adjust maintenance fees, having kept support prices stable to a large extent for the past 10 years, including waiving adjustments during the pandemic.
SAP said the increase did not represent an increase in list prices for SAP support offerings for new purchases of software. “SAP is engaged in an open dialogue with our customers and user groups to offer the right support offerings for their needs, at predictable commercial conditions. Transparency is important for SAP in its relationship with customers, and SAP will always strive to maintain a dialogue around important areas such as support,” it said in a statement.
Forrester principal analyst Liz Herbert said the changes highlighted the importance of sound contract negotiation when signing or renewing a deal. “While maintenance fees remained stagnant for a long time, this is a reminder to make sure your contract protects you in times like these and that you do not end up surprised,” she added.
Looking at how affected SAP users should proceed, Herbert said: “In terms of what you can do about the fees themselves, this may be a time to renew stalled conversations about migrating to cloud – either from SAP or the competition. Many firms are migrating to cloud for better agility and a more modern applications environment built for real-time decisioning and AI.”
In Herbert’s experience, SAP has historically been favourable in contract negotiations when its customers make the move to get off their older software and stay with SAP. “If you decide to look at competitor products, they too are likely to behave favourably as they have a major desire to win business away from SAP. You can also consider third-party maintenance from companies like Rimini Street, which typically saves you 50% off maintenance fees.”
However, third-party support, such as that offered by Rimini Street, means organisations choosing this option are cut off from future SAP enhancements, Herbert warned. However, she said that using a third-party enterprise software provider did offer a way to keep a current product running, including any mandatory regulatory fixes.
“You could also explore giving up ownership of existing licences and reducing maintenance that way, though this can be a difficult option in practice,” she added.
“Also, most customers can save costs and optimise in many other ways, and so can use this announcement as a catalyst to look more broadly at all costs. It’s a good time to look at infrastructure/cloud, support resources, shelfware and redundant systems. This is also a good time to look at whether outsourcing or automation could create more efficiencies and potentially a better experience for the business.”
As Herbert noted, third-party support offers existing SAP customers a way to avoid the price hike in maintenance fees. Rimini Street is likely to be one of the providers set to benefit from SAP’s plans.
Discussing the SAP statement, Emmanuelle Hose, general manager for Europe, the Middle East and Africa (EMEA) at Rimini Street, said: “This is not the news SAP customers want to hear, especially in the current economic situation. At a time when they are under pressure to make decisions about their long-term investment in SAP, thanks to the vendor planning to switch off full support for ECC by 2027, customers need as much financial flexibility and time to plan as possible.”
Hose said SAP users need to consider how they build out an ERP environment that is composable and agile, which means unpicking highly customised existing systems.
“SAP customers really need to evaluate if moving to S/4 HANA is even the right path forward. Given that so much IT budget is dedicated to keeping the lights on, any increase in support costs is going to result in less resources available to unpick such complex ERP systems,” she said.