UpperEdge would like to provide an update and add some additional support reaffirming our original prediction regarding SAP support fee increases coming in 2017. In numerous recent customer negotiations with SAP, we have seen SAP remain extremely disciplined in not affording any support fee locks beyond December 31, 2016.
This is particularly telling as SAP has also maintained this position in negotiations with net new prospective customers who were competitively evaluating SAP against another vendor. As is the case with most vendors, SAP provides the greatest flexibility on commercial terms with net new customers in order to capture market share and establish an initial footprint which can be expanded over time. SAP typically becomes more rigid and disciplined with existing customers because the opportunity for future growth within that customer diminishes over time plus there is a limited likelihood of that customer migrating to a competitor.
SAP has also remained consistent within its base of customers who have met the current thresholds for support at 17% under SAP’s Product Support for Large Enterprises (PSLE) program. In these largest of accounts, SAP has been unwilling to flat-line support beyond 2016 and has also ensured it has the flexibility to increase the maintenance base and annual support fee thresholds required for PSLE eligibility.
SAP’s approach within the PSLE accounts raises red flags as this applies to SAP’s largest customers. Most of these customers have invested as much as hundreds of millions of dollars in SAP over many years, served as early adopters, provided SAP testimonials and references, and have been advocates for SAP within their respective industries. This is the group of customers that SAP has the deepest and strongest relationships and values the most. Since SAP is not even providing these customers with support fee protections, UpperEdge believes this is strongly indicative of SAP’s intention to increase raise support fees beginning in 2017.
SAP’s determination to increase support fees will require approval of its board. Various economic models showing impact to the top and bottom line will be presented. Lessons learned and customer migration rates from the prior increase will be reviewed and considered. Numerous questions will be asked touching on the magnitude of customer blow back, the best approach for realizing the least path of resistance, and the likelihood of the increase accelerating the customers’ shift to SAP cloud.
What’s your take on the likelihood of SAP increasing support fees in 2017?
We would love to receive your feedback and thoughts so please do not hesitate to post a comment. You may also contact me directly at [email protected] if you would prefer a more discrete discussion.