SAP Introduces Two-Tiered Support

SAP has stepped back from its plan to move all customers to Enterprise Support contracts priced at 22% per year. Instead it will adopt a two-tiered system that reintroduces a Standard Support option set at 18%.

Bowing to customer complaints about economic hardships, SAP also has frozen prices for existing Enterprise Support contracts at the 2009 level of 18.36%. The plan to gradually increase that rate will resume in 2011, bringing Enterprise contracts to 22% by 2016 instead of 2015, as previously planned.

"We understand that many of our customers are facing difficult market conditions, and they also face strong pricing pressures," said Leo Apotheker, SAP's CEO, during a conference call this morning. "Therefore we decided to hold the price for existing SAP Enterprise Support contracts at 2009 rates for 2010, and we're giving customers the Standard Support option as well as price predictability so they can plan their business in this tough environment."

The change is a victory for SAP customers, user groups and the many who complained bitterly about application vendor's July 2008 decision to increase maintenance and support fees from 17% to 22% over five years. But it's not a complete victory in that the Standard Support option -- which was available only in Germany, Austria and Switzerland in 2009 but will be reintroduced worldwide -- is set at 18%, a 1% increase from 2008 rates. What's more, Standard Support will be subject to inflationary price increases -- a common practice but one that does not apply to Enterprise Support through 2016.

"We have the liberty of linking Standard Support that to the cost-of-living index in the various countries, which SAP will do every year," Apotheker said.

The good news is that "SAP has spent considerable time listening to customers and found that customers do want choice," wrote Altimeter Group analyst and SAP expert Ray Wang in a blog on the announcement. And there are plenty of choices to be made, with customers facing a deadline of March 15 to opt for a Standard Support contract.

Standard Support is geared to customers who want to keep systems up and running with bug fixes, support and software upgrades. Enterprise Support includes everything included in Standard Support, plus best practices for IT operations, proactive monitoring and reporting, and transparency for business process performance.

"Standard Support is really a reactive offering for our customers; if they've got a problem, we'll fix it," said Janet Wood, vice president of maintenance. "Standard Support also includes enhancement packages and new releases but the Enterprise Support offering is proactive, so it's about working with customers to see issues before they experience a problem."

As an example, Enterprise Support includes Solution Manager software that monitors systems, identifies baseline performance and helps customers institute best practices for system optimization.

If customers do nothing, they will remain on Enterprise Support contracts, an outcome Apotheker predicted will be the most popular choice. "Our Enterprise Support offerings have met and exceeded key performance index benchmarks we agreed to share with SUGEN," he said, referring to the SAP User Group Executive Network, which has been negotiating with SAP on support over the last year or more. "That gives us great comfort, because we do believe Enterprise Support is the optimal solution for our customers, and the KPIs demonstrate that."