SAP and Its Pricing: A Sign of Deeper Challenges?
November 15, 2009
SAP is an outfit that provides me with some clues about what will happen to over-large enterprise software vendors. The company grew via acquisition. The company followed IBM’s approach to generating revenue from services. The company made shifts in its services pricing. The company has done just about every trick in the MBA handbook, yet revenues continued to soften. The most recent MBA play at SAP is disclosed in a news report from Reuters called “SAP Plans to Raise Licensing Fees”. The notion of releasing interesting news when most people are eating donuts and thinking about their dwindling retirement accounts is catching on among big companies. Fortunately for us in Harrod’s Creek, Reuters never sleeps. The story revealed:
Germany’s largest software company, SAP AG (SAPG.DE), plans to raise licensing fees for thousands of clients who use older versions of its software, German weekly Wirtschaftswoche reported on Saturday. “SAP’s older customers will be especially affected — that means the most loyal,” Andreas Oczko, deputy head of the German SAP client advocacy group DSAG told the magazine. The magazine said older clients who do not switch to newer versions of software applications or have not switched to a new incremental price structure will see the largest cost changes.
There you go. Upgrade or pay more. Upgrade and pay more for engineering support. That’s the MBA play of the week in my opinion.
What about customers who do nothing? Maybe some of these people will take a close look at their options. In a year, Google will have most of the SAP functionalities latent within the expanding Apps’s ecosystem. Then what? In my opinion, SAP may find that its business challenges have been made more problematic by the Google.
I am eagerly awaiting the unfolding of events in 2010.
Stephen Arnold, November 15, 2009
The Veterans Day Committee has to be aware that this opinion is uncompensated. I might add that canny veterans may want to check out their holdings in SAP to avoid the Wal*Mart greeter syndrome.
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One Response to “SAP and Its Pricing: A Sign of Deeper Challenges?”
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SAP didn’t grow by acquisition. The only significant acquisition it’s made was BusinessObjects. It has made many what it terms ‘tuck in’ acquisitions but these are very small and provide tech the company felt it could acquire cheaper than developing itself.
It would still like to see itself as a software provider shipping CDs with services secondary but fact is services (or rather maintenance revenues) are a highly lucrative business it can’t ignore. Any more than any of the other ERP vendors. They’re all following the same path.