Under surprising, but maybe not unexpected news, Frank Scavo and Jarret Pazahanick revealed today that SAP is again raising its fees for maintaining software it already sold.
SAP has done this before. Four years ago, SAP eliminated its low-cost maintenance option (scroll down to bypass registration). That decision led to a customer uproar, a KPI program that was established and scrapped and a great deal of examination of just what SAP customers get from maintenance. That’s what made today’s news surprising.
According to Pazahanick, SAP sent a letter to partners today, informing them of the change. It said:
To be able to provide the same level of support in the future, we will change the maintenance rate for new maintenance contracts with SAP Standard Support from 18% to 19%, effective July 15, 2013.
Of course, maintenance fees are a huge cash cow for legacy, on-premise software vendors. That’s what keeps this news from being unexpected. As Reuters points out in its coverage of SAP’s latest earnings call:
Software sales generate high-margin, long-term maintenance contracts and are an important gauge of a company's future profit.
It’s a point Scavo also acknowledges with some pointed questions of his own. How will maintenance be improved with the hike? How will SAP’s gross margin change as a result? Have there been increases in SAP’s support costs to justify this?
It’s times like these that Software as a Service (SaaS), with its automatic upgrades, standard monthly fee and ongoing, consistent support structure, starts to look very good.
-Barney Beal, Content Director/Editor at NetSuite