SAP Details Tiered Pricing Model for Customer Support

SAP announced on Jan. 14 that its customers would now have a choice between SAP Standard Support and SAP Enterprise Support, each with different pricing structures. The announcement comes more than a month after the company delayed a decision on increasing customers' maintenance fees, a plan that raised the ire of companies facing squeezed IT budgets in the wake of a deep global recession.

SAP is now offering a tiered pricing model for customer support, an apparent stand-down from the business-software maker's earlier plan to raise its entire user base's maintenance fees. In addition, the company will keep its 2010 fees for existing SAP Enterprise Support contracts unchanged from 2009 benchmarks.

"We will now provide a tiered support portfolio," Leo Apotheker, CEO of SAP, said during a Jan. 14 conference call with reporters and analysts, adding that the new offering was "a predictable price model."

Customers will now be able to choose between SAP Standard Support, whose features include updates, problem resolution, knowledge transfer, and quality management; and SAP Enterprise Support, which includes all the elements of SAP Standard Support plus additional focus on business continuity and business process improvement.

In theory, the choice between the two support options will simplify customers' pricing structures and offer a level of predictability to budget planning.

On Dec. 1, SAP announced that it would delay a decision on increasing customers' maintenance fees until the beginning of 2010, and that it would convene a task force to solicit feedback from customers and user groups. In theory, that feedback would be leveraged into improvements in SAP's support offerings.

"Until then, a decision on pricing for Enterprise Support has therefore been postponed," SAP said in a statement at the time.

In July 2008, SAP had rolled out a plan to shift all its customers onto SAP Enterprise Support as of Jan. 1, 2009. As part of that transfer, customers would have seen their maintenance fees increase to 22 percent of their base licensing fee by 2015.

However, as Apotheker acknowledged during the Jan. 14 conference call, many of SAP's customers have been facing "strong pricing pressures" amidst a deep global recession and its aftermath. Recognizing the increasingly cost-conscious nature of many companies, particularly as it shifted its focus towards the SMB (small- to medium-sized business) market, SAP had been offering its flagship Business Suite 7 as deployable in modules without customers needing to upgrade to the whole platform.

SAP itself also suffered somewhat from the recent economic unpleasantness, with its revenues falling by 9 percent during the most recent quarter due to a generalized decrease in spending on business software. During an Oct. 28 quarterly earnings call, SAP executives predicted a 6 percent to 8 percent dip in software and service revenue overall for 2009.

SAP executives have appeared publicly unconcerned about challenges from rivals such as Oracle, which is on the verge of absorbing Sun Microsystems in a $7.4 billion deal. SAP engaged in partnerships itself throughout 2009, including joining forces with Microsoft to offer the SAP BusinessObjects Planning and Consolidation application through the latter's channel, and with IBM and other companies for the SAP Business Suite 7 rollout.