Customers begin to question enterprise software value
SAP customers are unhappy with price hikes, but few are going to be willing to bolt for the exits.
There's nothing like a price hike in the midst of a recessionary economy to raise customer ire, as well as expectations as to what they're getting for their fees. SAP, perhaps more than any other vendor, is feeling that right now. By raising its maintenance pricing from 17 percent to 22 percent, with no perceived increase in actual value delivered, SAP has firmly placed itself on the hot seat, as CIO.com reports:
(Of) 203 customers Forrester interviewed, a whopping 85 percent expressed minimal utilization of (SAP's) Support offerings. In addition, SAP customers told Forrester that they just weren't seeing the innovation in product offerings from SAP that should have resulted from the collective billions they've been paying in maintenance dollars over the years.
Indeed, as the article goes on to suggest, SAP should have been lowering its maintenance pricing over the past few years, given that its actual costs of support have gone down. Fat chance.
This is why we need competition in the ERP (enterprise resource planning) market. Oracle brings this to SAP's doorstep, but these are mostly two birds of a feather. Neither has any interest in lowering customer costs because both have an incentive to raise prices on customers that have little ability to move to other offerings.
It would therefore be ideal to see Microsoft and open source move into ERP in a more concerted way. Microsoft is a proprietary software company but it does tend to lower prices when it enters a market. Open source, for its part, would put both pricing and innovation pressure on a market that has been content to collect monopoly rents for far too long.
The problem in ERP is that it's so mission critical that few enterprises are willing to take a calculated risk on competing solutions in order to save money. For this reason, perhaps enterprises are getting exactly what they deserve, after all. No risk, no reward.
Disclosure: SAP Ventures is an investor in my company.