SAP Enters the 22% Maintenance Fee Fold!

SAP completed the highly anticipated move of applying its new "Enterprise Support" offering to all customers (except for specific contractual agreements on some larger accounts), phasing in the new 22% maintenance support fee over the next 3 years for R/3 4.6C and 4 years for R/3 Enterprise.

Enterprise Support has been touted by SAP as offering increased value to customers, since it covers not only the standard "support packages" that update legal changes and technical patches, but also the addition of "enhancement packs," which will allow customers on the Netweaver platform to add new functionality. Additionally, being that the SAP product portfolio has expanded to include BPP and SOA, the increased fee is linked to the support and development of this next generation eSOA platform.

On the other hand, it is also very clear that this is a simple "dollar and cents" move by a company that has a strong case of margin-envy to its closest competitors. Being that Oracle and SAP remain as the last major ERP vendors to the large enterprise space, why shouldn't SAP charge the same maintenance fees as Oracle, if they can get them?

However, the draw-back of moving into the same category as Oracle may open the flood gates to 3rd-party maintenance suppliers. To this point, these players, such as TomorrowNow (for the time-being, owned by SAP!), Rimini Street (started by a TomorrowNow founder) and NetCustomer, have focused their businesses mainly on the PeopleSoft, Siebel and JD Edwards customer segments; since the ability to offer cost savings to a customer on 22% maintenance fees is obviously an easier and more profitable business model than offering maintenance on SAP's old 17% maintenance fees. With SAP now in the 22% fee fold, these maintenance suppliers will certainly be attracted to serving this large market. The question now is whether SAP's product direction is attractive enough for customers to dismiss the maintenance savings in favor of moving to a more modern technology platform.