What's the Latest on SAP Support and the Departure of ASUG CEO Steve Strout?

News Update: SAP support is a fast-moving story these days. I published the following piece Monday morning; much has happened in the meantime. Due to some aspects of contract law in Austria and Germany, SAP has agreed to honor the existing support contracts of customers in those two countries through 2009. There is currently a great deal of speculation as to whether this change is a move towards repeal of support increases across-the-board, or whether it is more of an isolated instance. It's going to take a while for this to play out. If you want more details on the latest developments, I issued a piece on JonERP.com that gives a play-by-play on how this latest SAP support twist unfolded. In the meantime, the fundamentals of this blog entry still hold up, so read on.

Since SAP raised its maintenance fees from 17 to 22 percent on July 16, 2008, SAP support has been a topic that has remained front and center. Some speculate that the aftermath of this announcement even cost ASUG CEO Steve Strout his position on Wednesday, November 26. In this blog entry, I will look at the departure of Steve Strout and then provide some updates on SAP support and why this issue is such a crucial one for SAP and its customers to reach a better understanding on.

When word arrived that the ASUG board had dismissed Steve Strout on November 26, I received a number of calls from reporters and analysts. All were thinking the same thing: that Steve’s departure was somehow connected to ASUG’s rather puzzling initial response to SAP’s announcement of its support increase. It was well known that the response from SAP’s own users to this price increase was anything but enthusiastic. However, unlike some of the SAP user groups in Europe, who went on the record with some very forceful remarks, ASUG initially seemed to be unnecessarily sympathetic to SAP’s position.

However, further investigation shows that ASUG, and Steve Strout himself, were not exactly rolling over when it came to the support issue. See, for example, this piece from September 25, 2008 which shows that ASUG had indeed joined a new 12 user group task force, the SAP User Group Executive Network (SUGEN), which was formed specifically to address the issue of SAP support increases and to effectively relay the position of SAP users to SAP executives. Since Steve Strout has been the recipient of quite a bit of “he was soft on support” blog commentary in recent days, it’s only fair to point out that in the quotes in this September 25, 2008, Steve comes off as someone determined to represent his users. “We're trying to be prudent and trying to be collaborative,” Strout said. “We're not going to roll over either.” No, it’s not the talk of a confrontational firebrand, but it’s also not the talk of an SAP apologist.

To me, one of the lessons of Strout’s departure is that if you don’t provide the blogosphere with some useful information, they are going to riff on whatever speculation is out there. To this point, the truth of why exactly Strout was dismissed has not been revealed. ASUG has not yet explained where they wanted to go that Strout wasn’t taking them. Thus unwarranted speculation rules the day, and let’s be clear: saying that Strout was dismissed due to user dissatisfaction with his handling of the SAP support issue is just that: pure speculation. ASUG issued a press release on November 26 by email that was eventually sent to me by some third parties. The release did not offer any reason for Strout’s departure. If you go to ASUG.com, a copy of that initial release is not easily found, if it is there at all. No follow up stories are linked to.

Board members I contacted personally had nothing more to say on the topic, though there were a couple of follow up quotes from ASUG Board Chairman Mike O’Dell that made clear the decision to dismiss Strout was not about Enterprise Support, though no clarification on what ASUG plans to do differently was offered. Surprisingly, even high-level user group volunteers I talked to inside of ASUG had no light to shed on this, on or off the record. So we can set the Steve Strout part of the issue aside for now. Whether it’s related or not, it shouldn’t be the focal point. More than likely, it is a blog fodder sideshow fueled by a lack of useful information.

Meanwhile, where do we stand on the SAP support issue in general, and why does it matter? Cynical types have suggested that the support issue is a non-issue because in today’s consolidated ERP market, vendors can charge what they want to charge (a tribute to the “company store” approach to capitalism). However, this is not the case. SAP needs the enthusiastic support of its users to succeed in the long term. On October 31, 2008, Forrester issued a report comparing SAP and Oracle’s market position. One of the themes of the report that did not receive enough attention, in my view, was the notion that if Oracle can be ready with Fusion in 2010 (which Forrester believes they can), then Oracle is in an position to potentially win over SAP customers running on 4.6 who have remained on that release due to their frustration with the SAP maintenance issue.

Whether this is a credible hypothesis or merely a worst case scenario, if it happened, it would be an ERP game changer, and SAP should be taking it seriously. It has also been noted that SAP might be motivated to hike support fees to bolster its profit margins and thus the attractiveness of its stock price for investors in comparison to Oracle, which currently boasts better profit margins. If that’s the case, there is some evidence that it has backfired. Recently, Societe Generale analyst Richard Nguyen issued a “sell rating” for SAP’s stock largely on the basis of SAP customer discontent.

From what I can see, SAP is now making a major effort to get on the same page with its customers on the support issue. While SAP has not backed down from its plans to increase support prices, they have shown a willingness to assess the value of “Enterprise Support” from a KPI perspective. SAP has maintained from the beginning that the value of Enterprise Support, driven by new tools like Solution Manager and the post-go live RunSAP methodology, will more than justify the price increase.

For the most part, customers have been less receptive to the idea that Solution Manager will change their lives as they know it. But as this Computer Weekly article reports, SAP is working with the SAP User Group Executive Network (SUGEN) to agree upon a set of KPIs for Enterprise Support. As the article states, “After January, further cost increases will depend on meeting those KPIs.” This development comes on the heels of SAP offering to extend the lifespan of Enterprise Support over additional years, thus sweetening the pot for cost-conscious CIOs.

These developments indicate that SAP is engaging in more than lip service on the support issue, though it must be said that some prominent analysts, in particular ZDNet blogger Dennis Howlett, continue to make a persuasive case for SAP repealing its support hike altogether as a way of getting on the same page with its customers in a difficult economy. Whether or not that happens, it’s clear that the Enterprise Support issue is moving more into “dialogue mode.”

One thing we should keep in mind is that support is not just a function of price; it’s also a function of value. Those SAP customers I have talked to about SAP’s current support are not always enthusiastic about the kind of support they are receiving currently. Additionally, while the SAP Community Network (SCN) has become a valuable part of the puzzle for those SAP customers seeking support, there are questions that need to be resolved about the limits of community-based support, as well as the ethics of charging SAP customers a premium for support if their most useful support channel turns out to be online communities that they themselves help to populate.

Finally, there is continued skepticism about Solution Manager as a huge support difference-maker. SAP should get its chance to prove Solution Manager can deliver the goods through these as-yet-agreed-upon KPIs, but it warrants mention that the best support has a human element behind it, ready to be called upon for personalized service when needed. If SAP can provide integrated “tools/community/human intervention” support, my bet is that the price will become less of an issue than it appears to be today. As for ASUG’s part, if ASUG can play a role, along with the rest of the SUGEN, in influencing the support issue from a customer advocacy standpoint, then past quibbling about ASUG’s initial response to the support increase will become irrelevant.