SAP's Skyrocketing Revenue Leads to On-Premise Maintenance Price Hike

After announcing their good financial results on July 20th, 2023 (a Revenue of 11,9 billion euros and a gross margin of 88% on the maintenance contracts), at the end of July SAP shared its intention to increase its On-Premise maintenance prices.

SAP’s official support statement appeared on its support page and is informing its customer that a planned increase will take place on January 1^st, 2024. It will only affect the following products:

• SAP Standard Support,
• SAP Enterprise Support,
• SAP Product Support for Large Entreprises (PSLE).

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Source : https://support.sap.com & https://support.sap.com/content/dam/support/en_us/library/ssp/carousel/support-fee-statement_english.pdf

This increase will be based on the local CPI rate (Consumer Price Index) and will be limited to 5%. This is a second SAP support fees augmentation since 2023 – last year’s increase was capped to 3,3% though.

Despite of the total cost-push inflation reaching 8,3% in 2 years, it is however important to note that the publisher had not increased their support fee for about a decade.

SAP reassures its customers specifying in its statement that the support fee increase will not impact Price List offerings and the Cloud products cost will also remain unchanged.

In 2023, SAP had justified the increase by the rise of energy, of labor and of third-party services cost. The 2024 support fee increase is in fact a reaction to the current market conditions, and notably to the “still-high inflation rates”, German publisher said.

Indeed, the inflation inside the European Union had reached 9,6% in June 2022. Nevertheless, we could observe the inflation rate decreasing down to 6,4% at the end of the first semester of 2023.

The German SAP user community (DSAG), which represents 3800 companies that are SAPs customers, seems to disapprove of the support prices increase even if such increase is below current inflation rates. The main reason of DSAG unhappiness with support fee increase is the quality of the SAP support and its associated services not increasing along SAP support fees.

This price growth follows a long-term strategy, that we have been observing for a few years within SAP and other publishers, consisting of pushing their customers toward Cloud and subscription models.

Indeed, during the review of the financial results of the first semester, Christian Klein (SAP CEO) has said: “SAP’s newest innovations and capabilities will only be delivered in SAP public cloud and SAP private cloud using RISE with SAP as the enabler. Our new innovations will not be available for on-premise or hosted on-premise ERP customers on hyperscalers.”

The Christian Klein’s statement along with recent SAP commercial changes confirms the German publisher’s strategy to progressively abandon its historical products in order to move forward with Cloud subscription model.

Source SAP : https://support.sap.com/content/dam/support/en_us/library/ssp/carousel/support-fee-statement_english.pdf