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SAP increases prices for cloud services

Peter Hartmann of the SAP Switzerland interest group has done the math: That adds up to a cost increase of around 18 percent for a five-year contract - not including list price increases. With the "silent" price increase during the summer vacations, one sees similarities with the procedure in 2008, when SAP wanted to unilaterally increase the maintenance fees by 30 percent, explained Peter Hartmann as chairman of IG SAP: "We expect the rule to be reversed."

Cloud becomes more expensive

SAP told its existing customers that the group is committed to continuously increasing the value of cloud solutions. This includes: improving service levels, developing new functionalities and innovations, and ensuring the highest standards of data security. Delivering continuously improved and agile cloud solutions offered by SAP requires extensive and complex work. This effort brings increasing costs, argues the ERP world market leader. The price adjustment is intended to reflect this additional value that SAP has delivered and intends to continue to deliver. For this reason, the executive board around SAP CEO Christian Klein made the strategic decision to make annual price adjustments for the SAP cloud solution portfolio on a global level for new contracts and to align them with the industry-standard pricing mechanisms in the market.

This creates an additional hurdle for existing SAP customers to switch to the cloud: According to a survey by Peter Hartmann's IG SAP, existing Swiss customers were already very critical of the switch to the cloud and of current services in general before the price increase. An automatic cost increase regardless of interest and use of new functionalities is questionable in any case. The attractiveness of the SAP cloud offering is further diminished by this increasing paternalism of customers. In addition, with low inflation and the further strengthening of the Swiss franc, prices in Switzerland should be pointing in the other direction - namely down!

Especially with the maintenance costs of the (still) SAP ECC operators, the price-performance ratio has not been right for a long time. The maintenance costs are far too high in relation to performance and the lack of further development, according to the SAP Switzerland interest group. "Similarly, customers are not willing to pay x times more for cloud services compared to before, on-prem, just to offload the operation of the software to the cloud. This is because, in the abstract, SAP often offers an outsourcing proposition rather than a cloud solution."Peter Hartmann sums up the current mood.

Market power and coercion

The accusation is: SAP is using its market power! Existing SAP customers no longer have a choice between on-prem or cloud solutions. For example IBP, Integrated Business Planning for Supply Chain. This SAP software replaces the well-known APO (Advanced Planner and Optimizer), is said to be much more powerful and functional, but is only available as a cloud offering. "Likewise, we get contradictory feedback regarding the crediting of licenses when switching from ECC to S/4," Peter Hartmann knows from the numerous members of IG SAP Switzerland. "Charging 100 percent of the maintenance base is a must, after all the customer had to pay maintenance for years for the further development of SAP products! Here SAP wants to exploit its market power and customers are forced to switch to the cloud."

A year ago, IG SAP conducted a customer survey to identify problems and challenges in the SAP environment and to address specific expectations of SAP. Unfortunately, more than a year after the results were published, feedback from SAP is sparse. "Many questions are unanswered and it generally confirms the current opinion towards SAP from the press. But SAP has promised feedback and dialog for the upcoming IG SAP meeting on November 17, 2022 in the Autohalle in Andelfingen, Switzerland," summarizes Peter Hartmann, Managing Director of the consulting firm BizCon and leadership and contact person of IG SAP CH. "We give SAP plenty of time in the meeting to comment and interact directly with customers."

An update on customer opinions will follow in E-3 Magazine February 2023. The fact is that SAP strategy and expectations of existing customers diverge. Although the proportion of S/4 operators has increased slightly, many things remain unclear for IG-SAP members: product roadmaps are missing, lack of integration and consistency of S/4 products, insufficient price and performance ratios in the maintenance models and, in particular, deficiencies in service quality.

IG SAP CH is currently the only independent association in the SAP community with a focus on legal and commercial topics (complementary and supportive to the initiatives of DSAG e. V.). The IG was founded in 2008 and currently consists of 124 corporate members with 250 registered participants. The combined SAP licensing total is CHF 650 million.