2023-07-28 10:49:35
Berlin, Düsseldorf SAP is once again raising prices for many existing customers. Companies will pay up to five percent more for the maintenance of software licenses from the beginning of 2024, as the group informed its customers in the middle of the week. Specifically, the surcharge is based on the increase in the local consumer index, but is capped at five percent in the event of high inflation rates. After a long phase of stability, SAP had already added up to 3.3 percent last year.
In its customer portal, the software manufacturer referred to “the current market conditions, which are still characterized by high inflation rates”. In addition, the maintenance of classic software systems – in technical jargon on-premise – is complex, since numerous different versions are in use on the market.
The price hike is below inflation in the euro area, where consumer prices rose 5.5 percent in June from a year earlier. The customer organization DSAG, which represents members from 3800 user companies, is still angry.
The added value that should arise for the company through SAP support and the associated services has not risen to the same extent as the prices charged for it for years, said Thomas Henzler, DSAG board member. “Products migrate to the cloud and then have to be purchased there separately.” Legacy systems, on the other hand, would be excluded from innovations.
SAP is not the only technology company asking customers to pay. Salesforce recently announced the first price increase in seven years, and from August the products will cost an average of nine percent more. The group justifies the step with the development of new functions. Microsoft has raised prices in the euro area by eleven percent, citing exchange rate effects.
Necessary updates: It is possible for SAP to “pass on the inflation”
When purchasing software licenses, companies usually conclude a maintenance contract with SAP. It hardly works without it: For example, customers receive security updates and adjustments to changes in the law from the manufacturer. With the most used model, the so-called Enterprise Support, this usually accounts for 22 percent of the license costs.
Companies will have to adjust to regular price increases in the future. SAP has absorbed cost increases in the past and thus “spoiled” customers, CFO Dominik Asam told analysts in May. However, the group has the ability to “pass on inflation” and will do so more frequently in the future.
SAP is under pressure to increase profitability. Management has promised analysts and shareholders that profits will increase significantly again after the strategic realignment in autumn 2020. The operating result is expected to show double-digit growth in the current financial year.
>> Also read: SAP loses touch with Salesforce – and unsettles customers
The price increase is likely to have a significant effect: Last year, the group achieved sales of 11.9 billion euros with maintenance, with a gross margin of 88 percent in the software and support area. The surcharge adds several hundred million euros, with practically no additional expenses.
According to the assessment of market observers and some customers, SAP is also using the pricing policy to persuade existing customers to introduce cloud products – these are the focus of the strategy of CEO Christian Klein, as they mean calculable income and potential for marketing additional products.
SAP boss Christian Klein
The spokesman for the board of the software group SAP wants to get more customers into the cloud.
(Photo: dpa)
It is “very important to emphasize” that SAP’s latest innovations and functions are only delivered in the cloud products, said CEO Klein recently when presenting the quarterly figures.
A conceivable calculation, as described by the major bank UBS in a report: if the prices for software maintenance rise more sharply than those for cloud products, the changeover will become more attractive. SAP itself emphasizes to customers that cloud-based systems are the “most stable, most reliable and most cost-effective options” for operating business software (ERP).
The switching speed should also be increased. Customers report announcements that the previously possible crediting of license fees when switching to the cloud is to gradually disappear.
The regulation has made the switch cheaper so far. For existing customers who are waiting to sign a contract, it is obviously becoming more and more expensive.
More: SAP invests in leading AI start-ups – including the most successful young German company.
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