Licence complexity a blemish on SAP’s reinvention

Back in 2009, the UK and Ireland SAP User Group was not happy. At the time, the German application vendor was embroiled in a dispute with customers over support fees, and the consensus was that innovation had stagnated.

 Licence complexity a blemish on SAP’s reinvention

Back in 2009, the UK and Ireland SAP User Group was not happy. At the time, the German application vendor was embroiled in a dispute with customers over support fees, and the consensus was that innovation had stagnated.

Two years, a change of leadership and several acquisitions later, and the story is quite different.

SAP has become more responsive to customer needs, says UKISUG’s chairman Alan Bowling, through measures that include the appointment of an executive sponsor of the user group.

It is more communicative on product strategy, demoing its HANA in-memory database appliance and mobile technology well in advance of general availability.

And it is more transparent on support pricing, he says. “SAP’s announcement that they are extending maintenance for core Business Suite applications until 2020 has been very well received.”

But not everything is rosy with the world’s largest business applications vendor.

According to Bowling, the complexity of SAP licensing – an enduring bugbear among customers – is getting worse as the company adds new cloud, mobile and "big data" products.

"All these things cut across products and licences that existing customers are already using," he says. “For example, you might be licensed up to the hilt on [data warehousing product] Business Warehouse, and now along comes HANA. What are you supposed to do with your existing licenses? Do you have to write them off? Do you have to buy additional licences? These are the issues for existing customers.”

The complexity of SAP’s licensing models means that customers who have kept pace with its technology roadmap may be paying way over the odds, says R "Ray" Wang, enterprise software analyst for the Constellation Group.

“If you’ve gone from Business Warehouse, to Business Objects, to HANA, for example, that’s been a ten year roadmap,” he says. “In those ten years, you’ve paid between 10% and 20% of the cost of all the licenses in maintenance every year, and you’ve bought three products that potentially do the same thing, so you might end up spending five times the cost of the product.”

The blame does not entirely lie with SAP, says Wang – many customers have lost track of their own contracts with the company. “A lot of these deals were cut ten to 15 years ago, and most of the people who cut the deals are no longer around. So there’s a lack of knowledge about how existing contracts have been structured, and what’s being used and what isn’t.”

SAP has begun to offer to exchange licences for ‘shelfware’ – software that is paid for but not used – for new products, says Wang. One UK company, which found it had £2 million-worth of shelfware, used this option buy new licences, he says.

And according to Steve Winter, SAP UK & Ireland’s new US-born managing director, the company is making refinements to the licensing of the new products. For example, it has introduced a bulk licensing option for mobile applications, and a run time licence that allows customers to use Business Warehouse on top of HANA.

But these refinements have yet to reassure the UK and Ireland user group. "We understand SAP has got to make money, and it’s in our interest for them to be a sustainable supplier," says Bowling. "What we want is an equitable deal."

Competition at the periphery

If this licensing complexity proves to be a barrier to adoption, it could jeopardise SAP’s innovation strategy.

According to Wang, it is the products at the periphery of SAP’s installed base of core transactional systems – SaaS and mobile apps, social collaboration, ‘big data’ analytics – that represent its best opportunity for growth, but are also where it faces the fiercest competition.

"SAP has got this great asset in their installed base, and those core transactional systems are not going to go away," he explains. "But at the periphery, where the action is, they’re under attack from every angle".   

Wang argues that SAP’s ownership of transactional systems gives it the ability to make these peripheral products “enterprise ready”. But the enterprise price point, when compared to cheap or free alternatives, may hamper adoption.

Still, for Alan Bowling, SAP has been heading in the right direction ever since former CEO Leo Apotheker was replaced with ‘co-CEOs’ Jim Hagermann Snabe and Bill McDermott.

"A step change happened when the new CEOs came in," he says. "Like any organisation, it takes a while for changes to filter through the system, but they are making it happen."

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