By: Steve Robins
This is an update to the earlier post, Oracle, SAP and the Value of Maintenance & Support Contracts:
VALUE is a core element of the SIVA solution marketing model. Not surprisingly, the most important element in pricing a solution is the solution’s VALUE as perceived by customers. That lesson proved embarrassing for SAP this week as they were forced to slow down a planed support price increase until they could demonstrate its value.
The Details. When they eliminated lower-cost options and effectively increased their support pricing in early 2009, SAP failed to look at the solution value equation from the customer’s perspective. But now that’s about to change. This week, in a dramatic about-face, SAP announced that it would slow down the pace of price increases for support. Dow Jones reported that:
SAP attributed the extension to the “current economic climate and discussions with SAP User Group Executive Network, or SUGEN.” SUGEN is a global federation of 12 key SAP user groups.
Nice spin. More telling was the following statement in the press release:
SAP has agreed to postpone the subsequent price increase schedule until the targeted improvements measured by the SUGEN KPI Index are met.
Demonstrate the value. Especially in today’s economic climate, customers demand value (Value = Benefit – Cost) from their solutions. SAP was unable to demonstrate the value of their enterprise support solution. So SAP user groups prodded the company to demonstrate that customers could meet value benchmarks (i.e., key performance indicators) before SAP would be able to implement the support price increase.
SAP’s pricing model is still broken. Here’s the rub: the value metrics are still designed to reinforce the value of SAP’s support pricing, rather than helping SAP to set pricing based on the actual value that customers will achieve. If SAP customers fail to achieve the desired value, SAP could be forced to adjust its maintenance pricing even further. This will be interesting to watch over the coming months.
Read the original post: Oracle, SAP and the Value of Maintenance & Support Contracts