SAP is operated by lawyers and beancounters …try to read their SAP agreement and you will feel depress as 100% of the terms mentioned are in favour of them , not the customer

Although SAP now offers SAP Standard Support at 18% ( + CPI) , they reserve the rights to increase the CPI after 2012. The Standard Support will then probably close to Enterprise Support @22% . In a way , SAP is going all out to discourage customers to opt for Standard Support

The traditional enterprise software business model is on it’s last legs. Here’s the evidence:

1) Maintenance has become the model accounting for greater ratios of enterprise software company revenue = vendors not providing sufficient value to ignite new license sales.

2) Lack of upgrade value where customers can no longer consume or need many additional features – or the incremental value isn’t worth the internal upgrade cost and the added system complexity. Maintenance no longer means paying to get more good stuff in future releases.

3) Consolidation vs commoditization where large vendors get larger (and lack of organic growth) to ‘own’ customers at the point where much of the software stack has become commoditized.

4) Mature markets require customer intimacy rather than heavy-handed tactics. Most enterprise software companies have optimized internal processes (after all, that’s what they are selling). Being customer centric is inefficient. SAP learned this lesson when trying to implement the 22% plan. The result was a better alignment of customers with support, according to SAP. The problem is that SAP had to create a disaster in order to realize that they had customers.

Where is this all going?

My view is that we’re in the midst of change. Clever ways to extract more revenue from existing customers, as documented in the post, isn’t sustainable by software vendors. The survival of the fittest will include the following characteristics:

1) New Value Models like SaaS will grow. After all, with SaaS, you pay for what you use – no shelfware. Maintenance is included. Upgrades happen at no cost to you. (Or relatively low cost).

2) Customer-centric models dominate where vendors who support and engage with customers win. Software vendors will adopt models that optimize customer engagement for specific markets – not one-size-fits all.

3) Alternative seeking where fast mover technology adopter will consider completely different software vendors. Consolidation has created a “red ocean” where vendors compete on the same value metrics. As choices reduce and the differentiation narrows, organizations will begin to look at alternatives – vertical specialists, Enterprise 2.0 start-ups, open source etc.

I am in Asia Pacific , is there anyone out there willing to join force with me to twist arm with SAP ?