Is the SAP KPI program really dead?

SAP AG is still planning to conduct a benchmarking program for its Enterprise Support service, despite words to the contrary from CEO Léo Apotheker last week — sort of.

The German ERP (enterprise resource planning) giant created a KPI (key performance indicator) program along with SUGEN (SAP User Group Executive Network) after widespread outcry over the roll out of Enterprise Support in 2008. Enterprise Support offers more features than standard support, but also comes at greater cost. 

The move rankled SAP users, both for its timing during a fiscal downturn, and the fact that many customers have stable, older systems that don’t necessarily need a gold-plated service plan. But the richer services of Enterprise Support can actually help hold downcustomers’ costs, according to SAP.

Still, in response to criticisms, SAP formed the KPIs and pledged to link future Enterprise Support cost increases to meeting them successfully. 

But last week, SAP announced that it would restore a lower-cost Standard Support option for customers. Given this choice, the KPI program was no longer necessary and would be discontinued, although SAP will “continue to monitor” Enterprise Support’s efficiency, according to Apotheker.

Apotheker’s latter remark should not be construed as a throw-away comment, according to Janet Wood, SAP executive vice president of maintenance go-to-market.

Part of the problem with the initial KPI program was the time and logistical burdens placed on the 100 companies that participated in it, according to Wood.

SAP is going to work with SUGEN “to evolve” the KPI program into something that can measure Enterprise Support’s value “in a way that requires less investment [on the part of customers] and is totally scalable across our entire customer base,” Wood said. 

Exactly what this work will produce remains to be seen. In addition, the resulting benchmark program won’t be tied to support cost increases. 

And a software analyst who has followed the KPI saga closely questioned whether Wood’s remarks about SUGEN applied to all members of the user group’s board. 

“There are differences of opinions at this moment within SUGEN,” said Ray Wang, a partner with Altimeter Group. “I’m not sure if she’s speaking on behalf of all SUGEN.”

SUGEN board members could not immediately be reached for comment.

Ultimately, despite SAP’s concessions, the vendor is “trying to force everyone to Enterprise Support,” Wang said. “The incentives are aligned that way.”

Standard Support costs 18 per cent of a customer’s software license base, with adjustments made each year according to inflation, beginning in 2011. 

Enterprise Support’s list price is 22 per cent. Contracts signed up to July 5, 2008, are subject to a previously announced fee-increase schedule, which will bring costs to 22 per cent by 2016.

If Standard Support customers decide to switch to Enterprise Support before March 15, their fees would be 18.36 per cent this year and then follow the schedule. But if they sign up for Enterprise Support after that date, they would begin at 22 per cent. 

Companies that are not investing more money in SAP software aren’t interested in Enterprise Support and instead are looking at third-party maintenance from companies such as Rimini Street, Wang said. 

Wood downplayed the notion. 

Firms like Rimini Street “get a lot of press, but to be honest with you, the press is bigger than the reality,” she said. 

It’s also possible that SAP’s two-tier model will apply some competitive heat to its rivals, according to Woods. 

“Our Standard Support offering is really on par with other vendors’ typical offerings which are typically priced at 22 per cent. It will be really interesting to see,” she said. “For 22 per cent we’re offering something that’s quite a bit above what’s industry standard.”

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