Thursday, April 30, 2009

SAP is Proving the Open Source Model

You may be surprised to know that SAP is providing compelling proof that open source software is the better model, particularly in this troubled economy. In case you haven’t followed the recent reporting and intrigue from the world of SAP, I’ll provide a summary.

Like all aged, proprietary software mega-vendors, SAP’s software license growth has slowed during this past year and it is seeking to counter that downturn by raising maintenance fees to extract more revenue from existing customers. You can read a summary of SAP’s latest financial results here. Keep in mind that, historically, customer support and software maintenance fees have been particularly incendiary topics within the SAP user community.

To remedy SAP’s ever-increasing maintenance rates, the SAP User Group Executive Network (SUGEN) has been at the bargaining table with SAP officials, trying to negotiate a compromise. Forrester’s Ray Wang has reported on the outcome of this discussion with a solid summary. Bottom line: SUGEN has compelled SAP to measure and monitor its customer support progress through a series of key performance indicators (maybe they should use Jaspersoft to do so ☺?), indexing future maintenance increases based on the delivery of proven customer value. In any case, the SAP press release states: “Starting in 2010, the price of SAP Enterprise Support for existing customers will continue to increase based on individual contract terms but will not be higher than a yearly fixed upper cap. This translates to an increase average of no more than 3.1 percent per year from 2010 onwards. The price of SAP Enterprise Support will be capped at 22 percent through 2015.”

Well, this seems to be quite a bargain for SAP customers. They now have the negotiated privilege to pay SAP 22% (through 2015) for the mediocre support they’ve been complaining about for years. If this isn’t compelling evidence of the need for open source software subscription models, I don’t know what is. CIOs are learning, through trying circumstances, how to “right” the backward pricing and sales model that enterprise software companies have imposed on them for 30 years. I’ve written about this topic energetically in the past and would point out that open source software when combined with subscription-based pricing enables any organization to wade into a product and solution at its own pace, proving the value before or while it is being used (not many quarters or years afterward as with proprietary software and licensing models).

To all the SAP / Business Objects customers out there whose budgets won’t allow yet another maintenance increase, let’s talk. We can stand behind the “R” in ROI.

Brian Gentile
Chief Executive Officer