Global CIO: SAP Jilted Again By Siemens: Isolated Case Or Deep Problem?Global CIO: SAP Jilted Again By Siemens: Isolated Case Or Deep Problem?
Unhappy with the value it was getting in return for its 17% annual fees, and looking to innovate with SaaS, Siemens has bypassed strategic customer/partner SAP twice in the past few months.
The bottom line - economic pressures will bring more enterprise software customers to consider (3PM): Almost all SAP customers have end of year maintenance renewal terms. As these organizations review their maintenance contracts going into 2010, it will be important to consider the role of third party maintenance in decisions. Customers seek strategies to free funding up so they can address economic shortfalls and/or invest in innovation. But don’t expect vendors such as SAP to back off without a fight. Beware of some tactics some vendors have used to cut customers off from the third party maintenance option . . . .
You can also gain some additional perspective from Vinnie Mirchandani's blog post about SAP-Siemens here.
But the real perspective—the one that counts—has to come from SAP. As I've stated on several occasions when writing about the issue of annual maintenance fees—including in a recent href="http://www.information.com/news/global-cio/interviews/showArticle.jhtml?articleID=217600083">open letter to SAP CEO Apotheker—Oracle and SAP have every right to charge whatever annual percentage fee they want. If they can each charge 40% annual fees and lots of customers are willing to pay those fees, then good for the big software companies because profit is a great thing and 40% maintenance fees from thousands of customers would sure as heck generate some big fat profits.
But charging what the market will bear requires a nice little checks-and-balances system by which the seller can gauge the value that buyers do or do not put on specific products and services, and by which the buyer can determine whether this is a seller worth sticking with, or whether it's time to seek greener pastures.
In that scenario, perhaps it will turn out that Siemens will be the one and only SAP enterprise customer that decides to take its 17% maintenance dollars and try a new approach—one that SAP could not or would not provide.
Perhaps.
But I doubt it. The demands that CEOs and boards are putting on CIOs to reduce internal IT budgets by lowering the cost of infrastructure and maintenance is not going to go away, and that means the angst and grumbling and sense of unfairness from many CIOs about immutable 17% and 22% maintenance fees isn't going to go anywhere either.
When the irresistible force of new CIO budget mandates and priorities meets the immovable object of annual fees required to sustain software-vendor profit margins, something's got to give. For Siemens, that something was part of what had been an extraordinary relationship with SAP. And I don't think Siemens will be the only company to react precisely that way when its business imperatives slam into the immovable object of a business model whose time appears to be over.
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