SAP revises its pricing for software due to pressure from customers

SAP, a leading business software company based in Germany, is revising how it prices its core business planning software, offering more transparency.
SAP-HANA-India
The decision to revise its pricing follows a legal crackdown against customers — beverage giants Diageo and AB InBev – backfired among its wider customer base, who feared they might be hit by hidden, indirect charges, Reuters reported.

The company said on Tuesday it will offer a new model for sales, license audits and pricing that will serve as an alternative to its decades-old approach to charging customers by the number of users accessing its software.

The new pricing model, known as “indirect access” covers the increasing use of SAP with non-SAP systems, running automated processes in the cloud or handling machine-to-machine transactions by internet-connected devices or sensors.

The changes mean customers pay handling fees only when significant business processes or outcomes are achieved, rather than simply because a random technical process was triggered, indirectly, through an SAP software system.

SAP did not say whether the new pricing structure would positively or negatively impact the revenue in coming months.

The new model – a first of its kind for the enterprise software industry – addresses challenges faced by some customers when it comes to pricing for Indirect/Digital Access.

For most use cases, SAP enterprise customers had the option to pay for SAP ERP application based on the number of users. Increase in challenges due to access of SAP software systems, some customers have asked for an alternative pricing approach.

SAP will differentiate between Direct/Human access (existing) – which will be charged for by number of human users.

Indirect/Digital Access – Access via third party, Internet of Things (IoT), bots and/or other digital access that can be licensed based on transactions/documents processed by the system itself (new).

SAP’s new model pertains to the digital core – SAP S/4HANA® and SAP S/4HANA Cloud – as well as the SAP ERP application.

Existing customers can choose to remain on the current model or move to the new document-based pricing model – whichever best fits their SAP solutions and digital transformation initiatives.

Conversion offerings are available to help customers who choose to move from current pricing to the new model.

“We applaud SAP for bringing to market this new model that should bring transparency and simplicity to customers for future SAP software use cases. There is further work to do to demonstrate to customers that the new model will be cost-neutral for their existing use cases,” Gianmaria Perancin, chairman of SAP User Group.

SAP customers need reassurance that if they believed they were correctly licensed, due to factors such as discussions or communication with SAP or ambiguous contract clauses, they will not face new license costs.

“Enterprise software vendors not only seek to modernize their pricing to meet the shifts to outcomes-based pricing, but also must find models to allow customers to stay the course, receive value for their existing investments and convert to new business models in a fair and equitable manner to their customers,” Ray Wang, CEO of Constellation Research, said.