SAP Increases Pressure for On-Premise Customers

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⇨ Consider automation or decommissioning unused systems

⇨ Explore moving to the cloud

In 2022, for the first time in nearly a decade, SAP announced an increase in maintenance fees by up to 3.3% based on the local consumer price index (CPI) rate. The company said the adjustment was due to increased energy and labor costs and increasing expenses for third-party services. The increase that went into effect on January 1, 2023, impacted all customers with existing support agreements, including SAP Standard Support, SAP Enterprise Support, and SAP Support for Large Enterprises.

In a recent update, SAP has announced a further adjustment to support fees taking effect from January 1, 2024. This time the increase will be up to 5%, with the CPI rate again being the determining factor in the adjustment size. SAP cited “current market conditions which are characterized by high inflation rates” as the reason for the increase. As with the earlier adjustment, the size of the increase will depend on regional and local market conditions.

However, not all organizations with a support contract will be affected as SAP states the terms of their support contracts allow for an “annual adjustment … after the initial and first renewal terms”. But most SAP ERP customers have been running those systems for years and are well beyond the initial and the first renewal terms.

For customers  with support agreements, the update explicitly says that “the characteristics of an on-premise landscape require complex and intensive maintenance procedures, spanning multiple versions and hardware combinations.” The announcement further mentions that SAP continues to adapt to new regulations and laws, supports over 850 local ERP versions, and incorporated over 1,200 legal changes into ERP systems in 2022 alone.

While it is possible that SAP may also adjust the cost of cloud-based offerings, this announcement applies specifically to on-premise solutions. It also means that, depending on region and CPI rate, some customers will experience as much as an 8.5% increase in support fees in a two-year period. For organizations with extensive SAP environments who pay hundreds of thousands or millions of dollars in support fees, this is a considerable increase and further increases the pressure for on-premise customers to move to cloud environments.

When examined independently, this announcement might seem overdue. However, in conjunction with SAP’s recent statements around new innovations being exclusively available in the cloud and pushback from customers requesting equality between cloud and on-premise offerings, it could be interpreted as more pressure on-premise customers to move to the cloud.