October 12th, 2009

The case of the missing iPhone 3GS's

Posted by Dennis Howlett @ 5:16 am

Categories: pricing

Tags: Apple iPhone, Telefonica S.A., Spain, Smart Phones, 3G, Consumer Electronics, Personal Technology, Cellular Phones, Dennis Howlett

When I finally filled my iPod Touch 16GB and realized that I really do like a lot of the iPhone apps, it was time to bid my Nokia N96 (which has been a problem child) goodbye and go straight for the top: an iPhone 32GB.

I’d not heard any recent reports of shortages although WSJ blogs had reported shortages back in July. There were reports of shortages in Australia in August. The same was true in Canada - again in August. But nothing after that. Unless of course you live - as I do - in Spain.

As far as I can tell, there are barely any available from Telefonica in Spain or any of its third party outlets. I asked my colleague Tom Raftery, analyst at Greenmonk if he’d managed to get one. He lamented he’s been on three waiting lists since July. He did a tour of the local stockists in Sevilla last weekend: nothing, zippo, nada. I could have sworn I’d seen one in Carrefour Malaga the other week but Tom warned it was probably only a demo model. I then asked Luis Suarez an IBM’er who lives on Gran Canaria whether he’s been able to track anything down. His response in a direct message via Twitter:

No, there isn’t [any iPhone 3Gs]. Not until Movistar decides to block the sales after they have sold all 3G models. Really pathetic. Read http://is.gd/4fiYU

That link is to a El Mundo article dated 16th September entitled: ‘El nuevo iPhone 3GS no acaba de llegar a España’ which literally means: ‘The new iPhone 3GS has not finished arriving in Spain.’ Looks like it’s barely started! 185 comments running right up to the other day repeat the same tale: none to be found in anything like a reasonable time scale. Luis booked with six different shops and has not heard a word back from any of them.

It seems that Movistar, the arm of Telefonica that runs its mobile division is stuck with large stocks of the older 3G and will not release the new models until stocks are depleted. Or at least that is what places like PlanetaiPhone believe according to the El Mundo report.

This doesn’t surprise. As Luis said in a subsequent Tweeted message:

That simple action being … not having a clue whatsoever on what customer service is all about!

But is this correct? Reading Apple’s Spanish site, it claims that the iPhone is available in ‘hundreds’ of Telefonica stores. Maybe the old model is but certainly not the new which is the one the Apple site is most heavily promoting.

Telefonica’s service quality in Spain is legendary for the heights it scales in the ‘appalling’ stakes. Only the other week, I inquired to see if I could get my broadband upload speed lifted to 1 mbps (please don’t laugh, we only get 256 kbps on a good day) only to be told it was impossible but maybe technical services could help me. I know it can be done and I’m prepared to pay the premium but to be brushed off in this manner is annoying. Having had several run-ins with Telefonica’s tech services, I can safely say it seems to operate on the principle that whatever the problem is - it ain’t theirs. If you want to know what I really think about Telefonica, then check out this 30 second video I recorded in 2006.

But here’s the kicker. If I want to buy an iPhone from O2 in the UK, it is available on demand. What’s the connection? O2 is owned by Telefonica. Oh yes - and they’ll sell me a plan that gives me a discount on calls back to the UK from Spain. But no similar data concessions.

Of course I could buy a jailbroken iPhone in Spain from places like TecnoMobile if I am prepared to pay the eye watering price of €799 ($1,180.) Given the state of the British peso pound and US Dollar, that makes such thought a far off dream.

Looks like I’ll have to grin and bear the shortage like everyone else.

June 19th, 2009

Rip off roaming: the MAXRoam response

Posted by Dennis Howlett @ 6:49 am

Categories: pricing

Tags: Sustainability, Vodafone Group Plc., Telephony, Mobile, Mobile 2.0 Europe, Advertising & Promotion, Marketing, Dennis Howlett

Mobile 2.0 Europe has a strong sustainability element but the meme kinda falls apart when it comes to mobile roaming telephony costs. As anyone who travels outside their own country knows, roaming charges are at eye watering levels. Yet according to Tommy Ahlers, founder of Zyb and now head of location based services at Vodafone: “Location doesn’t matter.” That prompted the obvious question: “If location doesn’t matter and Vodafone has a global brand then when will I get a global plan that doesn’t require me to consider re-mortgaging my house?” Ahlers wasn’t going there: “Talk to Pat Phelan,” and later “I can’t get into a discussion about roaming charges.” That prompted the making of the above video - with Pat Phelan, CEO of Cubic Telecom which owns MAXRoam, a low cost call and data services company based in Cork, Ireland.

According to Phelan, mobile roaming is so lucrative that the large carriers can’t give up their high margins: in the range 32-37%, without incurring the wrath of the financial markets. Sound familiar? We’ve seen this before in the business model that incumbent enterprise applications vendors operate. Wall Street first with customers losing out. Just as I believe the maintenance dominated apps market model is unsustainable, the same should be true for the mobile carriers. But as Phelan says, we need stronger competition.

March 25th, 2009

Where to for revenue recognition?

Posted by Dennis Howlett @ 8:01 am

Categories: pricing, saas

Tags: Revenue, Taleo Corp., Phil, Revenue Recognition, Operational Accounting, Financial Services, Finance, Dennis Howlett

Fellow Irregulars Phil Wainewright and Jason Corsello are batting around the implementation services revenue recognition issue following Taleo’s restatement of earnings. Phil uses it as a reason to take a sideways swipe at the on-premise vendors:

I wonder what the impact on SAP, Oracle and Accenture’s financials would be if they couldn’t recognize all their implementation and license fees until the application had been up-and-running for a three-year stretch? Ouch!

while Jason believes this might allow Taleo to benefit:

I would expect new implementation partners to come calling to Taleo.  This could be great news that allows them to build deeper channel relationships with multiple tiers of services partners.  Not that Taleo is doing a horrible job today (in fact they probably do implementation better than most) but services could potentially become a differentiating factors if they could balance the demand on rapid implementation with long-term client success complimented by more specialized services.

At one time, the software industry had a certain notoriety from playing revenue recognition shell games. One only has to think back to the days when CA regularly announced rule changes much in the style of Rollerball. We now know where that ended with former CEO Sanjay Kumar drawing a 12 year stretch at Club Fed in 2006. Much earlier, the then PeopleSoft got itself into an SEC tangle over R&D expense shifting of some $500 million through a special purpose vehicle. If the Taleo story is another example of the industry cleaning up its act then all to the good. I have reservations.

While Phil is right to point out that this apparent rule change further complicates the saas revenue model, the decision to rateably recognize implementation revenue over the life of the initial contract is wrong headed. In my view, Taleo should have stuck to their guns. It is illogical because it fails the fundamental cost and revenue matching principle inherent in generally accepted accounting principles.

Using Phil’s logic for instance, you could argue that services provided by on premise vendors are to be recognized over infinity because application licenses are usually couched in terms of a perpetual right to use. No-one is going to agree to that any more than they’d agree to the cost of filling your car with gas as something to be amortized over the time it takes between refills. That’s how silly the logic can go.

The wider point about disparate treatment is worthy of discussion. When vendors treat revenue in different ways then it makes like for like comparisons difficult. This matters to the financial analyst community but should also matter to buyers who should be evaluating on vendor viability. Complexity breeds suspicion and I can imagine that customers might be baffled by these artificial machinations. More to the point, if revenue is to be recognized rateably across the board then I would expect deal makers to extend the logic to include terms of settlement. In doing so, it would expose the logical fallacy to which Taleo has been forced to submit.

Can you imagine a vendor willing to accept settlement for implementation services on the same terms as its online service contract period? It’s not going to happen because the disruption to cash flow would be too great. And what happens when a company decides to switch via a get out clause? Using the same logic, the vendor would be entitled to view the contract as terminated and accelerate deferred revenue.

Even so, both Phil and Jason’s arguments intensify the light on saas differentiation. Saas vendors only get paid for what they deliver. In those terms, failure is less likely. That’s all to the good.

PS - unlike Phil, I used to be a practising accountant. What do I know?

December 10th, 2008

SAP: "We made a mistake"

Posted by Dennis Howlett @ 8:17 am

Categories: ERP, Enterprise applications, pricing

Tags: SAP AG, Bill Wohl, Strategy, Management, Dennis Howlett

Bill Wohl, Vice President, Field Communications SAP, spoke with me today to clarify the price issues I raised yesterday. According to Wohl, there were specific legal issues in Germany and Austria. These required the company to tear up the existing contract and issue afresh so that it could impose the price increase. Wohl said this created an emotional response from the German and Austrian customers: “They saw it as a breach of trust and that’s something we had to fix.”

SAP now says it is giving those customers choice whether it takes up the new enterprise support offering or sticks with existing - at least for the next year or so. However, Wohl warns that most existing contracts allow for a cost increase that may see some support costs rising to 21% rather than the 19.3% if they take enterprise support. “It’s clear we made a mistake in the way in which we communicated the manner in which we needed to legally take this step and we’re now trying to fix it. We are giving them choice but they need to evaluate the best option for themselves.”

However, Wohl is clear this is an exception that will not apply to other territories. Even so, it will create a complex environment for multi-national companies that have different contracts signed in different countries. These will be faced with multi-step cost increases. It also means a multi-national that has signed its contract in Germany will be able to take global advantage of the new arrangements.

As I said to Wohl, SAP is running the risk of building up resentment for the future. That opens the door for consideration of alternate offerings. Wohl says the company is not noticing any change in the commitment existing customers are making to SAP solutions. He also pointed out that different markets display different conditions and cultures. That may be true but resentment is a common issue and potentially dangerous to future business. Wohl conceded that some spending may be deferred, although he attributed that more to economic conditions than any competitive issues.

Wohl was keen to stress that SAP is not seeing the levels of unrest I am seeing among the customer base. That doesn’t surprise me. Customers often do not feel they have the power to tough it out with their software suppliers, relying instead on their user groups to do the fighting for them. It is however telling that SAP recently agreed with SUGEN that they will jointly develop KPIs against which enterprise support and the price rise will be evaluated.

December 3rd, 2008

Sage results show impact on SMB market

Posted by Dennis Howlett @ 4:42 am

Categories: Enterprise applications, pricing

Tags: Revenue, Growth, Health Care, U.K., Small And Medium Business, Sage, Operational Accounting, Vertical Industries, Benefits, Finance

Earlier today, Sage, the UK’s largest software vendor announced its full year results to 30th September and provided an update on how it sees the market going forward. Both the UK and US markets are the most affected by the economic downturn. In his review, CEO Paul Walker said that the remainder of the European Union and other territories were remarkably strong. These markets are dwarfed by the top line contribution it gets from UK/North America which together account for 57% of total revenue. The impact is best understood when you note that top line growth in the US was 1%, the UK 10% but overall growth was pegged to 7% at £1.295 billion ($1.93 billion.)

The second half was softer with 1% growth in the UK and a fall of 2% (excluding Healthcare)in the US. This is the firmest indication yet of where the impact is being most felt. (see graphic above)

Sage derives 61% of its revenue from support and service. So far, the company says there has been no discernible softening in subscription renewal rates but its big months are yet to come. December and January is the key period and as I said elsewhere:

I expect Sage will announce what happened in that period as this is such a huge contributor to bottom line profitability and cash flow

We could therefore know as early as February 2009 how well its support fees are standing up.

Its real troubles lay in the US Healthcare Division where revenues retreated 11%, aging products like Peachtree which was flat on growth and industry specific solutions where it managed a miserly 3% growth for the whole year. The other warning sign was an overall fall in margin from 20% to 18%.

While none of this should be surprising, Sage is vulnerable in part because it is carrying £541 million ($808 million) in net debt. If there is any appreciable softening in service revenue then its bottom line plummets. While it has plenty of interest cover today (10x on EBITDA, covenant 4x), the margin impact of any fall in maintenance revenue could become a genuine concern. CEO Paul Walker says there is a ‘mixed picture’ but seems to be hanging his hat on one off events like tax changes to keep the maintenance business ticking along.

Much of the formal presentation was devoted to explaining how the healthcare management team has been strengthened over the last year but even so, there is no masking the fact that Sage has not been able to make money on this $565 million investment. Last year I said:

When Sage acquired Emdeon, I felt they’d paid a hefty premium and earlier in the year it became obvious this division really was not performing at all well. In July, Andy Corbin who ran the unit was fired and at the time I said:

It would now seem that Mr Corbin wasn’t up to snuff as far as Sage is concerned and has paid the price. It will be interesting to see what happens over the next few months.

Interesting indeed.

Sage cannot continue to let this lame duck remain a drag but it has little choice. It talks about operational efficiency but what about product investment? This should be a market that is relatively recession proof yet Sage is losing out.

While Sage does not have to report again until May 2009, it will want to do what it can to protect its share price. That’s why I believe we’ll see fresh updates earlier rather than later. That cannot be a bad thing because everyone is watching everyone else to see just how rough 2009 will be.

November 17th, 2008

Merrill Lynch downgrades SAP and Oracle

Posted by Dennis Howlett @ 3:01 am

Categories: CRM, ERP, Enterprise applications, pricing

Tags: Oracle Corp., Merrill Lynch & Co. Inc., SAP AG, Sales Strategy, Operational Accounting, Marketing Research, Sales, Finance, Marketing, Dennis Howlett

It should come as no surprise that investment research at Merrill Lynch sees downgraded assessments of both SAP and Oracle’s near terms results. In the last month, Merrill has conducted research among European CIO’s and finds that a full 40% are less bullish on IT spending than they were three months ago and that 70% expect a recession. It also says that 44% of companies are delaying spend. In a paragraph entitled ‘Most negative CIO survey ever’ lead author Raimo Lenschow says:

A first look at the data from our CIO survey conducted at the end of October and the beginning of November shows that we are getting readings that we have not seen before. These are significantly more cautious than in the last downturn when it was perceived that IT was really suffering.

For SAP, Merrill is cutting revenue projections 4% for both 2009 and 2010, chopping $180 million from its Q4 license estimate to $1.2 billion. It fears that the current spend reduction of $200 million SAP has already announced will be outstripped by the potential fall in license sale run rate. If Merrill is correct, then this will damage bottom line profit.

For Oracle, lead author Kash Rangan believes application license sales will take a full 27% hit in FY2009 with an overall license sales decline of 13-14% in 2009 and 2010. However, in drawing comparisons with the last major downturn Rangan says:

Recurring and high margin maintenance revenues, most investors already appreciate, are nearly 50%, up from 32% in FY01. No question that ORCL is in a better position this time.

In both cases, Merrill accepts it is being cautious and notes that despite market conditions, both companies are in relatively good shape.

I’m not convinced about this last part. While maintenance revenues are always seen by financial analysts as a good defense in recessionary times, they forget that recession also gives buyers a stronger bargaining position.

I’ll add to that by making what some will say is an outrageous statement. That fact SAP and Oracle have worked hard to lock in their customers does not mean that lock is permanent. If, at current rates, customers effectively pay for their software three times over a 10 year period, do both Oracle and SAP honestly believe they can get away with that forever? Forrester’s Ray Wang offers this view:

Software vendors under pressure to make margins will be forced to choose whether they are willing to take short term pain in stock valuations for long term gain in improving the vendor-client commitment or make their numbers by disenfranchising customers during a time of crisis by violating any one of the three tenants of maintenance pricing (choice, value, predictability.)

In this context I believe SAP is in the weaker position. Last week for example I listened to a very well known retail brand talking about the lack of value in moving from R/34.6 to 4.7. That company is considering re-implementing to the later EC6 offering. Any time there is a re-implementation, the door opens for alternatives and re-negotiation. Oracle on the other hand has plenty of options to trade up its customers from the smorgasbord of applications it has acquired over the last few years. While my colleague Vinnie Mirchandani bemoans the lack of progress on Oracle’s Fusion applications, I am hearing favorable reports. In competitive deals, I see it as content to nibble around SAP rather than attempt to go for the big hit. But then another SAP customer told me they are loving the BusinessObjects offerings. Confused? Imagine what it’s like for folk like me, trying to make sense of it all!

From a financial viewpoint, Oracle doesn’t have the cost base manoeuvrability that SAP has. By any measure, SAP is carrying a lot more fat. It can therefore put the brake on spend cuts if it needs to deploy resources to close deals. Oracle would almost certainly have to spend more to win those big deals at a time when it has managed its cost base rather better than SAP. That would put pressure on margins.

As we move into the next reporting season, we will get better visibility into what’s happening. My view is that this is not business as usual. I believe that whatever the new economics hold, buyers will be forced into demanding a better deal from their software providers. It only requires a determination by a relatively small number of key accounts to get the ball rolling. If that happens, then the economics of both companies could be radically affected.

October 14th, 2008

SAP's forced march may be good news

Posted by Dennis Howlett @ 6:49 am

Categories: ERP, implementation, pricing

Tags: SAP AG, Leo Apotheker, Roi/Tco, Finance, Managerial Accounting, Dennis Howlett

At SAP TechEd Berlin, Leo Apotheker, co-CEO reinforced the message that the enhancement packages will significantly reduce the amount of testing that customers need undertake as part of an upgrade. However, consultants disagreed.

Jim Spath of Black and Decker for instance said: “There is no way we would apply any new code without full regression testing. Our compliance procedures would not allow it. The risk that it breaks something is too great.” Christian Guenther, senior consultant at RealTech added: “While some organizations can get away without significant testing, you really don’t know what will happen until the package is implemented. In one case I have worked on, the client ended up with a confusing interface they had not expected. That meant we wasted three months implementation time.”

However, it may not be all downside risk. Oliver Kohl, solution architect at MIBS said that “Once enhancement packages have been implemented, they cannot be uninstalled but remember they do bring enhancements that you probably don’t want to configure unless you have a highly customized environment.” This could be good news for customers that are embarking on an SAP project or which are relatively new to SAP and have not coded many customizations. How much relief this provides in the wake of the planned maintenance price is another matter.

Apotheker emphasized the value that customers will get from the maintenance price rise. He said the value that can be got from the solution manager alone more than justifies cost increases because customers will achieve a better rate of TCO.

The current level of uncertainty and economic pain being experienced by companies across all industries makes introduction of any price rise problematic. As Apotheker noted, no-one wants to see a price rise. Instead, he continues to hold the line on value delivery as the justification for the price increase. There was no talk of price reduction or cost increase deferral, despite continued rumbling among customers.

August 25th, 2008

SAP: show the love your customers crave

Posted by Dennis Howlett @ 6:32 am

Categories: pricing

Tags: SAP AG, Free Trade, Corporate Communications, Finance, Marketing, Dennis Howlett

Jim Spath of Black and Decker, an SAP Mentor in the SAP Community and a volunteer on the American SAP User Group (ASUG) posts this video (see above) in advance of TechEd 2008. He asks: “If companies make positive contributions, answer other people’s questions on SDN, would they be enabled to receive some sort of support discount or credits for their work for their sharing of knowledge in the SAP community such that instread of paying full freight we would get some kind of break?”

SAP has committed to donating up to €200,000 to the UN World Food Program based on the value attributed to community contributions this year. I don’t wish to diminish in any way the value this kind of contribution makes. But it must pale into insignificance when compared to the amount SAP saves as a result of the work the community puts into solving problems.

Quite what that number is we may never know but it is safe to assume it runs millions of dollars. Whether that figure runs $5-10-20 million a year matters little because SAP operating income in the first half of 2008 was something around $1.4 billion at today’s exchange rates. Barely a rounding error. Nevertheless, it would be a nice gesture to see at least some of those savings going back to customers. That’s what Jim’s asking. It’s not an unreasonable request.

August 15th, 2008

SAP wrap and transparency points

Posted by Dennis Howlett @ 10:52 am

Categories: ERP, Enterprise applications, pricing

Tags: Small And Medium Enterprise, SAP AG, Smb/Sme, Retail, Channel Management, Marketing, Dennis Howlett

This week’s SAP influencer summit was a roller coaster affair. On the one hand I didn’t detect anything fundamentally new on the BusinessObjects side other than a considerable amount of repackaging with a view to gaining additional sales. There’s nothing wrong with that but it didn’t demonstrate a huge amount of innovation. In fairness to SAP, they’re still digesting BusinessObjects and I know from other sources that they are gaining a much better understanding of user requirements from the products they’ve acquired. That should bode well for the future.

On the other hand, the piece I wrote about pricing stirred some controversy. It’s worth adding additional comment on that issue. While he was not there, Vinnie Mirchandani astutely observed in comments:

I need to convey that within the Irregulars you are considered a model vendor executive. You are smart and transparent - in our web 2.0 world we need execs like you who don’t just sugar coat and spin.

Yep - I was remiss in not reinforcing that point of view though it was one made by Mike Krigsman in his analysis of the SME session:

The SME deep dive raises the bar on communications by enterprise software vendors. Led by Jeff Stiles, SAP executives, partners, and customers accepted challenging questions from the small audience (30 people). To his credit, Jeff allowed the full-day schedule to drift based on audience interest in particular topics. While many of the questions were tough and analytical, the answers were straightforward and reflected confidence in the offerings…

…Note to other enterprise software companies: transparency is a sign of confidence and demonstrates you have nothing to hide. Let’s see you step up and meet the openness challenge.

The SME sessions were interesting because Jeff Stiles, who leads marketing for all SAP’s SME offerings demonstrated incredible skill in responding to a battery of tough questions in every session. He even managed to shut me up by calling foul when I suggested ByDesign sales is a ‘disaster area.’(Score one to SAP for that!)

I recall at SAPPHIRE Berlin, Phil Wainewright said to me that he was deeply impressed with the level of access and transparency among the executives he met. Contrast that with almost all other mainstream enterprise vendors. They struggle to arrange a call, let along develop a credible blogger relations program. They are the losers because as anyone who reads this blog knows, SAP gets an outrageous amount of coverage - both good and bad.

It is worth noting that afterwards, analysts from Gartner, IDC and Forrester said they felt they’d learned a lot and enjoyed the sessions, precisely because of the interplay between SAP, its customers, it VARs and the attendees. I believe that interplay worked for several reasons:

• Jeff allowed it to happen. He said: “I want to have this conversation.”
• The Irregular contingent made the best use of the opportunity
• The VARs and customers were willing to answer any question put to them

I learned afterwards that unlike the usual marketing sessions, the VARs and customers were not scripted or tutored. It did mean the day ended somewhat chaotically but that was hardly SAP’s fault. They were trying to cover a huge amount of turf and constant interruptions cannot have helped.

Above that, I was surprised the extent to which SAP has managed to integrate the way the products are presented to customers. The configuration calculator for instance goes a long way twards helping customers get to the point where they understand what they’re getting themselves into on whichever product is most appropriate for their circumstances. That’s a huge win for customers.

Any organization of SAP’s size will find it difficult to get all its ‘ducks in a row’ at any one time. Add in the collegiate nature of the company’s management and it will sometimes appear conflicted. Even so and despite the many naysayers I see commenting about SAP, it remains THE most interesting of the enterprise vendors.Next stop for me? TechEd.

July 28th, 2008

More dissent on SAP maintenance price hike

Posted by Dennis Howlett @ 10:21 am

Categories: ERP, pricing

Tags: SAP AG, ECC6, Service-Oriented Architecture (SOA), Corporate Governance, Enterprise Resource Planning (ERP), Enterprise Software, Web Services, Middleware, Software, Business Operations

Things are not getting any easier for SAP following the across the board maintenance price hike announced July 16th. Earlier today I spoke with Alan Bowling, chairman of the UK and Ireland SAP User Group on the topic. In an official announcement last Friday, Bowling said: “The mandatory nature of this change along with the increase in cost has received hugely negative feedback from our membership to date. In real terms this is a 29.4% increase in costs over the next four years for existing SAP customers, and is proving to be a particularly difficult area to accept. As I have stated before the Enterprise Support product looks good and for organisations needing the extra level of support that it offers it will no doubt provide value.”

During our conversation, Bowling expanded on his comments which he estimates affects some 900 British and Irish customers: “It’s a good deal for new customers implementing ECC6 (the latest SAP Business Suite iteration). ECC6 is a big hurdle, it is way harder than R/3 and a fair amount of support is required.” I questioned whether there are that many customers moving to ECC6 from R/3 as there is comparatively little available case material. “It is happening and it is worthwhile where there is a need for what I call ‘governed’ SOA (SAP terms this Enterprise SOA.) With ECC6 you have assurance that as you move to SOA, all your GRC stuff is going to be OK. That is valuable. But, I stress that’s not everyone,” said Bowling. “If you’re a seasoned SAP customer, especially if you’ve built up SAP competencies then it is hard to see the value. The message we want to get across is that the current one size fits all approach doesn’t work. We want to see business cases where the value is demonstrated. The difficulty comes in recognizing the differences in demand.” This is similar to the position taken by the German SUG.

I asked whether SAP can arbitrarily impose the price hike: “That’s an interesting debate. Some customers have fixed price maintenance contracts while others have ‘no’ increase’ clauses.” As is usual in these types of contract, every case is slightly different but I anticipate there will be much discussion about SAP’s legal ability to impose the increase.

Meanwhile, the French SUG is taking a similar position, saying they are very skeptical the plan will deliver. They are deminding that SAP puts a formal recruitment process in place so that quality assessed engineers are an integral part of the new Enterprise Support program.

The user message that is emerging can be summarized as follows:

• SAP’s communications have lacked clarity.
• What was once thought to be a new customer only issue will likely impact all SAP customers with the exception of those with a cut off of €30 million in discounted license fees plus BusinessOne customers and those with specially noegotiated terms.
• The one size fits all argument is not accepted as appropriate.
• There will be a significant amount of negotiation around individual contracts.
• Business value has yet to be demonstrated as a justification for the price hike.

Interestingly, Bowling doubted whether third party providers like RiminiStreet could take up the slack: “I’m not sure it has been shown that these providers have the skills to support the newer solutions,” he said.