In a move that has garnered significant attention in the software industry, SAP, a prominent enterprise software company, is charting a course toward cloud dominance. This strategic shift has multiple facets, including a second consecutive year of price increases for users of its on-premises software and the exclusivity of the latest innovations for cloud customers. The repercussions of these decisions have left SAP’s on-premises user base feeling the pinch and pondering the future of their enterprise solutions.

Second consecutive year of price increases

For SAP users relying on on-premises software, the announcement of a second consecutive year of price increases has undoubtedly raised eyebrows. After a decade-long price freeze, SAP took the bold step of raising support prices on January 1, 2023, with the increments tied to local consumer price indexes (CPI), capped at 3.3%. While the initial shock of the price hike reverberated through the user community, perhaps the most startling revelation is the projection that, beginning in 2024, this cap will surge to 5%.

The timing of SAP’s decision is noteworthy, especially as inflation rates fluctuate globally. Some countries are witnessing a gradual decrease in inflation, leading to questions about SAP’s rationale for escalating the cap. These price increases come at a time when businesses across various industries are grappling with economic uncertainties and cost containment.

Focus on cloud innovations

SAP CEO Christian Klein articulated a clear direction when he stated that the company’s new innovations would be reserved exclusively for cloud-based offerings. These innovations encompass a wide spectrum of critical functionalities, ranging from cutting-edge Enterprise Resource Planning (ERP) capabilities to solutions addressing sustainability, carbon accounting, and breakthroughs in artificial intelligence.

One of the focal points of SAP’s cloud-centric approach is the “RISE with SAP” program, which serves as the conduit for businesses to access these groundbreaking innovations. The message is clear: the future of SAP’s technological advancements lies in the cloud, compelling users to consider migration as a strategic imperative.

Cost increase details

The decision to raise support costs for on-premises software users was a bold one, especially after a decade of cost stability. The new pricing structure, tied to local CPI, is designed to reflect the prevailing economic climate. However, it is the cap on these price increases that has led to serious scrutiny.

Starting in 2024, SAP plans to raise the cap to 5%, a move that has sparked concerns within the user community. While acknowledging the reality of inflationary pressures, customers are left wondering whether this decision strikes a fair balance between SAP’s profitability and the financial stability of the businesses that rely on its software.

Future expectations

As SAP steers its ship toward the cloud, the specter of annual support price increases looms large on the horizon. The company has signaled that this trajectory may continue, further nudging customers toward cloud adoption.

The implications of this move extend beyond SAP’s user base. It suggests a broader trend in the software industry, where companies are placing increasing emphasis on cloud-based solutions. The promise of greater flexibility, scalability, and access to cutting-edge technology has made the cloud an attractive proposition for businesses looking to future-proof their operations.

Tim Boesen

January 4, 2024

3 Min read