One of SAP’s best-kept secrets has been its product-pricing list. The German enterprise software behemoth has always been tight-lipped about publicly announcing pricing; instead, SAP execs save that key piece of information for the sales account executives who wheel and deal with customers.
SAP’s reticence stands in stark contrast to its archrival in business apps, Oracle, and its transparency with its pricing list—available to every Tom, Dick, and Larry.
As to why Oracle does this, spokesperson Deborah Hellinger declines to comment. But on its Global Pricing and Licensing webpage, Oracle says its “goal is to help you optimize your software investment by enhancing your understanding of Oracle’s licensing and pricing practices.”
SAP spokesperson Evan Welsh confirms that SAP hasn’t ever disclosed product pricing as a list. “The rationale: We have so many different solutions available, and they oftentimes are tailored scenarios for specific customer needs. It hasn’t really made sense to publish a software price list,” Welsh says. “We want to ensure each customer or prospective customer gets product pricing that is tailored to their specific use case.”
SAP Software Prices: Taken Out of Context?
SAP’s stated corporate line is understandable and unsurprising. But there’s more to it, contends Amy Konary, a research VP at IDC who specializes in software pricing, licensing and provisioning.
“What holds them back is their tendency toward precision,” Konary says. By that, she means that most enterprise software deals are complex endeavors with various combinations of products and price points that can influence negotiations and the ultimate “sticker price.” SAP’s top concern, then, is “putting out pricing information that may ultimately prove incorrect when it comes to each individual deal,” Konary says.
There also would be no “context” inherent in a public SAP pricing list. So, for instance, when a prospective customer compares a seemingly similar SAP product to another from Oracle, SAP’s product might look more expensive, Konary says, when in fact there may be critical functionality, upgrade or licensing differences that will impact the price. “The fear for SAP,” she adds, “is that [cost] be taken out of context.”
Of course, the reality of software negotiations is that rarely does anyone ever pay full license prices. Especially in massive enterprise software deals. “I’d be very surprised if anyone paid that [Oracle list] price in a deal today,” she says.
Which is not to say a pricing list isn’t valuable to software buyers. “Putting a price list out there, as Oracle does, does build a bit of goodwill,” Konary says. “At least you give people a starting point.” According to Konary, most enterprise software vendors do not publish their prices: “It is rare.”
The SaaS Effect on Software Licensing
Whether it’s SAP, Oracle or any other enterprise software vendor, most of their customers today are resentful of their vendors’ licensing practices. A recent Forrester Research survey of 151 sourcing and vendor-management professionals found “damning indictment” of vendors’ software-licensing policies. Writes Forrester analyst Duncan Jones in the report:
Many traditional software companies, both large and small, boost their profits by rules and policies that annoy their customers, who are usually otherwise happy with the provider’s products and services. The publishers could change their approach and still achieve perfectly respectable profit levels, and this would free up customers’ IT budgets for new projects and greater innovation. Yet the vendors’ quarterly growth requirements, coupled with their market power, cause them to continue with outdated policies that annoy customers unnecessarily.
SAP does publish its licensing terms, as well as a product list. SAP’s Welsh points out that pricing for SAP’s “uniform deployment solutions” is public. For instance, its on-demand ERP suite, Business ByDesign, will cost customers $149 per user, per month, with access to the full suite, including no additional fees for the service (there is a 10-user minimum).
One would think that the (mostly) straightforward SaaS pricing plans that SMBs get from SaaS vendors would have some effect on the mysteries of on-premise pricing. (That is not the case, however, with enterprise SaaS deals, Konary says, where, again, everything is negotiable due to the size of the deal.)
“My feeling is that all software pricing should start to get more transparent over time, when you consider the SaaS and App Store effects,” Konary says. “I ask software publishers about this mystique around software pricing and [say] that it needs to go away. But it’s not a veil that’s going to come down quickly.”