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Cloud prompting demands for better SAP licensing, price flexibility

SAP has to stop 'distancing itself' from customers' problems and offer more flexible terms and SAP licensing if it wants to compete, says one expert.

While SAP is making headway in offering customers more flexibility in software licensing, it must do more if it wants to compete in an increasingly cloud-driven IT marketplace, according to one analyst.

One solution is making sales of products contingent upon successful outcomes, says Duncan Jones, an analyst with Forrester Research, Inc., based in Cambridge, Mass.

"[Software as a Service vendors] tend to be much more focused on the customer's success. They know if that doesn't happen, then they're not going to get the renewal a year or two or three years later," Jones said. "Perpetual license companies like SAP have in the past been happy to sell licenses and then walk away."

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The need for a significant cultural shift is underscored by recent troubles that cosmetics company Avon, Inc. had with a massive SAP on-premises software implementation, which cost Avon somewhere in the neighborhood of $100 million. SAP's response was that the software was working as planned, and that's a mistake, Jones said.

"They were distancing themselves from the problem. A SaaS company would never ever do that, because they wouldn't get the renewal," Jones said.

Despite such setbacks, SAP is slowly beginning to focus more on customers' needs, in party by offering new programs that allow for a greater degree of flexibility in licensing, which Jones said is "more than just window dressing."

In this podcast, Jones talks about what else SAP must do to compete in today's SaaS-centric market, how customers can get more out of their software contracts and why SAP will never allow customers to "park" their unused licenses.

Next Steps

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