SAP wants to increase the prices of cloud services by 3.3 percent per year. User association DSAG is concerned.

According to German newspaper Handelsblatt, SAP adjusted its customer contracts a few weeks back. Cloud service prices are expected to increase by 3.3 percent per year. That’s a considerable amount. Customers with five-year contracts face 18 percent increase. A licence of €50,000 per year rises to €59,000 per year after five years.

The increase is necessary according to SAP. The software giant states that operating costs increase due to inflation. Customers pay for some of the costs. “Unlike the competition, SAP has not implemented general price increases in the past two years”, CEO Christian Klein told Handelsblatt.

The CEO stressed that SAP is taking several measures to cope with inflation. “We cannot pass on inflationary pressures to customers on a one-to-one basis”, he added, noting that price increases are common in the cloud market. “It’s quite normal to offer more functionality with each release and adjust prices over time. Our competitors do exactly the same.”

The exact increase, date of effect and affected products are unknown. “Right now, we’re thinking about how exactly we will implement this”, Klein shared.

Concerned

The costs of SAP licenses vary by product, customer and environment. Price changes occur regularly. Around the turn of the year, SAP adjusted the prices of S4/HANA Cloud ‘Private Edition’ licenses. Customers with few users faced significant increases.

The upcoming price increase applies to every customer group. DSAG, a user association for German SAP customers, is concerned. “Cost stability has been one of the biggest reservations about the cloud in recent years”, DSAG board member Thomas Henzler told Handelsblatt. DSAG surveyed 3,800 SAP customers on their experience with SAP’s price changes. 45 percent described the changes as hardly transparent or non-transparent.

Alternative

SAP is currently discussing the price increase with DSAG. The user association urges SAP to revise its plan. DSAG wants SAP to base increases on the labour cost index. The labour cost index indicates the increase in labour costs over a given period. DSAG suggests that SAP only change its prices when the labour cost index falls below a certain value. As a result, any price increase is proportional to inflation.

SAP isn’t bound by the DSAG’s advice. The software giant can still opt for annual increases of 3.3 percent. The plan is currently being discussed.

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