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.”

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3 Comments for Why Doesn’t SAP Publish Its Price List?

Mark A Montgomery

Of course the tailored systems does complicate pricing, which would prevent such a company from guaranteeing or implying a price, this does not prevent any such company from providing averages or ranges of prices, particularly for commonly found installs and situations.

It’s much easier to trust companies that go out of their way to be transparent, particularly with the news filled with industry litigation — trust is a phenom that is often invisible, even in a social networking world, and therefore very difficult to quantify, but experience suggests that it’s more valuable than most execs assume. I am confident SAP culture is wrong on this one. They lead in multiple market segments now that overlap that requires a more enlightened and open culture.

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martin english

Even publishing a range of prices is dangerous for the old-school Enterprise Software Marketing / Business model, because it makes the CEO ask the CIO “Why did we pay near the high end ?”
The Enterprise Software Vendor, Subsidiaries and Partners want the negotiation position the current situation leaves them in, and indeed, I’d suggest their sales and business model demands it, with discounts only available for those deals who have sufficient clout to worry either the Sales (i.e. deal size) or Cashflow (i.e. annual maintenance fees) targets of the Vendor ecosystem.

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Mark Montgomery

No disagreement here Martin– price modeling is tethered tightly to business modeling. It does usually require tweaking the business model to tweak pricing, which usually requires tweaking the culture and thinking. It does occasionally occur voluntarily in advance of a disruption forecast, but more frequently seems to occur in reaction to actual disruption. It’s obvious that SAP has been struggling with related issues for some time, which to the credit of some of the execs has been fairly transparent, and of course much discussed by others. As is usually the case, the cash flow from the old business model makes a voluntary change quite difficult and painful, but I think still wise. What tends to occur these days is circling the wagon in groups, the members of which employs a similar culture and model, but that may well be the riskier path in today’s world, particularly with the cloud– the publishing industry comes to mind. What’s always surprising to me is just how well such strategies work in the near term– I was almost a decade off in my forecast for e-books, for example, but then when it turned it turned quickly. The old enterprise software model has been surprisingly durable to a lot of very smart folks I have talked to about it, including customers, partners, and former execs. Just how durable is of course the $300 billion question.

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