SAP Delivers on Promise to Simplify Software Pricing and Licensing

After years of customer complaints and a lot of internal effort, the multinational software corporation SAP says it’s finally followed through on its promise to simplify its software pricing and licensing procedures.

SAP, based in Europe, supplies business-related software to companies around the world. SAP software includes solutions to manage both customer relations and business operations.

Former co-CEO Jim Hagemann Snabe responded to years of complaints about the company’s complex pricing scheme in October 2012, telling IDG News Service that the company was working on solutions.

After two years of surveying customers and consulting SAP legal personnel, account executives and other staff, the company was able to make a series of carefully calculated changes to licensing and pricing structures, the final phase of which was completed in July.

One of the major changes is a solution Snabe referenced in 2012: the company is now offering 30 new software bundles targeted at specific types of customers and businesses. This isn’t the fist time SAP has tried bundling, but their previous attempts were simply too expansive. 360 Customer, for example, bundled several programs with a focus on customer relationship management, but it was more than most buyers wanted.

“What we found out when we rolled it out is that we were trying to sell a bunch of stuff to people who only wanted a piece of it,” Joe LaRosa, vice president of global pricing and commercialization at SAP, told PCworld.com. “It wasn’t targeted to any particular buying center, it was too big.” LaRosa cited SAP’s corporate treasurer software bundle as a hallmark of the company’s new approach.

“We’ve come a long way,” added LaRosa. “It took a lot of time on our part to do this and we wanted to make sure we don’t end up here again…we don’t want this to become complex again.”

The company also cleaned up its list of software based on what people weren’t using, simplified user licenses, and streamlined the buying process.

However, the company may soon be facing another shake-up. According to Chief Financial Officer Luka Mucic, SAP’s web-based computing software is set to outsell traditional software licenses by 2020. “By the end of the decade, latest, we will drive more revenue from new cloud business than software licenses,” he told Bloomberg.com.

He clarified that the long-term contracts required for software installed on customer computers will still account for more total revenue, but that license sales “will shift very quickly in favor of the cloud business model,” which would allow customers to make use of offsite servers and software without a traditional purchase.

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