SAP is rethinking its financial model for software partnerships -- the alliances and relationships that allow independent software vendors (ISVs) to integrate and cross-sell each others' products, a report said. Part of the strategy appears designed to help SAP's Online Marketplace compete more effectively vs. Salesforce AppExchange, ChannelE2E believes.
In some cases, SAP is preparing to reduce its software partnership fees. In other cases, the Germany-based software giant is preparing to raise the partnership fees, a report indicated. Among the details that surfaced in a Bloomberg interview with SAP Senior VP Tom Roberts:
- SAP is eliminating the fee for a vast majority of partners to gain access to its online marketplace. Many will also pay a lower fee to connect into SAP’s systems, down to 15% of product revenue from 20%. The changes are expected to be announced imminently, Bloomberg reported.
- Moreover, SAP is hoping to deepen its partnership with a smaller group of invitation-only companies. There would be no set royalty fee for these software vendors. Instead, SAP is seeking to negotiate individual contracts with each. While the fees will ultimately be higher than what some partners were paying before, SAP argued that the agreements will come with added benefits, like additional sales support, Bloomberg reported.
SAP Online Marketplace vs. Salesforce AppExchange
The headline on the Bloomberg report emphasized SAP's effort to raise fees on its largest software partners. While accurate, the headline overlooks potential good news for smaller and emerging software companies that want to work more closely with SAP -- especially in terms of online sales.
Indeed, low-cost or no-cost access to SAP's online marketplace could allow small software partners to more rapidly scale their businesses -- while freeing up funds to invest more channel partner programs, ChannelE2E believes.
The SAP online marketplace model may also allow SAP to compete more aggressively against the Salesforce.com AppExchange, ChannelE2E believes. Indeed, the Salesforce AppExchange takes a 15% share of ISV sales, and a 25% share of OEM sales, according to MagicFuse. Also, software companies pay Salesforce $2,700 in year-one and $300 annually thereafter for Salesforce to check the security of applications listed in the marketplace, MagicFuse notes.
It's also important to note: It sounds like the updated SAP software partner fee strategy truly focuses on software companies. The Bloomberg report did not mention any new or changing fees for SAP's IT consulting and MSP partners -- though consulting firms and MSPs that develop their own applications may want to check in with SAP about the fee strategy.
SAP Business Transition to Cloud Services
SAP, like rival Oracle, has been transitioning from traditional client-server software licenses to cloud-based subscription services. SAP's quarterly revenue was €$7.981 billion (US$8.71 billion) in Q4 of 2021, up 6 percent from Q4 in 2020, the company announced in January 2022.