Many cloud services are pay-as-you-go models, which makes sense. For example, if AWS suddenly decided to raise its unmatched storage prices, customers could switch to Google or Microsoft. It wouldn’t be easy, and it wouldn’t be cheap, but it would be possible.
If customers use NetApp’s cloud technology, they can easily switch between Amazon, Microsoft and Google at the press of a button. A pay-as-you-go model based on usage makes sense in this case – it’s almost mandatory.
Pay-as-you-go: financial blessing for SAP
However, if SAP customers develop their Leonardo apps on SAP Cloud Platform, they have no choice but to stay in SAP’s own cloud. There is only one way out of it: until death do us part! Here, a usage-based model would be a customer’s worst nightmare – and a financial blessing for SAP CEO Bill McDermott.
Once customers start using IoT, machine learning, blockchain and many more Leonardo functionalities on SAP Cloud Platform, they are at the whim of SAP’s licensing metric.
For some, this might be reminiscent of another licensing debacle. The ever-changing licensing rules and metrics of SAP NetWeaver made a once almost free platform one of SAP’s most profitable products.
Looking at SAP’s pricing list, it becomes clear that SAP Cloud Platform’s usage-based business model will follow the same path.
At the whim of SAP licensing metrics
Pay-as-you-go means to be at the whim of SAP’s licensing metrics. It might be free today – but it could cost you a million dollars the next day. New engine prices, ever-changing usage models, new functionalities, extended interdependencies of apps and modules – SAP can raise prices however it pleases. What are customers going to do against it? They’re bound to SAP Cloud Platform by ERP modifications and add-ons.
Unlike on-prem, cloud forces users to follow the orders of service providers. Only generally standardized tasks and generic data can be migrated to another cloud platform.
Abap modifications, add-ons and customizations can’t be migrated to another ERP system – just as apps on SAP Cloud Platform can’t be transferred without SAP’s approval and support.
Even though SAP is also working on a multi-cloud concept with Amazon, Microsoft and Google, customers will still depend on it regarding functionalities and licenses. Customers can operate the Leonardo app on MS Azure cloud all they want, SAP will still cash in the licensing fees.
It’s always the same old story. SAP starts by luring customers in by making new platforms like NetWeaver, SolMan or Hana Cloud seem cost-efficient and benign. Then, it slowly starts adapting its licensing metrics – ultimately tripling SAP’s stock price.
CEO Bill McDermott is a genius salesman. He really knows how to squeeze the last of their money out of SAP’s customers.