At a Glance

  • The European Commission on Wednesday opened a formal investigation into SAP, focusing on whether its ERP software maintenance and support services affect market competition.
  • The investigation will assess whether SAP restricts competition from third-party maintenance and support providers and whether it constitutes exploitative behavior.
  • In a statement on Thursday, SAP said it does not expect the investigation to have a material impact on its financial results and will work closely with the Commission to resolve the issues.

In-Depth Analysis

Although SAP plans to cooperate with the European Commission to address competition concerns, analysts point out that this investigation touches on issues that tech executives have long been concerned about, and SAP may find it difficult to walk away unscathed.

"SAP's maintenance and support services for its ERP licensed products have been under the scrutiny of tech executives because the German vendor is aggressively pushing customers to migrate to its subscription-based cloud products," said Dario Maisto, senior analyst at Forrester.

The European Commission's investigation targets four practices implemented by SAP:

  • Requiring customers to obtain maintenance and support services for their on-premises software directly from SAP, which the Commission says may prevent customers from "mixing and matching" services from vendors at different price points.
  • Preventing customers from terminating maintenance and support services for unused software licenses, which may result in customers paying for services they do not need or use.
  • Periodically extending the term of initial on-premises ERP licenses, making it difficult for customers to terminate maintenance and support services.
  • Charging customers who resubscribe to maintenance and support services after an interruption period reinstatement fees and retroactive maintenance fees.

"Thousands of businesses in Europe use SAP's software and its related maintenance and support services to run their operations," said Teresa Ribera, the European Commission's Executive Vice President for Clean, Just and Competitive Transition, in the investigation announcement. "We are concerned that SAP may be restricting competition in this key aftermarket by making it harder for competitors to compete, leading to fewer choices and higher costs for European customers."

Alan Pelz-Sharpe, founder of market research firm Deep Analysis, noted that the bigger issue is software vendors creating barriers for on-premises products while pushing customers to the cloud. Despite the tech industry's heavy promotion of cloud products, in certain industries and countries, most backend systems remain on-premises, and "enterprises have no interest or plans to move them to the cloud."

Pelz-Sharpe said some enterprises prefer on-premises deployment for security and data sovereignty reasons, but others may resist expensive and restrictive subscription pricing. Software vendors like SAP are under increasing pressure to migrate on-premises customers to the cloud, which boosts both revenue and customer lock-in.

A report published in May 2024 by the UK's Competition and Markets Authority found that significant technical barriers make business executives less interested in switching cloud service providers.

Earlier this month, SAP said it plans to invest more than $23.3 billion to expand its cloud services in Europe.

"Business buyers believe some technology vendors are using strong-arm tactics to force them off on-premises deployments, and they are increasingly prepared to push back," Pelz-Sharpe said.

The EU has been at the forefront of driving changes to business practices under antitrust scrutiny. In 2024, Microsoft chose to unbundle its Teams communications product from Office 365 following an EU antitrust investigation.

Maisto said enterprise customers are likely to see SAP make concessions in the coming months. "Based on recent experience from similar investigations into other vendors, SAP may be more inclined to offer friendlier customer terms rather than risk fines of up to 10% of its global annual turnover under EU competition rules," he said.