European Commission Investigates SAP for Antitrust Violations

The European Commission has initiated an antitrust investigation into SAP, the German software giant, focusing on potential anti-competitive practices within its software support services. The probe, announced Thursday, signals increased scrutiny of dominant players in the enterprise software landscape.

The core of the investigation centers on SAP’s practices regarding “on-premises” software, a model where businesses install and run software on their own hardware rather than relying on cloud-based solutions. The Commission will examine whether SAP’s policies have unfairly restricted competition in the aftermarket for maintenance and support services related to this on-premises software, which is critical for managing core business operations.

Specifically, regulators are likely to scrutinize how SAP’s licensing agreements, technical support offerings, and software updates may influence customer choice and potentially impede independent, third-party providers from offering competitive support services. The concern is that SAP might be leveraging its dominant position in the primary software market to control the aftermarket, ultimately limiting options and potentially increasing costs for businesses relying on SAP’s on-premises solutions.

SAP issued a statement asserting its belief that its policies are fully compliant with EU competition rules. “However, we take the issues raised seriously and we are working closely with the EU Commission to resolve them,” a spokesperson stated. The company further indicated that it does not anticipate the investigation will have a material impact on its financial performance.

This investigation arrives at a pivotal time for SAP, as the company navigates a strategic transition towards cloud-based services. While still a leader in on-premises software, SAP is under increasing pressure to compete with cloud-native rivals like Salesforce and Workday. The outcome of the antitrust probe could potentially influence the direction of SAP’s future business practices and its ability to leverage its existing customer base during this transition.

With a market capitalization approaching €282 billion ($331 billion), SAP is a cornerstone of the European tech sector. The potential ramifications of this investigation extend beyond SAP itself, potentially impacting broader discussions about competition and regulation within the enterprise software industry. The Commission’s findings could set precedents for how dominant software vendors manage their ecosystems and interact with third-party service providers.

Following the announcement, SAP shares experienced a dip, trading down 1.4% by 11:48 a.m. in London (6:48 a.m. ET). Investors are closely monitoring the developments of the investigation, acknowledging the potential for disruption and regulatory changes within SAP’s business model.