SAP ERP Provider Negotiation


Situation

In divesting from its parent company, a global provider of optoelectronics entered into a shortterm transition services agreement for continued use and support of its ERP system until the system and services could be brought in-house. The challenges were:

  • The need to execute a license agreement with the ERP provider within a short time frame to ensure uninterrupted support and prompt upgrading of the ERP system
  • Limited leverage given that switching to a new ERP system would be costly, both in terms of fees and from a time perspective
  • Tight timeframe and limited budget as a result of the divestiture
  • Increasing pressure from the ERP provider and accelerating timeline through threats of decreased discounting if deal not executed immediately
  • A non-competitive proposal from the ERP provider, with little or no alignment to the specific needs of the newly divested, standalone entity

Action

UpperEdge was engaged to help negotiate the software license and support agreement. Specifically, UpperEdge:

  • Reviewed and analyzed the transition services agreement and initial ERP proposal
  • Identified the rights and obligations of all parties and the various options available
  • Identified and prioritized opportunities for improvement and defined leverage points
  • Developed a comprehensive and effective negotiation strategy aligned to the company’s goals, objectives and risk tolerance
  • Provided a robust business and financial term sheet to clearly communicate expectations
  • Prepared precise messaging and talking points for use by company executives during key meetings and negotiations with its ERP provider
  • Ensured final negotiated deal terms were accurately captured in the working agreement

Results

Utilizing the market and vendor intelligence, strategies and execution approach provided by UpperEdge, the company:

  • Increased leverage to strengthen its negotiating position
  • Realized significant license and support cost savings for both the near and long term
  • Mitigated downstream risks through protections that provided transparency, predictability and flexibility to adjust terms in line with the company’s unique requirements
  • Established an executive level relationship with the ERP provider, helping to create alignment and clearer understanding of the company’s long-term needs and transformation plans