The CIO’s Playbook for Managing an SAP Relationship – Role of the CIO


boston_deere-islandBefore Boston’s Big Dig, one of the largest public works projects in the United States was the Boston Harbor Clean-up.  My Mother was appointed by then Governor Michael Dukakis to the Board of Directors of the Massachusetts Water Resources Authority (“MWRA”), the state authority responsible for the harbor clean-up.  Her duty was to represent the interests of our town, a community bordering the site of the proposed treatment plant, including negotiation of a mitigation agreement that would impact our community for generations.

In preparation for this article, I reflected on my Mother’s MWRA dealings and my own experiences supporting executives responsible for leading large transformational initiatives and strategic negotiations with SAP.  I have worked with hundreds of executives over the years and have observed all kinds of styles, characteristics and approaches. By examining my own experiences alongside the MWRA experiences of my Mother, I wondered if there was a single trait or characteristic that would most significantly influence an executive’s ability to successfully navigate and optimize the negotiations and on-going relationships that support these strategic initiatives.

It didn’t take long before I narrowed it down to credibility.

I have learned a lot from executives who value and exude credibility.  They view credibility as an essential part of their value system, an asset of extraordinary value, integral to all relationships, and never to be compromised regardless of circumstance.  Advising on well over 100 SAP negotiations, I have observed some noteworthy strategies that executives employ to create and maintain credibility before, during and after their SAP negotiations.

Alignment of the Executive Suite

These leaders certainly undertake the traditional measures required to align their initiatives with the corporate strategy, associated investments, benefit and risk profile, etc.  They also are not naive enough to believe its SAP’s intention to approach a significant partnership or commercial opportunity at their company through a single channel.

These executives understand SAP has already penetrated various areas of their company and established relationships with the heads of Human Resources, Procurement, and Marketing through SAP’s other portfolio solutions such as Ariba, Concur, SuccessFactors, and Hybris.  They also know SAP’s organizational structure contains leaders responsible for its various individual business units.  Knowing this, these leaders take proactive steps to ensure their line of business leadership agrees with designating them as the overall SAP executive sponsor for the negotiation.  Lastly, they align on conflicting priorities, parameters of the negotiation, ongoing cadence and messaging to ensure overall continuity.

These leaders proactively seek out potential credibility gaps within their company or ones created by SAP and take measures to address these gaps at targeted times throughout the negotiation process.  These leaders also understand their consulting partners have set agendas and significant influence within their executive suite and often use this understanding to preemptively engage certain executives and the consulting partner leadership to ensure their original goals and objectives do not get derailed.

Assembling a Team of Winners

These leaders recognize that their credibility is influenced by and dependent on others around them.  As a result, they surround themselves with a select group of trusted colleagues and advisors.  They ensure this team possesses a similar value system and the prerequisite subject matter expertise required to undertake a complex negotiation with SAP as well as the consulting partners that are enabling the transformation.

At various points in the process, they selectively demonstrate the strengths of their team and the breadth of diligence being undertaken to their internal key executives as well as SAP.  They do so knowing that credibility must be built over time and if the process is executed upon properly and in an informed manner all throughout, the final request for contract signature will be viewed as a non-event.

Above all, these leaders do not unilaterally defer the “commercial negotiation” to their procurement organization. They know full well that their direct involvement coupled with the engagement of a cross functional team will result in substantial financial benefit to the company and relationship capital that can be leveraged in the future.

Conducting an End-to-End Relationship Assessment 

As described in Part I of the CIO’s Playbook for Managing an SAP relationship, these leaders task their team to conduct a comprehensive review of their SAP relationship.  They appreciate that the context of the current relationship has been shaped over many years and influenced by multiple stakeholders with different strategies and intentions.

They also understand that the SAP executives they are interfacing with are supported by a small army of experienced sales, support, service, contracts and legal professionals focused on stage crafting an end-to-end sales and close process.  They also know that SAP’s approach extends well beyond the potential transaction at hand and will be followed by the subsequent positioning of SAP Cloud Solutions, SAP MaxAttention and complementary professional services.

Most importantly, they understand the transaction being pursued by SAP is a key inflection point that presents an opportunity to learn from and leverage past experiences.  They understand prior precedent and the contractual provisions and relationship principles that need to be continued, rightsized, or fundamentally changed.

Knowing SAP as Well as SAP Knows Them…Again

The majority of these CIO executives have had prior dealings with and existing relationships with SAP.  However, in my experience, the lifecycle of a CIO’s relationship, even with key partners, ebbs and flows.  Because of this, it’s common for the CIO’s knowledge of SAP and strength of prior SAP trusted executive relationships to have diminished.

Well in advance of any partnership or commercial discussion, these leaders naturally engage their network of colleagues, counterparts, and advisors to inform and refresh their perspective on SAP.  They invest in understanding SAP’s corporate, go-to-market, and product and services strategies, as well as obtaining detailed market intelligence on SAP’s organizational structure, business and pricing practices. Employing this approach enables these leaders to fully assess relationship opportunities, compliance risks, and overall optimization opportunities.

Staying Relationship and Principle Based

These executives make it a priority to establish professionally personable relationships with their SAP counterparts up-front.  They demonstrate a genuine desire to understand SAP’s direction and priorities and make an honest assessment of their company’s alignment to SAP’s go-forward strategy.  In doing so, they come to the table with an informed point of view and adjust their perspective of value and leverage based on the dialogue.

These executives come prepared with a set of well thought out principles which will serve as the foundation from which they will manage their next generation SAP relationship.  These principles are based on a combination of their personal and organizational values; however, they are informed and prioritized based on an advanced understanding of the underlying issues that will arise during the negotiation.

These executives also understand the implications associated with misaligned principles.  For example, they understand that the adoption of a best of breed application strategy based on a fair assessment of SAP Cloud solutions versus competing solutions could prompt an SAP Indirect Access Audit.  They know going into the discussions the impact this implication could have on the relationship and therefore, understand the posture they need to be taking.

Walking the Talk

Like many software companies, SAP’s layers of management create an inherent negotiation disadvantage for its customers.  Candidly, most executives cannot take their personnel and have them go head-to-head with SAP at every level and expect to win the day.  The CIO or a trusted designee, is therefore compelled to engage with the various levels of SAP management throughout the negotiation.

These leaders understand they will need to go high and low at different times during the negotiation process and prepare themselves appropriately.  They respect the SAP organizational structure; however, they do not let the SAP executives get too far removed from the process or allow them to create an unspoken perception of playing above the deal and unaware of the details.

In addition, they understand SAP may insert its Strategic Initiatives Group to lead the commercial negotiation knowing the dialogue will shift to SAP’s business practices, pricing approach, revenue recognition requirements, etc.  They do not respond with emotion or a misunderstanding of details.  To reach common ground, they revert to their prepositioned principles and detailed knowledge of what SAP is truly capable of agreeing to.

Based on the outcome of my Mother’s negotiation, I am confident the MWRA Board of Directors viewed my Mother as credible.  If you have the opportunity to fly into Boston, you may notice a berm protecting a town from the sight of a sewage treatment plant; a pier used to support transportation to and from the facility; sludge digesters used for pelletizing sewage into fertilizer as opposed to smoke stacks used for incineration; and restored beaches and shorelines.

As leaders, we may not all have an opportunity to fly over our legacy, however, I have witnessed CIO’s using these strategies to manage their SAP relationships and negotiations in a manner that has positively impacted their legacy.

I welcome your questions and comments so please do not hesitate to contact me at lriley@upperedge.com or 617-412-4335.

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