As SAP’s year-end approaches, companies are leveraging the opportunity to negotiate strategic commitments like HANA or resolve their audit exposure. However, many companies are conducting these negotiations in a very siloed manner.
They are focused on negotiating best-in-class pricing on strategic commitments or audit resolution, while the opportunity exists to right-size the other aspects of their relationship that are typically below market after the initial SAP transaction and tend to remain that way.
We recommend taking the following actions before putting pen to paper:
- Optimize Your Assets
When companies are making strategic commitments or resolving their audit exposure, they are often asking, “What licenses do I need to buy?” They are often not asking, “What licenses do I not use or plan on not using?” This tendency to buy more licenses, without reflecting on use or planned use of already acquired licenses, leads companies to underutilize their assets by up to 40%, meaning unnecessary license fees and associated maintenance.
As you approach your negotiation, understand your underutilization and your current and planned shelfware, and make commercial requests of SAP that allow you to optimize your assets to avoid unnecessary license fees and associated maintenance.
- Actually Buy Future Demand in The Future
During SAP’s road-mapping meetings with its customers, they help companies define their roadmaps and look for an opportunity to sell SAP and third-party software. However, not only does SAP want to sell software, they want to pull forward your roadmap to increase the size of the transaction and your ongoing maintenance fees. SAP usually gleans the opportunity to pull forward your roadmap to increase your transaction size by having heard a casual mention of the budget or the internal approval thresholds.
As you approach your negotiation, understand your roadmap and market costs prior to engaging SAP, and do not socialize your budget or the internal approval thresholds. In addition, license what you need in the near-term and renegotiate commercial terms that allow you to exchange licenses, or license on an as-needed basis at highly competitive pricing.
- Renegotiate Commercial Terms
Shortly after the initial SAP transaction, the commercial terms that made the commitment to SAP so flexible, transparent and predictable expire, leaving many companies feeling compelled to negotiate commercial items with SAP on a transaction-by-transaction basis.
Renegotiate your expired or soon-to-be-expiring commercial terms at your next inflection point (e.g., SAP year-end strategic commitment or audit resolution). This will leave you with a flexible, transparent and predictable commercial relationship that allows you to optimize your assets over time, understand your roadmap and associated costs prior to engaging SAP in what will eventually become a sales cycle, and license on an as-needed basis at highly competitive pricing.
- Mitigate Audit Risk
When many SAP customers put pen to paper in the initial agreement, they had an understanding that SAP may audit their use of the software. If they use more than they paid for, they would be charged for a few additional licenses. However, as Indirect Access has reared its head with no intention of going away, those audits have become much more unpredictable for customers, leading to exposures of much more than a few additional licenses.
Therefore, renegotiate below market audit provisions and obtain predictability with respect to audits in the future, whether that be transparency into Indirect Access policies and pricing or a certain period of time where your company can breathe easy.
Elevate Your Relationship
During the initial SAP negotiation, SAP will often bring an executive sponsor to the table with an impressive title and their commitment to be there for you in the future. Shortly after the ink is dry, you start to see a lot less of the executive sponsor and a lot more of your account representative. Not that your account representative is a bad thing, but for obvious reasons, being at the correct level at SAP comes with its benefits. Their direct engagement in negotiations and their ability to make certain commercial requests happen without escalations is one of the biggest.
If you do not feel that you are at the correct level at SAP, use your inflection point as an opportunity to get there.
Your company may still be very focused on negotiating best-in-class pricing on strategic commitments or audit resolution. However, we recommend conducting a baseline assessment of your SAP relationship to understand where you stand with respect to each of these areas and subsequently leverage SAP’s year-end as an opportunity to right-size the aspects of the relationship that are below market.