As one of the leading software vendors in today’s market, negotiating with SAP can be a daunting task, especially if your relationship with SAP features limited strategic alignment. Between navigating new offerings like RISE with SAP and GROW with SAP, managing the upcoming deadline to move off ECC, and becoming educated on the rapid evolution of AI and its associated impacts, there are a lot of factors to juggle when evaluating your technology roadmap and planning for your SAP renewal negotiation.
For existing customers, it is critical to have an SAP renewal negotiation strategy that is proactive and holistic to unlock the most value for your organization. Conducting the proper due diligence prior to negotiations is proving to be increasingly important as SAP has become more stringent regarding what and when they are willing to negotiate. Here, I will cover SAP’s strategy and tips for negotiating an SAP renewal that lands you a competitive deal.
SAP’s Aggressive Sales Tactics
Historically, we’ve seen SAP allow customers to negotiate new and/or extended terms within the context of the renewal, such as broadening price protections. However, given SAP’s aggressive sales tactics of late, SAP has been hesitant to negotiate unless customers are bringing more demand in the form of cloud products or services to the table, or unless customers are seeking an early or a longer-term renewal period. Both levers help SAP accomplish their main objective, which is receiving more predictable, cloud-based revenue.
Another avenue SAP is using to achieve rapid cloud growth revenue is to push for annual pricing uplifts during the term and renewal periods. Because of this, simply maintaining the course and locking in an extension of previously negotiated terms may be a victory for customers who are unable to bring forward new demand or a long-term renewal extension. When you’re approaching a renewal or any deal with SAP for that matter, it is important to be aware of SAP’s objectives as you formulate your strategy and seek to determine realistic expectations.
Strategies for your SAP Renewal Negotiation
Having a strategy in place before your renewal will help you plan and set attainable expectations that align both with SAP’s sales strategy and your internal goals. For those customers who can leverage additional components in their renewal negotiations, we recommend incorporating the following seven key strategies:
1. Plan Early and Take Control
Start planning your renewal negotiations at least six months in advance to ensure a well-rounded strategy is established that addresses your company’s objectives. As is the case in all SAP negotiations, it is important to set the stage with SAP by being prescriptive regarding your proposed approach to manage the renewal cycle instead of allowing SAP the opportunity to present an un-solicited first proposal.
2. Establish Internal Alignment and a Communication Plan
Before you begin your renewal discussion with SAP, it will be critical that you first achieve internal alignment regarding your negotiation strategy. This alignment needs to include the people who will execute the negotiation as well as the cross-functional stakeholders who will fund the renewal or have other vested interests.
It will also be important to establish a communication plan and nominate certain individuals to lead the effort with SAP. One of SAP’s tactics is to top-side customers by going around key stakeholders via executive interactions. It’s critical that your organization follows the communication plan to establish and maintain leverage.
3. Be Clear on What Deal is on the Table
Communicating your requirements and objectives as part of your first communication with SAP will be critical. One of SAP’s standard sales practices is to include more volume or products beyond what you’re asking for. Get ahead of this tactic by being explicit in what you are expecting and, if needed, what you are not expecting.
4. Optimize Your Assets
All too often, SAP utilizes a sales narrative based on fear to drive future commitments (“your competitors are using this, so don’t get left behind”) rather than being a strategic partner and incorporating a sales strategy to optimize customer’s software footprint. This tendency to simply buy more licenses, without reflecting on use or planned use of already acquired licenses, can lead to companies paying excess license fees and associated maintenance.
Therefore, it is important to understand your utilization and existing shelfware, and make commercial requests of SAP that allow you to optimize your assets in the context of your renewal and any associated purchases.
5. Address Your Overall Commercial Relationship with SAP
In addition to addressing any shelfware, SAP customers should also leverage the renewal as an opportunity to improve the flexibility, predictability, and transparency of your SAP commercial relationship. This can be done by assessing your current commercial terms across your SAP portfolio for the purpose of identifying improvement opportunities, inconsistencies, and expiring terms to position as part of your renewal negotiations. For example, we have seen customers successfully negotiate further concessions in the form of additional volume price protections and swap rights.
6. Negotiate for Future Renewal Protections
As part of any negotiation for SAP’s cloud subscriptions, renewal protections are paramount and result in measurable cost avoidance. Therefore, we recommend customers seek renewal protections to avoid additional costs both at the outset of your next cloud renewal and compounding uplifts thereafter.
7. Leverage Escalations Appropriately
Depending on the size and strategic nature of the renewal, it may be necessary to involve executives both within your organization and at SAP to help secure your desired outcomes. While your account representative may present you with a ‘best and final’ proposal, SAP has frequently demonstrated they are willing to make additional concessions when you have the correct executives engaged on both sides.
With these strategies in mind, you’ll be well-positioned to obtain the best possible outcome during your SAP renewal negotiation.