Indirect Use: Did the Earth Move with SAP’s Opening Keynote?

Over the years, I have come to appreciate the methods sales executives use to manage a challenging relationship and conduct a negotiation. In my experience, understanding these methods requires observation, paying close attention to the storyline and appreciating the underlying message.

During his keynote address at SAPPHIRE yesterday, CEO Bill McDermott used these methods while addressing the topic of Indirect Access and its position on the matter. One could argue Mr. McDermott’s address just kicked-off the single largest coordinated sales event in the history of the enterprise application market.

To review highlights of SAPPHIRE, listen to the UpperCut podcast.

He Established the High Ground

Prior to Bill McDermott taking the stage, SAP presented a video that outlined their purpose on several occasions…Improve the Lives of People. This may be true, but it’s also an effective approach to diminishing the issue of Indirect Access by comparison.

He Was Highly Assumptive

McDermott was very effective with demonstrating a willingness to take the issue of Indirect Access head-on, however, he went straight to presenting a resolution for certain use scenarios, assuming the concept of pricing for Indirect Use is a given going forward.  This is certainly not the current view of many existing SAP customers.

He Offered a Compromise

McDermott played up the significance of the simplified pricing structure and access to static data as a material concession.  The reality is SAP has been offering order-based metrics to customers for some time and not pushing for fees related to access to static data for three reasons:

  • The nature of this access will be short lived
  • There are caveats and specific restrictions that McDermott did not speak of during the address
  • SAP knows it has a weak contractual argument given the basis for Use is predicated on evoking the processing capabilities of the SAP software in which case extraction of a flat file does not rise to such use.

Bottom line…as with any negotiation, SAP gave up very little early.

He Demonstrated Leverage

Shortly after presenting a simplified pricing structure, McDermott made it a point to tell the audience that SAP was responsible for processing 76% of the world’s transactions valued at $22 trillion dollars.  This certainly provides a certain “context” to the customer, unimpressed by SAP’s offer that is considering alternative options.

He Positioned Value

Although McDermott did so in a subtle manner, he positioned the incremental value the SAP core is bringing to customers via real-time access to artificial intelligence solutions such as Leonardo.  Certainly, SAP will position the value of the SAP core in the event a competing solution such as Watson is chosen.

He Defined an Engagement Strategy

For years, software companies have been repositioning themselves to interface with the business.  McDermott was clear that mobilizing at the CEO level and engaging the CMO, CPO, CFO and Head of HR is required to transform the business. This is certainly true, and SAP is well positioned to do so from relationships acquired via Ariba, Concur, Fieldglass and Hybris.  The question for SAP customers: Who is managing the SAP relationship holistically?

He Positioned SAP’s Future Intentions

McDermott indicated data “is the new gold” and positioned SAP as the “genome sequencer for the enterprise” enabling speed and business agility via real-time access to data.  For those reading between the lines, the “concession” on access to Static Data may not be too appealing.

He Positioned a Call to Action

No salesperson exits a discussion without a call to action.  Early in his presentation, McDermott indicated SAP is a “humble but hungry company.”  At a later point in time, he indicated it was “SAP’s job to make you an early adopter.”  Additionally, he encouraged SAP customers to engage proactively in Indirect Access discussions and resolution.  Simply put, SAP is expecting its sales organization to drive customer engagement one way or another.

Our recommendation to SAP customers has been simple and consistent. Advanced preparation is the key to effectively managing an SAP relationship, both internally and externally.  To that end, we have seen many companies undertake the following steps in preparation for an inevitable negotiation with SAP.

  1. Assess the strength of their SAP relationship
  2. Conduct a mark-to-market assessment of their SAP agreements to understand gaps
  3. Evaluate their license entitlements vs. actual use to determine optimization opportunities
  4. Conduct a deep dive on all existing and potential future non-SAP interfaces to assess the magnitude of indirect use compliance risk
  5. Determine their future roadmap and associated SAP demand profile.

Taking the output of steps 1-5 will help develop a sophisticated playbook for driving a predictable and favorable outcome with SAP.  Was this keynote a “Show of Empathy or Lip Service?

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