Indirect Use: Is SAP’s Bill McDermott the Best Salesperson on the Planet?

For those of you that had a chance to read our blog post the night before the SAPPHIRE 2017 kick off, you’ll agree that we made a pretty accurate prediction that SAP’s CEO Bill McDermott would leverage his prior theme of empathy to address customer concerns regarding indirect use.

What Did SAP Really Provide?

At the end of the day, what did SAP really provide when it comes to indirect use? For those executives not able to attend and for those who prefer scanning a blog article such as this, I offer the following summary considerations. You should also check out the set of questions we recommend customers ask SAP regarding their recent indirect use policy announcement.

Transparency

SAP customers have always been asking for transparency, not only with respect to roadmaps, but also with respect to licensing, pricing, and more importantly, clarity of SAP’s use definition. Under the veil of transparency, SAP reinforced its commitment to transparency relative to roadmaps and product direction, but it provided no clarity with respect to its definition of use and the criteria for when indirect access to SAP’s software amounts for use. From SAP’s point of view, use is use – there is no such thing as indirect use. Unfortunately, there will be no change in the definition of use. It will continue to be “anything that invokes the processing capabilities of the SAP software.”

Bottom Line: The definition of use will stay the same. It is ambiguous and does not provide any guidance as to the degree of use and how to address corresponding value. As such, SAP customers will continue to struggle with figuring out whether or not their interconnected systems are license-compliant given how they are using their software. Customers will only be approached by SAP with minor clarifying contract changes that also include incentives to move to S4.

Concessions and Balance

I agree with Mr. McDermott that protecting intellectual property is important and that it must be balanced with a customer’s ease of doing business. In his opening keynote, Bill McDermott used this as an opportunity to introduce simplified pricing for order-to-cash and procure-to-pay, ultimately linking those to the measurable business metric of orders. He also used it as an opportunity to communicate that SAP will not charge customers for a static read of data. Subsequent communications from SAP highlighted that customers who take a proactive approach to engaging SAP to determine full compliance for indirect use will not have to worry about paying back maintenance.

Bottom Line:  SAP did not really offer anything. In our experience, order-to-cash and procure-to-pay scenarios involving indirect use have historically been resolved and negotiated under an “orders” business metric because everyone involved in the negotiation ultimately agreed that it was unreasonable to apply a user license. It made sense for SAP to lead with this from a positioning point, but in our experience, customers landed on orders as the metric for being compliant so I am not sure how much was conceded here. The same logic applies to the waiver of back maintenance. It’s hard for SAP to look a customer in the eye and say, “I know we have been aware of how you have been using your systems for years, but now we need to enforce this indirect use policy that was not clearly spelled out in our agreements and also charge you back maintenance.” Back maintenance fees can be huge and SAP is banking on this empathy pull to get anxious SAP customers to the table. With regard to static data, SAP customers have always owned their data. I have yet to see an SAP agreement where they claimed to own a customer’s data. That is not the issue. This issue lies in the additional fees that SAP is looking to extract based upon how a customer uses the data stored in SAP with non-SAP systems. Extracting data from SAP to another system in a non-real-time manner with no updates to the data never amounted to use in the first place, so again, what was really provided here?

Making Chicken Salad out of Chicken $#&!

When it comes to indirect use and all the customer buzz and anxiety that has continued to percolate since the Diageo and AB InBev claims became public, SAP had no choice but to tackle the issue head on during its biggest customer gathering. The fact that Bill McDermott addressed the issue within the first few minutes of his opening keynote reinforces how significant the issue has become for SAP and how important it is to show some balance. It did not appear from the extremely limited round of applause the audience provided that customers were feeling the empathy and balance.

Bottom Line:  A lot of mayonnaise has been spread on the indirect use issue so far at SAPPHIRE. SAP just may have managed to take one of the more concerning issues for its customer base and turn it into one of the greatest sales and product migration opportunities in the company’s history. Think of all the SAP account executives and how they can now approach their customers with the opportunity to take advantage of SAP’s new simplified indirect use pricing without the worry of paying back maintenance. Bill McDermott is the penultimate salesperson and it will be very interesting to see if this empathetic approach to indirect use will yield the engagement SAP desires and the follow-on upsell opportunities. Can I have more mayo, please?!

Please do not hesitate to contact me at dblake@upperedge.com with your thoughts, comments and feedback.