Negotiating new SuccessFactors deals, expansions, and renewals establish your commercial relationship with SAP and will certainly be used as a baseline for future negotiations. If you are preparing for a SuccessFactors negotiation, be sure to keep the following in mind to effectively budget, negotiate, and renew.
Pricing Metrics and Tiering for Your Budget
The most common metric to develop your requirements and budget for a potential SuccessFactors investment is simply the number of users needed. SuccessFactors’ users metric is rather simple, especially compared to competitors, such as Workday’s FSE Workers metric which includes a calculation, attributing weight to each of the different types of worker categories, such as salaried, hourly, part-time, etc.
Despite the straightforward user metric, you should do some extra legwork and ask SAP to provide transparency into all relevant volume tiers. Typically, SAP only exposes you to the pricing for the tier of users you are procuring instead of providing insight into the value and monetary benefit that you may realize by moving to a higher volume tier. Gaining transparency into all relevant volume tiers will help you make an educated decision on your requirements.
Principles for Your Negotiation
When negotiating SAP SuccessFactors, the key commercial areas to keep in mind can be grouped into three principles:
- Value – After obtaining transparency into all relevant volume tiers, focus on obtaining market competitive pricing for the solution and for Preferred Care. It is worth noting that not all SuccessFactors solution pricing is created equal and that customers should expect SAP to treat each negotiation differently based on numerous variables including your volume tier, as they naturally build in some component of discounting into higher tiers.
- Scalability – Successful negotiation of market competitive pricing for the solution and Preferred Care should be followed by a simple question – What if I need more during the term? If you could need more during the term, you will want to ensure that the market competitive pricing for the solution and Preferred Care will apply in the event you require additional users during the term.
- Flexibility – When many SuccessFactors customers are negotiating their initial deal or renewing, they are sometimes developing business cases for other SuccessFactors’ solutions of potential interest. If this is the case, use this as leverage during your negotiations with SAP to secure market competitive pricing for those SuccessFactors’ solutions of interest.
Some SAP customers negotiating their initial SuccessFactors deal may feel comfortable leaving their renewals up to fate at the end of the initial term. However, what is often overlooked is the fact that competitors to SuccessFactors in the market are aggressively increasing costs of renewals — sometimes to the point where the offering no longer meets a company’s business case based on the compounding effect of renewal increases. Therefore, beyond the principles articulated above, we would recommend predictability in the form of renewal protections as a major component of your negotiation.
If you are negotiating your SuccessFactors renewal and did not secure renewal protections or feel as though your renewal protections are below market, it is important to create leverage with SAP to right-size your renewal. While every relationship is different, leverage can often be created through SAP executive relationships or by broadening the scope of your negotiation beyond HR’s requirements.
These are just a few tips for budgeting, negotiating, and renewing SuccessFactors agreements. When preparing for your negotiation, keep these factors in mind and try to gain a deeper understanding of SAP’s overall strategy for approaching the market, as these can often be used as leverage.
Additional posts from this series:
- SAP Indirect Access Pricing for the Digital Age
- How to Make the Most of Your 2018 SAP SAPPHIRE Experience
- The CPO’s Guide to SAP Ariba and Concur Updates
- Will SAP Bring the Steak of Just the Sizzle to SAPPHIRE?