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Many Enterprises Negotiate With SAP and You Can Too

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Believe it or not, SAP wants you to be its customer. Moreover, SAP wants you to be a satisfied customer so that your company will purchase other SAP management solutions in the future. If you have always assumed that negotiating SAP contracts is impossible (as impossible as negotiating contracts with a bank, utility provider, cell phone operator), then assume again.

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I’ll admit that the SAP licensing agreement is probably one of the most complex software contracts in the ERP arena. Nevertheless, after reviewing numerous and diverse contracts, I can confidently reveal to you that companies do negotiate with SAP and do succeed in improving the terms of the agreement.

SAP clients are large enterprises and no company is identical to the other. Therefore, inevitably contracts need to be adjusted and tailored to the specific needs of each client. Your goal is to try and get the best deal and the most suitable contract for your organization in terms of price, payment terms, possible add-ons and other various adjustments that can be made to fit your organization.

Some interesting conclusions

First, SAP customers will usually refer to their contract only as a result of an occurrence that demands changes to their SAP licensing structure, such as M&A, restructuring, purchasing a new SAP module, etc. Second, other customers might refer to their SAP contract when facing an imminent audit (which in some cases occurs after years of neglecting to submit reports on the company’s licensing status, hmm…). Finally there are customers that have a standard improvement process including an annual, semi-annual or quarterly inspection of contract terms.

Whether your organization is in the process of becoming an SAP customer, or whether your company is already an SAP customer, and whether the first, second or third situation above fits your organization – there is an SAP licensing agreement that you must understand in order to be able to achieve the best possible licensing conditions for your company.  

The ideal times for negotiation

From our customers’ experience, prior to implementing SAP is definitely the optimal time for the most successful negotiations and adjustments to the contract. This is when companies are in the best position to negotiate, and this is also when negotiating can make the biggest difference – before actually signing the contract… If your company has already signed a contract, the rule of thumb is simple; the ideal time for reevaluating and improving an existing contract is just before purchasing new or additional licenses, this is when you have the best chance to set a price for each license type in the future.

An important suggestion

My underlying advice is to hire a professional consultant, one that can really assist in understanding an SAP contract. Purchasing negotiators (who are great for many things) usually do not have the right know-how in SAP terminology – so essential for achieving best negotiated agreements. Price negotiation (the purchasing negotiator’s expertise) is vital, however it is not the only element in an SAP contract and companies MUST MUST MUST enter negotiations knowing what to expect also in terms of SAP jargon, methods of classification, clear understanding of current licensing requirements alongside forecasting future corporate needs smartly.

So, meet the SAM (software asset management) consultant who has SAP expertise. SAM consultants bring with them the most relevant expertise for helping enterprises tailor a contract that will fit both their current status and future licensing needs. In fact, an experienced SAM consultant together with a proficient purchasing negotiator can obtain the best prices, most suited applications and overall best terms in an SAP contract.

Of course, each SAP contract is unique and enterprises need to set their goals of negotiation according to their own targets, specific business processes and unique ERP needs.

Yoav Michaeli joined Xpandion in 2008 as a team leader, and in 2010 Mr. Michaeli began managing the entire Research & Development group of the company. Prior to joining Xpandion, Mr. Michaeli served in an elite technological unit of the Israeli Defense Forces as a team leader for various key military projects. Among other achievements, he was instrumental in pioneering the use of advanced .NET technologies for large scale distributed systems. Mr. Michaeli is an expert in programming, agile development, application security and specialized programming techniques.

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