SAP: Deal Challenges and Best Practices
Updated: 19 hours ago
Based on the SAP cases we have inspected in the past year, S/4HANA migrations are up by 260% and Digital Access cases have increased by 300%.
S/4HANA deals are massive, and many customers are hesitant to commit. The company recently extended its deadline for ECC support to 2027 (instead of 2025). If you are an SAP shop, you are going to have to make a decision soon. Here are your options:
Rip & replace – migrate to S/4HANA Cloud or on-premise license options.
Stay & pay – continue to pay for maintenance until 2027 deadline.
Use a third party – hire a company like Rimini Street to provide service and support.
For many customers, it is not “if” but “when” to make the move. It is crucial to conduct internal discussions now about your company’s needs before the vendor comes calling.
If you have been contacted recently by SAP about Digital Access, it is probably because the supplier believes you are out of compliance. While we do not expect SAP to sue its entire user base (like they did with Diageo), we do expect them to make customers pay up for unlicensed use. We urge clients to be aware that SAP will leverage the subject of compliance to draw you to the table and drive other deals.
To win against SAP, we recommend the following steps:
Analyze and address your compliance gaps related to Digital Access. You need to understand your exposure. Has there been a fundamental change in the way you use SAP that could trigger the need for Digital Access? What will it cost to true-up? Do you have any net new demand for Cloud or S/4HANA that would incentivize the vendor to deal favorably with you? You have got to get ahead of SAP and have a game plan before they approach you.
Develop viable alternatives to SAP to create leverage. Failure to skip this step leads to spending millions too much and wasting a lot of time negotiating for not a lot of results. (Oracle is intent on stealing SAP’s ERP market share and is a good place to start. Coupa has emerged with a strong alternative to SAP Ariba.)
Structure the deal to your advantage. For example, only purchase what you need from SAP when you need it to eliminate costly “shelf-ware” which incurs subscription fees and maintenance long before it is needed in the organization. Or, if you are confident in your forecast, ask SAP for a multi-year term. Sales commissions increase with term length, which motivates the sales rep to provide concessions on such deals.
Understand what they want to sell you. Whenever you introduce the possibility of net new spend on the cloud or S/4HANA, you will build leverage against SAP.
Analyze pricing gaps to determine if the deal is competitive. Can you even evaluate the deal? If the deal is bundled, it is impossible to validate competitiveness. We urge clients to insist on information surrounding list pricing, SKUs, discounting, unit net price, and maintenance rates.
Brady Carlson is an Analyst II at ClearEdge Partners.
This blog post was inspired by the 2020 SAP Supplier Briefing. You can access the full recording to this webinar below. For more information about SAP, read our four-part series on SAP audits or contact your ClearEdge representative.