One of the biggest complaints about SAP from customers is how much shelf ware they end up buying. In one illustrative case, we had a client who made an $85M deal with SAP four years ago for on-premise licenses. A couple of months ago, they conducted an evaluation of that spend and discovered that $53M worth of these licenses were unused.
As shown in this slide, if you add in maintenance costs, that’s $27M more money for software that was never deployed, for a total of $80M wasted over four years. Furthermore, our experience reviewing hundreds of SAP deals indicates that this type of situation is not unusual.
How does SAP do this?
Most customers might not realize that SAP invests almost twice as much on sales than on R&D – improving the product offerings. In other words, SAP is acutely focused on sales. The vendor’s sales team is highly trained at becoming enmeshed in your organization, to never miss a selling opportunity, and to undermine internal alignment. The sales team includes SAP staff with non-sales titles, such as the “Solutions Engineer” who’s working with your IT team on what the organization needs, and the “Value Engineer” who’s working with your finance team, building ROI models to provide a business case for the purchase.
The “divide and conquer” strategy means the team members are everywhere in your enterprise, talking to everyone. They often have badges and a workspace in customer organizations.
SAP people work to keep your procurement team off to the side; they run out the clock on the deal, working the other relationships, leaving no time left for due diligence by procurement – no chance to evaluate all the assumptions that went into the deal that determine your demand, and add any value by vetting the deal. Former SAP sales executive Andrew Ozlowski reports that he never spoke with anyone from a customer procurement or sourcing group “unless we had to.”
The result: customers are consistently out-played by salespeople who don’t appear to be salespeople, and SAP’s steady hand driving the sales cycle.
Further, your sales rep is working another channel, too. As former SAP auditor Richard Wright observed, 100% of the audits he conducted were triggered by an SAP sales rep looking to gain visibility into the customer environment and drive net new revenue from noncompliance findings.
Tactics to Counter SAP
Customers are urged to counter SAP’s well-oiled sales methodology with a playbook of their own, illustrated in the slide below.
These proven best practices are consistently effective at driving better outcomes with SAP, but unfortunately, many customers allow SAP to have input into the first three columns of activity, which severely limits the customer’s ability to succeed in the last two (highlighted) columns.
In bold typeface, we’ve noted in the below slide which specific activities customer must “get right” to achieve a competitive deal and meaningful discounts from SAP.
This slide represents the primary areas of struggle for customers and reflects the most critical parts of the buying process that must be wrested away from SAP. In short, the onus is on the customer to determine entitlements, usage, and demand, and get their stakeholders on board.
To address these challenges, ClearEdge has developed a set of SAP-specific tools and checklists to help guide a customer through an SAP engagement. It all begins with an Early Warning System that builds stakeholder alignment and clearly charts the necessary action items for a deal.
In addition to this timeline, ClearEdge has created a series of useful tools that drive down into these action items and are now available on our new Client Portal. These tools are designed to bring an organized structure to the sometimes chaotic or ad hoc nature of deal making in customer organizations. They include a Responsibility Matrix for your deal, a set of Inventory Readiness Questions, and an SAP BAU Builder Template that will enable you to develop an accurate and conservative demand model.
This is by no means a simple process; it requires customers to prepare as assiduously as SAP prepares for a deal, but you can contact ClearEdge for assistance. For more information on working more strategically with SAP, download our SAP Toolkit webinar, visit our Client Portal, review our portfolio of SAP content on our website, or contact your ClearEdge representative.
- ClearEdge’s Brady Carlson, Analyst, Richard Wright, Senior Manager of Compliance Services, and Andrew Ozlowski, Managing Director, are featured in the webinar on which this article is based.