I recently had a call from an unhappy SAP customer moaning about the high costs of SAP's annual maintenance and questioning whether they are getting good value for the money. I'm afraid that this is not a one-off conversation but something that is popping up regularly these days. The factors leading to the dissatisfaction include:
- CIOs are keen to shift spend from boring legacy IT like paying maintenance on infrastructure to new, more exciting stuff -- what Forrester calls business technology -- that help win, serve and retain customers.
- Hard economic times re-focus procurement's lens back on to those large chunks of money that vendors want for maintenance.
- SAP has been increasing maintenance costs to try to get everyone paying 22% of the net license costs each year.
Whatever the cause, the fact remains that SAP's maintenance costs (like many software vendors) are a big expense item on many CIOs budgets. So what can you do about it?
I regularly advise our clients on how to negotiate with SAP and I see a lot of tactics applied to squeeze SAP's maintenance costs. Here are three that often form the basis of any negotiation plan:
- Before you even start negotiating with SAP, use some of the more recent software asset management tools that understand all SAP's licensing nuances (including the now feared 'indirect access' issue) to help clean up your SAP estate. This will give you a clear picture of what you have and what you need. It will also highlight discrepancies between what you have licensed and what you actually want. For example, do you have shelfware that can be cancelled off your next SAP maintenance agreement (or traded in for other SAP services you may need at no net new cost)? Or are you paying for premium license editions when in fact lower cost versions are more than adequate? In other words, do you have too many Professional user licenses when Limited Professional licenses are more than enough to cover your user's needs?
- If you are planning to buy more new software from SAP (e.g, S/4 HANA) then make sure you combine your new stuff conversation with your annual maintenance conversation. SAP will try to keep these conversations separate, but you should keep them linked -- we must address the total package here. One example I saw recently was where SAP was offering to trade unused license maintenance costs for new cloud licenses as a way to sweeten the deal and to reduce the net new spend. And if you are looking to jump to SAP's cloud, then what about getting a trade-in credit in on any on-premise SAP software you are about to replace with versions in their cloud?
- Have you gotten a quote from one of the third party SAP maintenance companies such as Rimini Street or Spinnaker Support? Whether you choose to go with these companies and save yourselves 50% of the money you currently pay to SAP, or whether you use them as negotiation leverage to force SAP to lower their maintenance costs is up to you. Third parties are now making serious in-roads into SAPs client base and do pose a real threat to their high margin maintenance cash cow. And as with any negotiation, it's good to have a choice as it makes both parties bidding for your business work harder.
Of course, these are not the only negotiation levers you can play with when faced with another SAP maintenance renewal. But if you were wondering where to start then they make a good foundation to your negotiation strategy.
If you'd like to hear more negotiation ideas and tactics relating to SAP, please register to join our upcoming free-to-attend 'How to negotiate with SAP' webinar on September 24.