derek prior 1

8/8/2019 Derek Prior 1

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Negotiating with SAP:

Would you like aLicense to Thrill?

Derek Prior, PhD

Gartner

Research


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Key IssuesWhat are the SAP licensing modelsand maintenance options?

How can enterprises negotiate best-

in-class deals with SAP and protecttheir investments over time?


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Key IssuesWhat are the SAP licensing models

and maintenance options?




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Hosted bymySAP Business Suite Pricing Model:

mySAPCRM

mySAP

SCM

mySAP

ERP

mySAPFIN

mySAPHR

mySAP

PLM

mySAPSRM

Software Engine fees: (e.g Purchase Order/ Sales Ordere.g Purchase Order/ Sales Order

Industry Solutions based on industry metrics)Industry Solutions based on industry metrics)

Professional

E 3800

Limited Prof.

E1600

(mobile E800)Employee

E400Functiona

lity

/Price

Functionality

/Price

Named User fees

(4 categories)

Developer

? Up to E5700


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mySAP Pricing Models:The introduction of mySAP ERP

SAP R/3 Enterprise or

other single solution

NetWeaver : Web Application Server (Web AS)

Just R/3 Enterprise

or

CRM etc

Full NetWeaver : EP, XI, BW, KM, etc

HCM, Financials

CRM,

SRM

PLM

SCM

mySAP

ERP

mySAP

Business SuiteList Price forProfessional

User: E2550 forR3 enterpriseto E5000 for

CRM

List Price forProfessionalUser:ApproxE3000-E3500

List Price forProfessionalUser: E3800


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SAP Maintenance

Standard offering(17%)

Technical Support and Rights to New Versions

2 Early Watch checks and either SAP GoingLive Check, SAP GoingLive

Functional Upgrade Check, or SAP OS/DB Migration Check.

Max-Attention Service Level offering (20%)

Guaranteed response time for very high priority incidents

Safeguarding for up to 2 mission critical projects and named contact in

SAP support services

Max-Attention OnSite offering (23%)

Above plus two full-time on-site consultants


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User Vendor

Ramped or steppedmaintenance disappearing

Selected versions not included inmaintenance

Maintenance policy changing atvendor will

Vendor cancellationfor convenience

Shortened support periodsfor prior version

Increased maintenance fees Maintenance starts day the license is

signed

Separation of technical support fromrights to new versions

Removal of technical support duringwarranty period

Decreasing level of service instandard offerings

Maintenance

$$$$Software Maintenance Trends


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Hosted bySAP Maintenance Cost: Five Years

Assume 50% Discount on the $4,000,000 Software:

$2,000,000 Initial License Cost. 8% Cap Negotiated for Five Years

Maintenance Maintenance Maintenance and Support and Support and Supportat 17% at 20% at 23%

First Year: 2001 $ 340,000 $ 400,000 $ 460,000Second Year: 8% cap $ 367,200 $ 432,000 $ 496,800Third Year: 8% cap $ 396,576 $ 466,560 $ 536,544Fourth Year: 8% cap $ 428,302 $ 503,885 $ 579,468Fifth Year: 8% cap $ 462,566 $ 544,196 $ 625,825Total Maintenance: $1,994,644 $2,346,641 $2,698,636

Year 6: Maintenance cap is over, based now on then-current list price:$4,862,025

Due 2006 $876,544 $972,405 $1,118,266


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Key IssuesWhat are the SAP licensing models

and maintenance options?




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License Model

Choice of e-business platform = all SAP applicationsor solutions = CRM, or other single application.

Fee for three role-based, named users.

Automated B2B transactions charged via software engines based

on sales and purchase orders.

Maintenance: 17 - 23 percent

Top Five Terms to Negotiate: Full 100 percent credit for R3 investment, and for future conversion

from mySAP ERP to mySAP Business Suite if required.

On larger deals, minimize uplifts outside

Euro-zone countries Understand indirect access: Specify exactly when licenses for

external systems accessing SAP software are required, beparticularly careful with BW (OpenHub)

Right to outsource

Rights to custom-developed code

SAP License Terms to Negotiate:For Your Eyes Only


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SAP Interface Fees

From SAP, With Love

R/3 or R/3 Ent.

Real-time/Batch

Synch/Asynch

Data in from any

ISV or LegacyApp

Interface IN

Interface OUT SometimesFree,Sometimes not!!

BW

Interface OUT

Interface IN

SAPOpenHub.

- 3rd Party

Data Load.

Data Extract to Other 3rd Party

Application, eg DataWarehouse

Free !

NotFree !

Free !NotFree !

All mySAP Apps

Interface OUT

Interface IN

Sometimes

Free, Sometimes not!!

Free !


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Charges for Changes inTechnologyExample of onerous term and condition:If the licensee decided to change from one supporteddatabase to another supported database, the cost fordoing this will be horrendous.

Likely way presented in the contract:Database: Oracle (or any other specific database listed)

Example of solution (not legal advice):

Licensee may transfer this software, at no additional cost, toany hardware platform, software operating system, ordatabase that the vendor supports for this software.


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Onerous term and condition:

If you drop maintenance, but after a year, want to re-start it,you are subject to whatever we want to charge at the time,and you will have absolutely no leverage.

Likely way presented in SAP agreement:

In the event Maintenance is declined for some periodof time, and is subsequently requested or reinstated, SAP willinvoice Licensee the accrued Maintenance Fees associatedwith such time period plus a reinstatement fee.

Example of solution (not legal advice):Licensee can resume software maintenance for lapsed periodsby paying an amount no greater than the support fee that wouldhave been due if software maintenance had been continuedover the lapsed period.

Maintenance Reinstatement Fees:Maintenance Is Forever?


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Software Compliance: TheAuditor that Loved MeOnerous term and condition:We are going to send you software that you are notlicensed to use. If you use this software in error, you willbe out of compliance with this contract, and woe to you ifwe audit.

Likely way presented in an SAP agreement:

Licensee may only use the program modules referred to inthe definition of software even if the licensee is technically

able to use other modules from the software supplied.

Example of solution (not legal advice):Licensor shall not ship any software to licensee thatlicensee is not authorized to use.


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Increased discounting, but new

customers treated better than

installed base

Only 25% of installed base has

converted to mySAP licenses.These were larger customers with

strongest rationale to upgrade.

Believe the next 25% will take more

convincing

Time of year (Year end December)

Portal deals

Size of deal (average deal size in

2002 approx Euro 420,000)

Credible competition

Industry vertical (processknowledge)

Geography/Mid Market (reference

account)

Never Say Never, Again


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Pay-as-You-Go Agreements vs Buyingeverything up-front...

Evaluate against buying exactly what is needed

Establish minimum licenses to be retained after contract term

Ensure that licenses are transferable without limitation

Include new functionality and products in agreement

Build in flexibility to accommodate business change

Negotiate full credit for existing licenses


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Whats in a Suite...?

XI for non-SAP apps

Master Data management

Industry Solutions

xApps

mySAP

Business Suite??


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Six Steps of Preparation for Licensing withSAP

1. Establish a negotiating team with representationfrom all participating business units.

2. Define requirements over two to three years withfocus on funded projects.

3. Perform a physical inventory of SAP licenses andexisting contract terms; understand new modelsand terms. Compare with new proposal.

4. Determine whether purchase can be made underexisting agreement. Weigh re-licensing benefitsagainst loss of favorable terms.

5. Balance additional discount with potentialshelfware.

6. Leverage competition.

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