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Negotiating with SAP:

Would you like a
License to Thrill?
Derek Prior, PhD
Gartner
Research
 Hosted by

What
Keyare the SAP licensing models
Issues
and maintenance options?
How can enterprises negotiate best-
in-class deals with SAP and protect
their investments over time?
 Hosted by

What are the SAP licensing models

Key
and Issues
maintenance options?
How can enterprises negotiate best-
in-class deals with SAP and protect
their investments over time?
mySAP Business Suite Pricing Model: Hosted by

Named User fees

(4 categories)
Functionality / Price

Developer
Professional
? Up to E5700 Limited Prof.
E 3800 E1600
Employee
(mobile E800)
E400

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

Industry Solutions based on industry metrics)

 mySAP ERP
 mySAP CRM

 mySAP SRM
 mySAP SCM

mySAP FIN
 mySAP PLM

mySAP HR



 mySAP Pricing Models:
The introduction of mySAP ERP Hosted by

SAP R/3 Enterprise or mySAP mySAP

other single solution ERP Business Suite
List Price for List Price for List Price for
Professional Professional Professional
User: E2550 for User:Approx User: E3800
R3 enterprise E3000-E3500
to E5000 for
CRM CRM,
SRM
PLM
SCM

HCM, Financials

Just R/3 Enterprise

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

NetWeaver : Web Application Server (Web AS)

 SAP Maintenance
Hosted by

 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
 Software Maintenance Trends Hosted by

$$
User Vendor

Maintenance
 Increased maintenance fees  Ramped or stepped
maintenance disappearing
 Maintenance starts day the license is
signed  Selected versions not included in
maintenance
 Separation of technical support from
rights to new versions  Maintenance policy changing at
vendor will
 Removal of technical support during
warranty period  Vendor cancellation
for convenience
 Decreasing level of service in
standard offerings  Shortened support periods
for prior version
 SAP Maintenance Cost: Five Years Hosted by

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 Support
at 17% at 20% at 23%
First Year: 2001 $ 340,000 $ 400,000 $ 460,000
Second Year: 8% cap $ 367,200 $ 432,000 $ 496,800
Third Year: 8% cap $ 396,576 $ 466,560 $ 536,544
Fourth Year: 8% cap $ 428,302 $ 503,885 $ 579,468
Fifth Year: 8% cap $ 462,566 $ 544,196 $ 625,825
Total 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
 Hosted by

What are the SAP licensing models

Key
and Issues
maintenance options?
How can enterprises negotiate best-
in-class deals with SAP and protect
their investments over time?
SAP License Terms to Negotiate:
‘For Your Eyes Only…’ Hosted by

License Model
Choice of e-business platform = all SAP applications
or 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, be
particularly careful with BW (OpenHub)
 Right to outsource
 Rights to custom-developed code
 SAP Interface Fees
‘From SAP, With Love…’ Hosted by

Real-time/Batch Data Extract to Other 3rd Party Sometimes

Synch/Asynch Application, eg DataWarehouse Free, Sometimes not!!
Interface OUT Sometimes Not
Free, Interface OUT Interface OUT
Free !
Sometimes not!!

SAP
OpenHub.

R/3 or R/3 Ent. BW All mySAP Apps

- 3rd Party

Not Free !
Free !
Interface IN Free ! Interface IN Interface IN Free !

Data in from any Data Load.

ISV or Legacy
App
 Hosted by

Example Charges
of onerousfor
termChanges
and condition:in
“If the licensee decided to change from one supported
Technology
database to another supported database, the cost for
doing 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, to
any hardware platform, software operating system, or
database that the vendor supports for this software.”
 Maintenance Reinstatement Fees:
‘Maintenance Is Forever?’ Hosted by

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 period
of time, and is subsequently requested or reinstated, SAP will
invoice Licensee the accrued Maintenance Fees associated
with such time period plus a reinstatement fee. “
Example of solution (not legal advice):
“Licensee can resume software maintenance for lapsed periods
by paying an amount no greater than the support fee that would
have been due if software maintenance had been continued
over the lapsed period.”
 Hosted by

OnerousSoftware Compliance: ‘The

term and condition:
“We are going to send you software that you are not
Auditor that Loved Me…’
licensed to use. If you use this software in error, you will
be out of compliance with this contract, and woe to you if
we audit.”

Likely way presented in an SAP agreement:

“Licensee may only use the program modules referred to in
the 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 that
licensee is not authorized to use.”
 SAP Negotiating Levers:
‘Never Say Never, Again…’
 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)
Hosted by
 Portal deals
 Size of deal (average deal size in
2002 approx Euro 420,000)
 Credible competition
 Industry vertical (process
knowledge)
Geography/Mid Market (reference
account)
Pay-as-You-Go Agreements vs Buying Hosted by
everything 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

 What’s in a Suite...?
Hosted by

Industry Solutions mySAP

Business Suite???

Master Data management

xApps

XI for non-SAP apps

Six Steps of Preparation for Licensing with
SAP
Hosted by

1. Establish a negotiating team with representation

from all participating business units.

2. Define requirements over two to three years with

focus on funded projects.

3. Perform a physical inventory of SAP licenses and

existing contract terms; understand new models
and terms. Compare with new proposal.

4. Determine whether purchase can be made under

existing agreement. Weigh re-licensing benefits
against loss of favorable terms.

5. Balance additional discount with potential

shelfware.

6. Leverage competition.