Negotiating With SAP — Weighing Different Advice on Tactics for Q4 Smack Downs (Part 2)

In the first part of this post, we featured the advice of Forrester's Duncan Jones in how best to negotiate and structure relationships with SAP in Q4 and beyond. For the second installment, I thought I'd start by sharing some different learnings from one of Duncan's former colleagues at Forrester, Ray Wang. Ray is one of the most prolific and educated voices in the overall enterprise software ecosystem -- and also an old hand at SAP negotiations. He suggested that Q4 is absolutely not the right time to think about negotiations with SAP. Rather, you "think about it in September" and ideally, you begin the process in July because of the "90 day out rule" in contracts with the venerable ERP and business applications provider.

In terms of specific tactics, SAP customers should think about "third party maintenance as one lever," but there are several other tactics and leverage points as well. Incidentally, if you don't follow Ray's advice in enterprise software licensing negotiations and related topics, check out his firm, Constellation Research. They're one of the fastest growing industry analyst firms in the market at the moment, and although Ray is the genius behind the thing, he also somehow finds the time to stay an expert in this and related topics.

But back to the subject at hand. To this discussion, I'll add another point or two of my own and close with another of Ducnan's suggestions. Increasingly, it's important to understanding how you stack up in SAP's world as a customer -- and even how your individual rep perceives you. If you are a likely prospect for a suite of SAP tools in procurement (e.g., spend performance management, Sourcing On Demand, Supplier InfoNet) versus a target for an SRM upgrade sometime in the next decade (when the CIO finally decides to pull the trigger on the latest ECC version and consolidate instances at the same time), you've got more leverage in your dealings. Make your interest in these areas known and give SAP a shot at the business. And if they don't win, let your rep know why. No doubt, they'll come back with a stronger value proposition next time around and, perhaps, a sharper pencil as well.

For implementation, I like what Duncan suggests: "Request that SAP gives your account team appropriate incentives. You want an account manager focused on ensuring your success and solving problems, not searching for new revenue opportunities. So make it part of the deal that SAP reflects aspects such as product adoption in the account team's compensation. Even better, persuade SAP to include your program's key performance indicators (KPI) in its team's targets." Had companies insisted on such incentives around earlier SRM deployments including the use of partner technology and services, SAP would have had more P2P success stories on its hands today with adoption and spend penetration levels that looked more like earlier Ariba Buyer roll-outs than not.

Jason Busch

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