Keeping SAP Costs in Check

Spend Matters welcomes another guest post from Jon Winsett of NPI, a spend management consultancy focused on eliminating overspending on IT, telecom and shipping.

Next week, SAP will host its annual Sapphire Now conference, where the company is expected to announce the rollout of a new cloud-based sales force automation system (complete with the bells and whistles of social media and real-time customer interaction functionality). This is just one of many moves the German software giant has made in recent years to put its growing cloud capabilities as well as its HANA data and analytics platform in the spotlight.

The acceleration of innovation from SAP is good news for all stakeholders, especially loyal customers. But all of this change, combined with SAP’s already-complex licensing and pricing tactics, makes it even more challenging for customers to avoid overspending. Here are some of the biggest culprits:

Over-licensing. Most companies are overspending on their SAP user licenses in two ways: by paying for unused licenses and/or paying for higher-level licenses than they actually need. Customers need to make sure SAP user and package licenses are fully optimized from a quantity, functionality, and authorization perspective.

Over-support. Companies routinely overpay for SAP support by buying more support than they actually need (e.g. premium versus standard) or by failing to evaluate third-party support alternatives. With cloud adoption on the rise, some customers are now double-paying for SAP professional services to handle unanticipated customizations plus in-house support resources to handle lower-tier troubleshooting. It’s important for users to determine the support level best suited for their unique SAP requirements and benchmark pricing and terms for these services.

Contractual misalignment. Managing SAP user licenses goes well beyond auditing utilization numbers and roles. It requires a deep understanding of SAP’s contract terms and product use rights that can either drive your SAP costs up – or rein them in. By assessing their existing license base and contract rights, customers can reduce maintenance costs, avoid additional license purchases, and improve the contractual terms that govern license types, grants, and exchange rights.

Hidden integration costs. SAP has recently started charging customers for any form of integration between their applications and those of third parties. Many companies are unprepared for this hidden cost, which can translate into significant professional service and license fees. In some cases, SAP is requiring expensive user licenses for users in other systems that wish to access information in SAP applications. Customers should be prepared to navigate this purchasing land mine to keep integration costs lower.

The pace of innovation at SAP is exciting, but it also signals a time for caution. Just as many companies are still adapting to the complexities of sourcing cloud and mobile technologies, vendors like SAP are still learning how to monetize them appropriately. That means greater disparity in vendor pricing and terms, as well as more licensing options that need to be vetted and analyzed before buying decisions are made. Price benchmarking and contract/licensing optimization are critical steps in keeping license, support, and professional services in check.

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