How to Negotiate with SAP
Negotiating with SAP requires a proactive, data-driven approach and savvy timing.
By understanding SAP’s licensing models, sales cycle, and motivations, IT procurement leaders can secure substantial discounts and flexible terms.
The key is to prepare thoroughly, leverage SAP’s year-end urgency, and insist on contract clauses that protect your long-term interests.
Preparing for an SAP renewal, RISE with SAP proposal, or S/4HANA deal?
This free white paper reveals 10 proven strategies to:
– Reduce costs
– Avoid vendor lock-in
– Strengthen your negotiation position
Designed for CIOs and procurement leaders. Download now and take back control.
Prepare Early with Data and Clear Objectives
Successful SAP negotiations start well before you sit at the table.
Begin preparations 6–12 months in advance of a renewal or purchase:
- Inventory Your Licenses and Usage: Conduct an internal audit using SAP’s own tools (like USMM and LAW) to map actual usage vs. licenses owned. Identify shelfware (licenses paid for but underused) and opportunities to reassign or retire unused accounts. This data prevents overbuying and strengthens your position to reduce or swap out unnecessary licenses.
- Analyze Indirect Access: Check for third-party systems or apps interfacing with SAP (e.g., e-commerce platforms reading SAP data). Ensure you have appropriate licenses for this indirect usage, or negotiate a “Digital Access” package up front to avoid surprise audit fees later. Proactively addressing indirect access shows SAP you’re informed and can preempt a common pressure point.
- Define Your Needs and Goals: Internally align on what you need from SAP in the next 3–5 years. Are you expanding to new modules (SuccessFactors HR, Ariba procurement), or possibly downsizing usage? Outline your must-haves (e.g., 500 Professional user licenses, a new CRM module) and “nice-to-haves.” Set a clear budget and walk-away points. Knowing your requirements and limits ensures you won’t be talked into shelfware or unwanted add-ons during negotiations.
Starting early gives you time to gather this data and clarify objectives. It also allows engagement with SAP on your timeline, not last-minute under their pressure. Preparation directly translates into leverage.
Read SAP Negotiations: 10 Tips for Successful Licensing and Contract Strategy.
Optimize Your Licensing Footprint
Before negotiating new contracts or renewals, clean up your existing SAP footprint:
- Right-Size User Licenses: Ensure each user has the appropriate license type. For example, casual users might only need a limited or self-service license instead of an expensive Professional license. Adjust roles or deactivate dormant accounts before any official license count review. This prevents paying 22% annual maintenance on “ghost” users you don’t need.
- Eliminate Unused Engine/Package Licenses: SAP sells add-on packages measured by metrics (like number of employees, revenue, or orders). Verify if you’re below those usage thresholds. If you have licenses for modules or capacities you aren’t utilizing, plan to drop them at renewal or negotiate a swap for something more useful. Document the value of this shelfware (e.g., “$200K worth of unused licenses”) – it’s a bargaining chip to request credit or exchange: “We paid for X and didn’t use it, so let’s apply that value to Y product we need.”
- Consolidate Contracts Where Possible: Many enterprises have separate SAP agreements (ERP, cloud products, databases). Staggered renewals dilute your negotiating power. Where feasible, align end dates and co-term agreements so you can negotiate in bulk. A single larger deal gives you more visibility and leverage to demand better discounts. It also simplifies administration and reduces the risk of missing a renewal deadline.
By optimizing and trimming upfront, you enter negotiations with a leaner license profile. SAP reps are less able to upsell what you don’t need, and you can focus discussions on real requirements.
Understand SAP’s Sales Tactics and Timeline
SAP’s Walldorf headquarters. SAP’s sales teams often rush to close deals as quarter-end approaches, creating a prime opportunity for buyers. SAP, like most enterprise software vendors, has a well-honed sales playbook:
- High List Prices with Room for Discounts: SAP’s price list for licenses and subscriptions is notoriously steep, often far above what most customers pay. This is by design. Initial quotes may reflect list prices (e.g., a S/4HANA Professional user license listed around $3,000 each), but SAP expects negotiation. Significant discounts (30–80%) are common for sizable deals or strategic clients. Always benchmark offers against other SAP customers or independent market data to gauge what discount is reasonable for your deal size.
- End-of-Quarter/Year Pressure: SAP operates on quarterly and calendar-year sales targets. As Q4 or quarter-end nears, sales executives become eager to close deals to hit their numbers. Use this to your advantage. Plan your negotiation timeline so that your final decision phase coincides with SAP’s “crunch time.” For example, being ready to sign in late December (SAP’s year-end) can pry loose an extra discount or concession that was off the table earlier. One CIO noted that by timing their final offer for the last week of Q4, they secured an additional double-digit percent price cut simply because SAP needed the deal on the books. Leverage tip: subtly remind SAP that delays are possible if terms aren’t favorable – the fear of slipping a deal into the next quarter motivates them to be more flexible now.
- Strategic Product Pushes: SAP’s corporate objectives influence your deal. Currently, SAP is aggressively pushing cloud subscriptions and RISE with SAP (an all-in-one cloud bundle), and trying to migrate its huge ERP customer base to S/4HANA. This means SAP might offer special incentives, such as extra discounts, prolonged payment terms, or conversion credits, if your negotiation includes moving to a cloud product or the latest platform. Treat these offers as levers: if a cloud migration or new module is on your roadmap, trade your willingness to adopt it for better terms (e.g., “We’ll consider RISE with SAP, but we need a 50% discount and price lock for 5 years on our core ERP licenses”). Remember, SAP’s desire to meet its strategic goals (cloud revenue, customer success stories) can translate into tangible savings for you, but only if you negotiate them.
Understanding SAP’s mindset and timing helps you set the stage. You want SAP to feel that they need you to sign now more than you need them.
When they see a quota deadline or a strategic win on the line, you gain an upper hand in bargaining.
Leverage Key Negotiation Strategies
With preparation done and timing on your side, focus on the negotiation levers that can drive the best deal:
- Bundle and Maximize Your Deal Scope: The larger and more comprehensive your contract, the more negotiating power you have. SAP will fight harder to win (or keep) a multi-million dollar deal covering ERP, CRM, HR, etc., than a small single-product sale. Consider bundling planned purchases into one negotiation. Likewise, if you have disparate contracts, propose a unified renewal. A consolidated $5 million deal can often fetch higher discount tiers than separate smaller deals. Be cautious only to include products you truly intend to use – don’t let SAP entice you into adding “shelfware” just to increase deal size. The goal is to increase your leverage with real scope, not bloated scope.
- Use Cross-Product Leverage: When evaluating a new solution (e.g., SAP SuccessFactors vs. Workday for HR or SAP Ariba vs. Coupa for procurement), inform SAP that it’s not a sure thing they’ll secure that business. Competitive alternatives, even as a consideration, put pressure on SAP to sweeten the pot. You might say, “We’re looking at Salesforce for CRM, but if SAP can give us a compelling deal on CX Cloud, we’d prefer to stay on one platform.” Similarly, bring up any overlapping functionality you could get from existing vendors. The hint that SAP could lose its footprint often encourages a better offer.
- Exploit the “Better Offer” Threat (Credibly): Without being adversarial, make it clear you have done your homework on pricing. If you’ve gathered quotes from Oracle, Microsoft, or other rivals, use them. For example: “Oracle offered us a package at X% less – we need SAP to bridge that gap.” In cloud deals, where switching is easier, SAP knows it must stay competitive. Even a well-researched bluff can work, but ensure it’s plausible. Threatening to rip out the core SAP ERP might not be credible if you’re deeply invested; instead, focus on modules or services where switching is viable.
- Leverage Third-Party Support: One powerful (but nuclear) option for on-premise SAP customers is third-party support providers (like Rimini Street), which charge about 50% of SAP’s standard maintenance fees. Getting a quote for third-party support and diplomatically sharing that “We are considering dropping SAP support to save costs” can get SAP’s attention fast. SAP dreads losing recurring maintenance revenue and may respond by offering a special discount or support fee reduction to keep you. Use this tactic carefully – only if you’re prepared to follow through – as it can strain your relationship with SAP. But even raising the possibility can lead to concessions, such as a freeze on your maintenance increase or additional services at no cost.
- Negotiate Multi-Year and Volume Discounts: If you know you’ll need more licenses in the future, negotiate terms for them now. Lock in unit prices for future growth so you’re not paying a higher rate later. For instance, stipulate that you can buy additional users or extra cloud capacity at the same per-unit price as the initial deal for the next 2 years. In exchange for a longer commitment or larger upfront purchase, push for higher discounts. It’s common to achieve 50%+ off list in big deals; make sure SAP’s proposal reflects your long-term value as a customer. Don’t shy away from asking for the moon initially – it sets the stage for a better midpoint outcome.
- Seek Credits and Freebies: Beyond direct price cuts, ask for value-adds. Can SAP throw in a few months of free subscription, extra training credits, or a higher support tier for free? These extras have real value to you and are often low cost to SAP. For example, getting SAP to include additional user licenses at no charge to cover a prior compliance issue (audit finding) is a win-win: you avoid a surprise bill, and SAP secures a renewal without bad blood. Think broadly about negotiation currency: if price flexibility is limited, negotiate on implementation services, extended payment terms, or favorable SLAs.
Real-World Pricing Example: Negotiation can dramatically reduce total cost. Consider a scenario where you need 100 SAP S/4HANA Professional user licenses and a cloud module:
| Item | SAP Initial Quote (List Price) | Negotiated Deal (After Discount) |
|---|---|---|
| 100 Professional User Licenses | $3,000 per user = $300,000 upfront | 70% discount → $90,000 upfront |
| Annual Maintenance (22%) on users | $66,000 per year (on $300k list) | $19,800 per year (on $90k net) |
| New Cloud Module Subscription | $200,000 per year (list price) | 50% discount → $100,000 per year |
| 3-Year Total Cost | $1,098,000 (list + support) | ~$324,000 (negotiated) |
| Total Savings | – | $774,000 (≈70% off) |
In this hypothetical package, a combination of volume discount and bundling yields savings of over three-quarters of the list price. The takeaway: enter negotiations aiming high. SAP’s first offer is seldom its best; significant improvements are often achievable by stacking these strategies.
Secure Flexible Contract Terms
Winning a great prize is only half the battle; you also need a contract that protects you over the long term.
Key terms to negotiate:
- Caps on Increases: Insist on a cap for any annual price uplifts. SAP often builds in a 3–5% annual increase on cloud subscriptions or support fees, citing inflation or policy. Negotiate this down or eliminate it. For example, cap support fee increases at 0–3% per year, or fix your subscription price for a multi-year term. This prevents an agreed good deal today from eroding in year 2 or 3 due to compounding hikes.
- Lock in Discounts for Future Purchases: Ensure that any discount you win now isn’t a one-time thing. Your contract should state that the discount percentage (or unit price) for licenses will apply to any additional licenses or renewals. Without this, SAP might try to reset prices at a higher rate in the future. By locking the unit prices, if you need 50 more users next year, you’ll pay the same per-user rate as in your initial deal.
- Flexibility to Adjust Downward: Standard SAP agreements don’t let you reduce license counts mid-term, but you can negotiate at renewal for some flexibility. If you anticipate potentially needing fewer of a certain license, try to insert terms like the right to swap license types or credits for unused licenses. While SAP won’t usually refund, they might agree to let you retire shelfware licenses and apply their value toward new licenses (e.g., “trade in” 100 old licenses for 50 new ones). At minimum, ensure that if you downsize at renewal, you’re not penalized with a worse discount tier on the remaining licenses.
- Protect Against Compliance Surprises: If you settle an audit issue (like indirect access) as part of your deal, clarify that it resolves the issue fully. For instance, if SAP is offering a one-time discount on extra licenses to cover past overuse, get confirmation that those licenses bring you into compliance. Also, avoid clauses that allow SAP to audit too frequently or without notice. Reasonable audit terms (e.g., annual self-declaration with a true-up at agreed rates) can be negotiated.
- Termination and Renewal Clauses: For cloud contracts, negotiate customer-friendly renewal terms. Avoid automatic renewals at list price – specify that renewal will be at the same terms or a pre-defined cap. If possible, get a “right to renew” extension option so SAP can’t suddenly end a product or force a costly migration at term end. Also, clarify termination rights: large enterprises sometimes negotiate the ability to terminate part of the contract (e.g., a specific cloud service) if it’s not delivering value, without heavy penalties.
- Include Benchmark and Favor-Most-Favored Language (if you can): While SAP likely won’t grant a formal “most favored customer” clause (promising you the best price given to anyone), you can still state expectations of competitive pricing. Even mentioning that you’ll benchmark the deal against industry standards puts SAP on notice to offer a fair price. In some large deals, customers have managed to include a clause that if an independent benchmark finds their pricing above market, SAP will discuss adjustments. Use this as a stretch goal in negotiations – even if you only get informal assurances, it signals to SAP that you’re an informed buyer.
Focusing on these contractual elements ensures that your hard-won savings don’t evaporate later due to contract loopholes. A well-negotiated contract guards against future risks like price creep, usage spikes, or business changes.
Common Pitfalls to Avoid
Even seasoned IT procurement teams can stumble in SAP negotiations. Avoid these common mistakes:
- Inadequate Preparation: Rushing into negotiations without detailed knowledge of your license usage and needs is a recipe for overbuying. Skipping the homework (user analysis, internal alignment) leaves you reactive to SAP’s agenda.
- Accepting the First Offer: SAP’s initial proposal will often be high on cost and restrictive on terms. Some companies mistakenly accept or only nibble around the edges. Always push back – there is almost always a better deal behind the first offer, especially if you present data and alternatives to justify a change.
- Overlooking Indirect Access: Indirect use fees can hit you unexpectedly if not addressed. Don’t focus only on named user licenses; consider how non-SAP systems interface with SAP. Neglecting this can lead to a costly audit finding that undermines any savings you negotiated.
- Caving to Pressure or Deadlines: SAP sales might create a sense of urgency (“This discount is only valid if you sign by Friday”). While timing is important, don’t let arbitrary deadlines force a bad decision. If a deal isn’t right, be willing to pause. Often, the “last chance” deal improves when SAP sees you’re ready to walk.
- Not Negotiating Contract Terms: Focusing only on price and neglecting contract fine print can haunt you. For example, failing to cap a cloud renewal rate might mean a 20% price jump in year 4, wiping out initial savings. Scrutinize the terms as closely as the price – both are negotiable.
- Going It Alone: Lastly, don’t underestimate the value of an outside perspective. Engage your legal team, seek advice from SAP user groups, or bring in a licensing expert if the deal is complex. SAP’s negotiators do this every day; having experienced negotiators on your side can identify hidden pitfalls and innovative deal options.
By being aware of these pitfalls, you can steer clear of them and remain in control of the negotiation process from start to finish.
Recommendations
- Start planning negotiations early (up to a year in advance) to gather usage data, align stakeholders, and set clear goals.
- Audit and optimize your SAP licenses before negotiating – eliminate unused licenses and address compliance gaps (like indirect access) proactively.
- Align your deal with SAP’s sales calendar – whenever possible, time final negotiations with SAP’s quarter-end or year-end to maximize discounts.
- Leverage your full spending power by consolidating deals and co-terminating renewals – a larger combined contract can yield bigger concessions.
- Always benchmark SAP’s offers against industry pricing or competitor quotes; use these benchmarks to push for better discounts or terms.
- Negotiate for contract safeguards: cap any annual price increases, lock in your discount rates for future purchases, and secure flexible terms for adding or removing licenses.
- Be willing to walk away or consider alternatives – credible threats of moving to competitors or third-party support can significantly strengthen your position.
- Document everything agreed in writing – from special discounts to future credits – to avoid misunderstandings later. Ensure the final contract language reflects all negotiated promises.
FAQ
Q1: When is the best time to negotiate with SAP?
A1: Ideally, align negotiations with SAP’s quarter-end or fiscal year-end (typically December). SAP is under heavy pressure to close deals, which often makes them more generous with discounts and concessions. Starting discussions early and aiming to finalize near those crunch times can lead to a better deal.
Q2: How much of a discount can we expect from SAP off the list price?
A2: It varies by deal size and strategic importance, but large enterprises commonly secure 30–50% off, and in some cases even more (60–80% for very big or strategic deals). Always ask for more than you expect; SAP’s pricing has margin for negotiation. Use industry benchmarks or quotes from competitors to justify the discount you’re targeting.
Q3: What is indirect access and why is it important in negotiations?
A3: Indirect access (or “digital access”) refers to situations where users or systems indirectly use SAP data via third-party applications. It’s important because SAP might require additional licensing for this, and they often find it during audits. In negotiations, address indirect access by either obtaining a digital access license package or getting written clarity on how these scenarios are covered. This avoids surprise charges later and can sometimes be used as a chip to get a better overall deal (“we’ll settle any indirect use now as part of this deal, in exchange for X concession”).
Q4: Should we consider third-party support for SAP to save money?
A4: Third-party support can cut annual maintenance fees by half, but it means leaving SAP’s official support ecosystem. It’s a big decision. However, bringing a third-party support quote to SAP can be a negotiation lever. If SAP knows you might leave their support, they may offer a discount or enhanced support at a lower cost. Only pursue this if you’re genuinely open to it, as it can strain your SAP relationship. For some companies with stable SAP environments, the savings are worth it; for others, SAP’s support (and relationship) is too valuable to drop.
Q5: What contract terms are most important to negotiate in an SAP agreement?
A5: Key terms include caps on price increases (so your fees don’t jump unexpectedly), locking in discounts for future purchases or renewals, flexible rights to swap or retire unused licenses, and clear renewal terms. Also focus on maintenance terms (ensure support fees are based on your negotiated license cost and not subject to sudden hikes). These provisions protect you from cost creep and inflexibility later on.
Q6: How can a smaller company gain leverage in SAP negotiations?
A6: Smaller customers can level the field by banding together needs (e.g., negotiate for multiple SAP products at once to form a bigger deal) and by emphasizing future growth (“We may not be big now, but we plan to expand our SAP footprint”). Also, use competitive bids from other vendors aggressively – SAP knows it can’t afford to lose emerging clients to rivals. Even smaller deals can get good discounts if SAP believes there’s long-term potential or a risk of losing the account.
Q7: Is it better to go for a longer-term contract or keep it short?
A7: A multi-year contract (3–5 years) can lock in pricing and secure larger discounts now, but it also commits you longer. If you’re confident in SAP as a long-term platform and want price predictability, a longer deal with price protections can be beneficial (and SAP will reward the commitment). If your strategy or tech stack might change, a shorter term gives flexibility to renegotiate sooner. In either case, ensure you have clauses handling renewal pricing so you don’t face a big increase after the term.
Q8: What if SAP audits us during the negotiation?
A8: Sometimes audits or license reviews happen around renewal time. If an audit finds you out of compliance, don’t panic-purchase on the spot. Instead, fold the resolution of that compliance gap into the broader negotiation. For example, if you need additional licenses due to an audit, negotiate them within your new deal (possibly at a discount or with some cost forgiven) rather than as an isolated expense. Always maintain a cooperative tone: acknowledge the audit findings but leverage the timing to get a better overall package addressing it.
Q9: Can we negotiate SAP cloud subscriptions the same way as on-premises licenses?
A9: Yes, absolutely negotiate cloud subscriptions too. While the metric (per user per month, etc.) differs from perpetual licenses, you can still ask for discounts off the quoted rate, and more importantly, negotiate the renewal terms. Cloud contracts should have caps on renewal increases and options to adjust volumes. Also, if you’re transitioning from on-prem to cloud, negotiate credits for your existing investments. Cloud deals often include services and hosting – make sure to evaluate those components and ask for concessions (like free migration support or extended uptime SLAs) as part of the package.
Q10: What role do SAP user groups or external advisors play in negotiations?
A10: SAP user groups (like ASUG in the US or DSAG in Germany) are great for sharing experiences and benchmarks. They often provide insight into what discounts and terms peers are getting, which strengthens your ask. External licensing advisors or consultants bring expertise from many deals – they know SAP’s pressure points and typical contract language. Engaging such help can pay for itself if it leads to a more optimized contract. While it’s an added cost, having seasoned negotiators or independent experts on your side often results in a better outcome than going it alone, especially for large, complex agreements.
Read about our SAP Contract Negotiation Service.
