Key Points for Negotiating SAP Audit Settlements
- Understand License Terms: Review your contract to identify compliance gaps.
- Verify SAP Claims: Cross-check audit findings with actual usage.
- Negotiate Proactively: Focus on resolving gaps, not penalties.
- Consider Alternative Licensing: Explore better license models if needed.
- Get Expert Help: Involve specialists for negotiation insights.
Negotiating SAP Audit Settlements
Regarding SAP licensing, dealing with audits is one of the biggest headaches for most businesses. These audits can be complex and time-consuming and often lead to hefty settlement costs if handled improperly.
However, with the right approach, you can negotiate your SAP audit settlement in a fair and beneficial way for your company.
Below, we discuss the key aspects of negotiating SAP audit settlements and offer clear strategies for successfully navigating this process.
SAP Audits
SAP audits are designed to ensure that businesses comply with the terms and conditions of their SAP licensing agreements. These audits can reveal discrepancies in usage, unlicensed users, or even incorrect licenses, often with significant financial penalties. It’s crucial to understand the basics of an SAP audit:
- Frequency: SAP typically conducts audits every 2 to 3 years.
- Scope: These audits cover all licenses for core SAP modules or add-ons.
- Risks: Non-compliance might result in demands for back payments, penalties, or forced additional licensing.
Example: Imagine your company has purchased 100 named user licenses, but after a review, SAP finds that 120 employees are accessing the system. That additional usage can lead to a hefty bill if not addressed properly.
Key Challenges in SAP Audit Negotiations
Before diving into strategies, let’s look at some common challenges companies face during SAP audit negotiations:
- Complex Licensing Models: SAP licenses are often difficult to understand. There are different types, like Named User Licenses, Engine Licenses, and Indirect Access.
- Indirect Access Risks: You may be charged for third-party systems that access SAP indirectly. This is a major point of contention in most audits.
- Pressure to Settle Quickly: SAP’s audit team may pressure you to settle quickly, sometimes without giving you the time to evaluate your options.
1. Preparing for the Audit
Preparation is key to success in SAP audit negotiations. Here’s how to get started:
1.1 Inventory Your Licenses
- Gather Data: Review all your licenses and check if they match the user count and types your company currently needs.
- Evaluate Usage: Are there inactive users? Are there employees who have left the company and are still consuming licenses? Reducing these can lead to significant savings.
Example: A logistics company once found that 20% of its licenses were tied to employees who had left the organization. By cleaning up this list, they reduced their exposure dramatically.
1.2 Conduct an Internal Audit
- Simulate SAP’s Process: Try conducting your internal audit before SAP’s official audit. This will highlight discrepancies early on.
- Create a License Compliance Team: Have a dedicated team or person responsible for tracking and managing SAP licenses.
2. Assessing SAP’s Audit Findings
After SAP completes its audit, you will receive a compliance report. This report is critical for negotiations:
2.1 Understand the Report Thoroughly
- Check the Details: Compare SAP’s findings against your internal data. Confirm the number of users, license types, and systems accessing SAP.
- Challenge Discrepancies: SAP may make errors in interpreting your data. Take time to verify every claim.
2.2 Evaluate Indirect Usage Claims
- Indirect Access is one of the murkiest parts of SAP licensing. SAP may claim licensing fees for third-party systems accessing SAP data, even passively.
- Example: If you have a CRM system that pulls customer data from SAP, SAP might categorize this as indirect access and demand licenses accordingly.
3. Negotiation Strategies
Negotiating your SAP audit settlement is not just about paying less—it’s about finding a fair deal that aligns with your software usage.
3.1 Establish a Baseline for Negotiations
- Get Expert Help: SAP licensing can be overwhelming. Engage a consultant specializing in SAP negotiations to assist with the settlement.
- Prepare Documentation: Have all the relevant documentation about your SAP usage ready. Be able to back up your claims with facts.
3.2 Push Back on Indirect Usage
- SAP’s claims around indirect usage can be debated. Not all forms of indirect access necessarily require additional licenses.
- Negotiate with Proof: Show exactly how your systems interact with SAP. If third-party systems only pull limited data, make that clear. You can also propose more cost-effective license types.
3.3 Bundle Future Purchases for Discounts
- If you are in a position to negotiate a settlement, consider bundling it with future purchases.
- Example: If SAP demands $200,000 in compliance fees, you might negotiate that down by committing to an additional purchase of licenses or services.
3.4 Timing is Key
- Fiscal Year-End Advantage: SAP is a large corporation with sales targets. Negotiating towards the end of their fiscal year can give you leverage. They may be willing to cut deals to close settlements quickly.
4. Avoiding Common Pitfalls
4.1 Don’t Settle Immediately
- Time is Your Ally: SAP will try to push you to settle quickly. Take your time to validate the audit findings. A rushed settlement often leads to overspending.
4.2 Avoid Upgrading Licenses Blindly
- SAP might suggest upgrading your licenses or adding additional services during an audit to reduce non-compliance. Be cautious of this, as it may result in buying licenses you don’t need.
Example: An IT company was advised to upgrade their professional user licenses to a more expensive category when, in reality, re-categorizing users and buying only a few additional licenses would have sufficed.
5. Building a Long-Term SAP Compliance Plan
After the settlement, it is vital to build a strategy to prevent issues in future audits.
5.1 Monitor Usage Regularly
- Create Regular Reports: Track license usage and monitor user access in real time.
- Adjust User Types: Downgrade users from expensive licenses to lower-cost options when their needs change.
5.2 License Management Tools
- Use third-party tools to track SAP usage automatically. These tools can help you understand usage patterns and optimize your licenses effectively.
- Example: Tools like Snow Software and Flexera offer visibility into SAP usage, which can help you avoid non-compliance proactively.
5.3 Training for License Compliance
- Employee Awareness: Educate your staff on proper license usage. Ensure managers understand the misuse costs and the financial consequences of adding users without proper licensing.
6. Working with Third-Party Advisors
An SAP audit can become overwhelming, especially for businesses without specialized IT asset management teams. Working with a third-party advisor can greatly help negotiate settlements.
6.1 How a Third-Party Advisor Helps
- Objective Analysis: A third-party advisor can conduct an unbiased review of your SAP audit findings and give you an accurate picture of your compliance status.
- Negotiation Leverage: These advisors often have insights into SAP’s pricing strategies and can leverage their expertise to push for better settlements.
6.2 What to Look for in an Advisor
- Proven Experience: Ensure your advisor has a proven track record in SAP licensing and negotiations.
- Understanding of Your Industry: If possible, work with an advisor familiar with your sector, as they will understand the common licensing requirements and pitfalls in your industry.
7. Practical Tips for Successful Audit Settlements
- Use Historical Data: Show SAP that your license needs fluctuate based on historical data. This can help reduce the penalties.
- License Conversion: Push for converting existing licenses to more cost-effective alternatives rather than purchasing additional licenses.
- SAP Sales Representatives: Develop a good relationship with your SAP account executive. They can sometimes help during tough negotiations by offering flexible options.
FAQ: Negotiating SAP Audit Settlements
What are SAP audit settlements?
SAP audit settlements resolve discrepancies found during license audits by SAP, leading to potential financial agreements.
How should I prepare for an SAP audit?
Review SAP licensing agreements and understand your organization’s software usage thoroughly to identify any risks.
Why do companies undergo SAP audits?
SAP conducts audits to verify that customers comply with license agreements and ensure proper software usage.
How can I identify non-compliance in SAP audits?
Review usage reports, compare them against your current licensing, and identify overused or misassigned licenses.
Is it mandatory to accept SAP’s audit findings?
No, companies can dispute findings if there is evidence to counter claims made by SAP auditors.
What risks are associated with SAP non-compliance?
Non-compliance can result in financial penalties, increased costs for additional licenses, and legal implications.
How can data collection impact negotiations?
Accurate data collection helps identify areas of over-licensing or under-licensing, providing leverage during negotiations.
Can I negotiate SAP audit findings without a consultant?
While possible, it’s often beneficial to involve a licensing expert to maximize negotiation outcomes.
How important is license optimization before audits?
Optimizing your licenses before an audit can help minimize financial exposure and avoid penalties.
What should be avoided during negotiations?
Avoid accepting the first offer, making hasty decisions, or agreeing without fully understanding the financial impact.
How can I address indirect usage issues?
Analyze all potential indirect usage points, categorize them correctly, and negotiate with SAP for the best terms.
What’s the best approach for audit disputes?
Provide detailed usage data, understand SAP policies well, and present a solid argument for areas you disagree with.
Should I proactively communicate with SAP?
Yes, proactive communication helps build a transparent relationship, potentially easing tensions during audit discussions.
How do contract amendments factor into negotiations?
Contract amendments may be negotiated to align terms more closely with current usage, potentially reducing penalties.
Is a negotiated settlement better than full compliance?
Settlements can sometimes be more cost-effective, but they should be weighed carefully against achieving full compliance.
