Negotiating SAP Licensing Contracts

Negotiating SAP Licensing Contracts

Negotiating SAP licensing contracts is a high-stakes endeavor for any enterprise IT team.
Read our SAP negotiations guide.

With complex license models and substantial dollar values at stake, a well-planned negotiation can save millions and ensure flexibility. At the same time, a poorly planned one can lock in excessive costs and risks.

This article offers an expert playbook on how to approach SAP license negotiations strategically, maximizing value and minimizing compliance risks.

Why SAP License Negotiations Matter

High Stakes and Complexity: SAP software agreements are unlike standard software deals. They involve intricate licensing metrics, substantial upfront and recurring costs, and long-term commitments.

Decisions made during contract negotiations will significantly impact your IT budget and operational flexibility for years to come.

For example, committing to too many licenses or the wrong metrics can lead to expensive shelfware (paid-for software that remains unused) or compliance penalties later.

Not Just a Purchase, But a Partnership:

An SAP contract often spans 3–5+ years and covers critical systems (ERP, finance, supply chain, etc.). You’re not simply buying a product—you’re entering a long-term vendor relationship.

The contract governs not only license fees but also maintenance and support costs, future pricing for additional licenses, and terms for audits and upgrades.

Careful negotiation ensures your organization isn’t overpaying and retains the agility to adapt as business needs change.

Room for Negotiation:

The good news is that SAP expects customers to negotiate. List prices are steep, but in practice, the large enterprises secure significant discounts and concessions.

It’s common for savvy negotiators to achieve 30–50% or more off list prices for on-premise licenses, and to obtain more favorable terms, such as price caps on maintenance increases.

The key is treating the SAP deal as a strategic negotiation, not a mere procurement formality.

Read Key Terms in SAP License Agreements.

Preparation: Know Your Needs and Leverage

Assess Current Usage and Future Needs:

Begin by thoroughly analyzing your organization’s SAP usage before engaging with SAP’s sales team.

Conduct an internal audit of existing licenses:

• How many users do you have, and what type of access does each need?
• Identify shelfware: licenses purchased but never used. These can often be terminated or repurposed.
• Forecast future needs for the next 3 to 5 years. For instance, if a new division will onboard SAP or you plan to implement additional SAP modules (such as SuccessFactors or Ariba), factor that in. This prevents buying “too much, too soon” or, conversely, missing out on volume discounts for upcoming growth.
• Real-world example: A global manufacturer found that out of 800 SAP users, 300 were over-licensed as full “Professional” users despite only needing self-service access. By reassigning those to lower-cost user types, they saved approximately $500,000 upfront and $110,000 per year in support fees. This illustrates the value of rightsizing before negotiating new terms.

Educate Yourself on SAP’s Offerings:

Knowledge is power in negotiation. Understand SAP’s licensing models and products:

• Be aware of different user license categories (Professional, Limited, Employee Self-Service) and module/engine metrics. Be aware of the approximate costs of each type (see the table below) so you can recognize a reasonable offer.
• Understand SAP’s strategic push. Currently, SAP is heavily promoting cloud subscriptions and RISE with SAP (an all-in-one cloud bundle). This means they may offer incentives if you show interest in moving to the cloud or RISE. For example, SAP might provide credits for trading in old on-prem licenses towards a new cloud contract.
• Research market benchmarks. What discounts have similar companies achieved? If you can cite that peer organizations got, say, 60% off on a similar deal, it strengthens your position. Leverage user groups, analysts, or third-party advisors for benchmark data.

Build a Cross-Functional Negotiation Team:

Don’t leave SAP negotiations to IT alone. Form a team that covers:

• IT and SAP Application Owners: to clarify what is truly needed and what isn’t. They can identify opportunities to eliminate unnecessary components.
• Procurement and Sourcing: to lead the commercial tactics – they’ll focus on getting the best price and terms, just as with any major vendor.
• Finance: to model the deal’s financial impact (CapEx vs OpEx) and ensure it aligns with budget constraints.
• Legal: to review contract language, ensuring terms around liability, audits, and usage rights are fair.
  This team should agree internally on goals (e.g., target price, must-have clauses) before facing SAP. Presenting a united front prevents the vendor from exploiting internal misalignment.

Read Key Clauses for Indirect Access in SAP Contracts.

Explore Alternatives for Leverage:

Even if you fully intend to stay with SAP, it helps to evaluate alternative solutions (Oracle, Microsoft, or other niche software). Knowing the cost and capabilities of alternative arms equips you with credible leverage.

You can subtly let SAP know that other options are available.

For example, “We are also evaluating XYZ cloud ERP for our subsidiary” can encourage SAP to sharpen its pencil. Be truthful – bluffing can backfire if SAP calls your bluff – but do make it clear you have done your homework on the competition.

SAP Licensing Models and Cost Basics

SAP’s pricing structure is multifaceted. It’s crucial to understand the main license models and how costs accumulate:

• Perpetual Licenses (On-Premise): A one-time purchase to own the software, plus annual maintenance (~20% of license price) for support and updates. You host the software on your servers. This model requires a large upfront payment; however, it may be more cost-effective over a long horizon if you utilize the system for many years.
• Subscription Licenses (Cloud/SaaS): A recurring (annual or monthly) fee that includes software access, hosting (in SAP’s cloud), and support. There’s little upfront cost, but you pay continually. If you stop subscribing, you lose access. Over more than 5 years, subscriptions can end up costing more than outright ownership, so evaluate the total cost over time.
• RISE with SAP: A bundled subscription offering that includes S/4HANA Cloud plus infrastructure and other services under one contract. It simplifies vendor management (with a single contract and bill) and often includes migration tools or credits. However, it locks you into SAP’s ecosystem entirely. Ensure you understand what’s bundled and what components you need.

User License Types:

Whether on-premises or in the cloud, user licenses drive a significant portion of the cost. SAP uses a named-user model with tiers of access.

The table below outlines common user categories and indicative pricing:

Pricing Note: These are rough list price ranges. Few customers pay the list price.

Negotiated discounts of 50% or more on on-premise licenses are common for large deals, and cloud subscriptions often have tiered pricing (the per-user rate drops as you buy more). Maintenance is typically 20–22% of the net license cost annually, and SAP has been known to increase support fees (e.g., a 5% hike in 2024, citing inflation).

In cloud contracts, support is often bundled, but be aware of potential renewal price increases. Always negotiate a cap on any annual increase (for example, “fees shall not rise more than 3% per year”) to protect against unexpected cost hikes.

Engine and Add-On Metrics:

In addition to user licenses, certain SAP products (industry solutions or special modules) use “engine” metrics – licensing based on usage measures like number of orders, revenue, or system size.

For example, SAP’s Extended Warehouse Management may be priced by the number of warehouse bins, or the SAP HANA database may be licensed based on memory size.

Understand any such metrics in your contract and how they might grow with your business. If a metric can increase (e.g., sales volume), try to negotiate a cushion or a way to true-up at a discounted rate, so a business success doesn’t automatically trigger a huge license fee.

Negotiation Strategies and Best Practices

1. Right-Size Before You Buy:

Before sitting at the table, ensure you only purchase what you need. Clean up inactive users and recycle existing licenses. If you are moving to S/4HANA or adding new modules, consider repurposing or trading in licenses from older products.

SAP often offers conversion credits for existing investments – for instance, crediting the value of unused SAP ECC licenses toward a new S/4HANA deal. Take advantage of these programs to avoid double-paying.

2. Time Your Negotiation for Maximum Leverage:

SAP sales teams have quarterly and annual targets. The end of SAP’s fiscal year (December 31) or quarter-ends can be opportune times to strike a deal.

As those deadlines loom, SAP may be more flexible with discounts to help them meet their numbers.

It’s not unusual to get an extra 10–15% price break just by finalizing a deal in Q4. Plan your procurement timeline accordingly; if you can align your project so that you’re negotiating in Q4, you increase your bargaining power.

3. Create Competitive Tension:

Nothing motivates a vendor like competition. Even if SAP is the incumbent, get quotes from alternatives or at least feign strong interest in them. If SAP believes there’s a chance they could lose the deal, you’ll see a much friendlier price and terms.

For example, having a proposal from Oracle or Microsoft Dynamics as a comparison can push SAP to match or beat certain terms. Use phrases like “We have other options on the table” during talks – it signals SAP that they must put forward their best offer.

4. Bundle Strategically, but Avoid Shelfware: Bundling can unlock bigger discounts – SAP might give a better price if you buy multiple products or additional cloud services together. Consider negotiating a package (for example, ERP, analytics, and a cloud platform service) if these are on your roadmap.

However, only bundle what you genuinely plan to use.

A common mistake is agreeing to include extra SAP modules because they’re “free” in the bundle; if you don’t deploy them, you’ll still pay maintenance and count them in your contract.

Aim for a win-win bundle: you get a bulk discount, and SAP secures more of your IT spend, but you aren’t stuck with unusable software.

5. Nail Down Contract Flexibility Clauses:

Push for terms that give you flexibility as conditions change:

• Price Protection: Ensure that any discount you negotiate isn’t a one-time thing. Write into the contract that the discount (%) off the list price applies to any additional licenses or renewals. This prevents SAP from reverting to full price in the future (“no discount reversal” clause).
• Future Growth Locked In: If you anticipate needing more licenses in a year or two, negotiate the ability to add users or capacity at the same unit price you’re getting now. For example, “additional users added within 24 months will be at the same per-user rate as the initial purchase.” This guards against price creep once you’re locked in.
• Ability to Adjust Downward: Vendors often resist reducing commitments, but try to include a provision that allows for a reduction in some license volume or a swap of licenses for other products at renewal. Even a clause like “customer may reduce up to 10% of users at renewal without penalty” can save money if your workforce shrinks or you switch a business unit off SAP.
• Maintenance and Renewal Caps: As noted, cap any annual maintenance fee increases (e.g., 0–3% max). For subscriptions, negotiate that the renewal pricing will not increase significantly. If SAP insists on an inflation-linked increase, negotiate a reasonable cap (say CPI or 3%, whichever is lower).

6. Address Indirect Access Upfront:

Indirect use (when non-SAP systems or external users access SAP data, e.g., a web store creating an SAP sales order) has led to surprise bills for many. SAP now offers Digital Access licensing to cover this via document counts or an “all-you-can-eat” model (commonly priced at ~10% of your contract value for unlimited documents).

Don’t leave this topic unaddressed. In negotiations, explicitly ask: How will indirect usage be covered? You might negotiate a fixed number of document licenses or a flat fee that covers known third-party integrations.

Getting this in writing now will prevent disputes during audits later.

If SAP’s proposal is silent on digital access, bring it up – you don’t want a situation where an interface to Salesforce or a mobile app triggers a licensing violation after the deal.

7. Consider Phased Rollouts and Payment:

If you won’t use all the licenses on day one, don’t pay for them all on day one. For on-prem licenses, you might purchase in tranches (e.g., 500 users now, with an option to buy 300 more next year at the same discounted rate).

For the cloud, negotiate ramp-up terms: consider starting with a lower number of subscriptions and increasing over time as you go live. Another approach is to negotiate a delayed start for maintenance or subscription fees until the system is fully operational.

For example, if you sign an SAP SaaS contract in June but won’t go live until December, ask for the first six months at no charge or a reduced fee. SAP often will agree to align fees with value realization if pressed.

8. Use Third-Party Maintenance as Leverage (Carefully):

SAP’s standard 22% maintenance fees can be a burden, especially on unused licenses. Third-party support providers (like Rimini Street or Spinnaker) offer support for SAP products at roughly 50% of SAP’s fee, though without direct SAP upgrades.

Some enterprises quietly obtain a quote from a third-party support firm and share it with SAP to negotiate a more favorable maintenance agreement.

The mere possibility of losing maintenance revenue might prompt SAP to offer a concession (e.g., an additional discount or a freeze on support costs for a specified period). Use this tactic cautiously and only if you’re willing to consider it; it can sour the tone if not handled diplomatically.

9. Document Every Concession:

During talks, you might hear verbal promises like “we’ll throw in 100 extra user licenses” or “you can exchange those module licenses later if not used.”

Do not assume these are granted until they are in the written contract. Insist that all negotiated points are explicitly documented in the order form or agreement.

This includes discount percentages, future price locks, specific usage rights, any credits, free periods, and special terms related to audits, among other considerations.

If it’s not written, it doesn’t exist. Before signing, conduct a thorough review to ensure the final paperwork accurately reflects the agreed-upon terms. It’s much easier to correct it before signing than to fight later over “he said, she said” misunderstandings.

10. Plan for Ongoing License Management:

Negotiation is not a one-time event – it’s part of a lifecycle. Once the contract is signed, establish governance to manage your SAP licenses actively:

• Assign someone to continuously monitor license utilization and compliance.
• Periodically run SAP’s measurement tools (USMM/LAW) and internal audits to catch any usage drift or misclassification before SAP audits you.
• Keep an eye on new SAP products or licensing policy changes that could affect your agreement (for instance, SAP’s shift in strategy or new bundling offerings).
  Staying proactive will put you in a stronger position for the next negotiation or true-up, since you’ll avoid nasty surprises and have data on your side.

Common Pitfalls and How to Avoid Them

Even experienced IT procurement teams can stumble on SAP’s nuances.

Here are common pitfalls in SAP license negotiations and ways to mitigate them:

• Overbuying and Shelfware: SAP’s sales proposals might include “extra” licenses or modules you don’t immediately need. It’s tempting to take them if they’re heavily discounted, but remember you’ll pay maintenance on those each year. Unused software (shelfware) is wasted budget. Mitigation: Rigorously question each element in the deal – “Do we have a concrete plan to use this in the next 12-18 months?” If not, consider cutting it or at least structuring the deal so you can drop it later without penalty. Start smaller with an option to expand, rather than buying everything upfront “just in case.”
• Unclear Definitions and Metrics: SAP contracts are dense with definitions (what exactly counts as a “Professional User”? How is an “Invoice Document” counted?). If these are vague, you could be in trouble later if SAP interprets them strictly. Mitigation: Ensure that all license metrics are clearly defined in the contract. For example, if licensing is based on processor cores or revenue bands, specify how these measurements are determined. If there’s any ambiguity, ask SAP to clarify in writing now. It’s worth having your legal team or a licensing expert review the language.
• Ignoring Indirect Usage: As discussed, failing to account for indirect access is one of the most expensive gotchas. You might think only your 500 named employees need licenses, but if an external customer portal or a non-SAP app touches SAP, that’s additional usage. Mitigation: Discuss indirect access during negotiation and include a solution (digital access licenses or a waiver) in the contract. Never assume you can quietly use SAP data with third-party systems without additional licensing – eventually, an audit will catch it.
• No Protection on Renewals: You hammer out a great price for year one… but what about year three? Some companies focus on the immediate costs and forget that subscription renewals or even perpetual support renewals can jump if not capped. SAP has standard clauses that allow for 5-7% uplifts or align with inflation indexes. Mitigation: Negotiate renewal caps or freezes. If you receive a 50% discount now, ensure the contract states that the discount will also apply at renewal. If you’re signing a three-year cloud deal, push for a clause that renewal in year four will be at no more than X% increase from year three. Lock in as much as you can so you’re not at SAP’s mercy later.
• Underestimating Implementation Timeline: In eagerness to close the deal, companies sometimes start the contract term ticking even though the project won’t go live for months. This leads to paying for software that isn’t delivering value yet. Mitigation: Align contract start dates or payment schedules with project milestones to ensure timely completion. If there’s a delay in your implementation, contact SAP to discuss adjusting the subscription start date or receiving a credit for that period. It’s often negotiable if approached proactively.
• Lack of Internal Alignment: SAP salespeople often engage with different stakeholders (IT, procurement, and executives) to find a champion. If your team isn’t united, SAP might exploit the gaps – e.g., promising a business VP something that contradicts what procurement is negotiating. Mitigation: Present a unified front. Have regular internal debriefs during negotiations. Ideally, channel all communication through a single lead negotiator so SAP can’t circumvent the process and create confusion. Internally agree on your “walk-away” conditions and non-negotiables ahead of time.

By anticipating these pitfalls, you can steer the negotiation away from common traps. Every clause you negotiate and every license you right-size is an investment in avoiding headaches down the road.

SAP’s headquarters are in Walldorf, Germany. Major SAP contracts can run into tens of millions, so effective negotiation and planning are essential to control costs.

Negotiating an SAP contract may seem daunting, but with thorough preparation and a clear strategy, you can achieve a deal that meets your business needs without breaking the bank. It’s about balancing cost, risk, and flexibility – ensuring you get fair value today and don’t regret the terms tomorrow.

Recommendations

• Start Early and Plan: Begin the license renewal or new purchase process 6 to 12 months in advance. Early preparation gives you time to audit usage, remove waste, and set negotiation goals without last-minute pressure.
• Know Your Entitlements: Maintain an up-to-date inventory of what SAP licenses you own and use. This knowledge prevents over-buying and strengthens your position when negotiating for additions or changes.
• Insist on Benchmark Discounts: Don’t accept SAP’s first offer. Aim high in discount negotiations – 50% off or more on license fees is not unreasonable for large enterprises. Use industry benchmarks or third-party advisors to validate what discount and terms you should achieve.
• Protect Your Future: Write the contract to guard against future cost increases. Cap maintenance or subscription fee hikes, lock in your discount percentage for later purchases, and include flexibility to adjust volumes or swap products at renewal.
• Address Compliance Risks: Proactively include clauses for indirect access and audit processes. For example, secure a fixed price or allowance for indirect usage, and agree on reasonable audit notification and resolution procedures to avoid surprise bills.
• Leverage SAP’s timing: Align your negotiations with SAP’s quarter or year-end, if possible, and consider alternative vendors or third-party support quotes as needed. Timing and outside options are powerful bargaining chips.
• Document Everything: Ensure every concession, discount, and special condition is written into the contract. Verbal assurances mean nothing later – get it in the agreement to make it enforceable.
• Use Expert Help if Needed: For complex deals, consider consulting with SAP licensing specialists or legal advisors who are familiar with the intricacies of SAP licensing. They can identify hidden risks and opportunities that save money well beyond their fee.
• Plan for True-Ups: If you anticipate business growth (i.e., increased user numbers, higher transaction volumes), negotiate pricing for these scenarios now. Don’t leave your next true-up to chance – include unit prices or discount tiers for expansions in the contract.
• Continuous Governance: After signing, treat license management as an ongoing discipline. Regularly track usage, optimize license assignments, and engage SAP early if you need changes. A well-managed SAP environment will make the next negotiation much smoother.

FAQ

Q1: How much discount is reasonable to expect when negotiating with SAP?
A: It depends on the deal size and timing, but large enterprises commonly secure discounts in the range of 30% to 50% off SAP’s official price list for perpetual licenses. In some cases, even higher discounts (>50%) are achieved, especially when negotiations occur at the end of the fiscal year or when committing to a major S/4HANA migration. Cloud subscription discounts tend to be smaller on a percentage basis (since list prices are less transparent), but SAP might offer other incentives like free months or service credits. Always push for as much discount as benchmark data suggests – SAP’s first quote will rarely be their best offer.

Q2: Should we choose perpetual licenses or SAP’s cloud subscription (RISE/SaaS)?
A: This depends on your company’s strategy. Perpetual licenses (on-premise) mean a higher upfront cost but full control and potentially lower total cost over a 5-10 year period if you use the software extensively. Subscriptions (RISE or S/4HANA Cloud) shift costs to a pay-as-you-go model (OpEx), with lower upfront spend, and include infrastructure and updates – ideal for flexibility and always having the latest version. However, over many years, subscription fees can add up to more than a one-time purchase. Weigh the 5+ year TCO: if you prioritize agility and lower short-term costs, the cloud is attractive; if you want long-term cost control and ownership, on-premises may win. You can also negotiate hybrid models, or start with subscription and have conversion rights to on-prem if needed (or vice versa).

Q3: How can we mitigate the risk of indirect access charges in our SAP contract?
A: The best approach is to tackle it head-on during negotiation. Do an inventory of all systems and users that connect to SAP indirectly (customer portals, third-party apps, etc.). Then discuss with SAP a licensing arrangement for those indirect users or documents. Often, the solution is SAP’s Digital Access license, which allows you to either purchase a package of documents (e.g., a bundle of 100,000 sales document creations) or an unlimited usage license for a fee. Negotiate a one-time flat fee or an allotment that covers your known indirect usage. Ensure the contract language clearly states that, with this in place, you are compliant for those indirect scenarios. This prevents SAP from coming back later claiming you owe for indirect use. In short, don’t ignore the issue – license it upfront at a known cost rather than an unknown penalty.

Q4: When is the best time to negotiate an SAP deal?
A: Leverage timing to your advantage. The end of Q4 (calendar year-end) is typically the best time, as SAP is pushing to meet annual targets – your sales representative may have an extra incentive to close your deal by December. Quarter-ends (March 31, June 30, Sept 30) are also leverage points, though Q4 is usually strongest. Additionally, if you have a compelling event (like your current contract expiring, or you’re evaluating competitors), that timing gives you an upper hand. Negotiate when SAP needs the deal more than you do. Conversely, avoid negotiating when you’re under extreme time pressure – if SAP senses you must sign quickly (e.g., a project deadline), it’s harder to get concessions.

Q5: What are the key contract terms to focus on besides price?
A: Aside from license and subscription prices, pay attention to:

• Maintenance Terms: What is the annual maintenance fee (as a percentage of the license), and can it be increased? Negotiate caps on any increase, and see if you can get a grace period for unused licenses (shelfware) or a lower rate for them.
• Audit Rights: SAP reserves the right to audit you, ensuring the contract provides reasonable notice and outlines dispute resolution procedures in the event of findings. You might insert language requiring SAP to discuss findings and allow you to purchase additional licenses at the pre-negotiated discount to resolve compliance gaps (instead of paying list price penalties).
• Renewal and Extension: For cloud, define how renewals will be priced. For on-prem, clarify your rights if you choose not to renew maintenance (you can usually still use the software, but lose support).
• Termination or Downsize Options: If it’s a subscription, can you reduce the number of users or modules at renewal? What if a merger or divestiture occurs – can you transfer licenses or adjust volumes without incurring additional fees? These scenarios should be contemplated to avoid lock-in.
• Future Product Rights: If you’re expecting to move to S/4HANA or another SAP product, negotiate migration rights now – e.g., the ability to swap current licenses for equivalent S/4HANA licenses at favorable terms. This avoids paying twice for similar functionality.

Q6: How do we handle SAP annual maintenance fees – are they negotiable?
A: SAP’s standard maintenance is 22% of the license net price annually, and this rate itself is not usually negotiable for on-premise deals (it’s a standard rate for SAP Enterprise Support). However, there are a few strategies:

• Negotiate the Base: By securing a significant discount on the license price upfront, you effectively lower the absolute cost of maintenance (since 22% of a lower number is less).
• Cap Increases: Ensure the contract caps maintenance fee increases. SAP has raised support fees in recent years; a cap (like 0-3% per year) protects you.
• Shelfware Reduction: If you have unused licenses, you can attempt to terminate their maintenance at renewal (stop paying for support on unused software). SAP may resist, but if you can demonstrate a lack of use, you have a case.
• Third-Party Support Leverage: As mentioned, having the option of third-party support at half the cost gives you a bargaining chip. Even if you don’t switch, showing SAP you’re considering it can sometimes lead them to offer a discount or credits to keep you on SAP support.
  In summary, you generally can’t reduce the 22% rate outright in the contract, but you can limit its growth and manage what it’s applied to.

Q7: What if our user count or business changes after the contract? Are we required to pay for unused licenses?
A: In the case of perpetual licenses, once you buy them, they’re yours – you won’t get a refund if they go unused. So it’s important to avoid over-purchasing. However, you might negotiate swap rights (e.g., exchange some licenses for others) or the ability to drop a portion of maintenance as discussed. In subscription contracts, you typically commit to a specified number of users or usage for a term (such as 3 years). During that term, you can usually only increase the number, not decrease it. This is why negotiating a reasonable volume and perhaps a mid-term checkpoint is key. For instance, some contracts allow a one-time adjustment after year 1 to true-down or true-up based on actual deployment. If your business might downsize or shift, try to build that flexibility in at renewal points. Additionally, keep an eye on contract anniversary dates – if you know you’ll need fewer licenses next term, notify SAP in advance and negotiate the reduction as part of renewal. SAP will often work with you to resize the contract (maybe with some conditions) rather than lose you as a customer entirely.

Q8: How can engaging a third-party expert or advisor help in SAP negotiations?
A: SAP licensing is notoriously complex, and SAP’s negotiators do this every day. Bringing in an expert – whether a consultant who specializes in SAP contracts or leveraging peer benchmarks via an advisory firm – can tilt the playing field back in your favor. An expert can:

• Provide benchmark data on discounts and terms that companies similar to yours have obtained, so you know what’s achievable (and when SAP is low-balling an offer).
• Spot hidden pitfalls in the contract language or metric definitions that a layperson might miss, ensuring you don’t agree to problematic terms.
• Develop a negotiation strategy, including timing and tactics, based on experience. They are familiar with SAP’s common sales strategies and areas of flexibility.
• Save you time by crunching the numbers on various scenarios (on-prem vs cloud costs, etc.) so you can make an informed decision quickly.
  For a multi-million dollar contract, the cost of an advisor is often trivial compared to the savings they can help secure. Even Gartner or vendor-neutral licensing advisors can be engaged for quick benchmark guidance if not a full consulting project. In essence, if you don’t have in-house expertise, consider external help to avoid costly mistakes.

Q9: What are SAP conversion credits, and how do we use them in negotiations?
A: Conversion credits (also called trade-in credits) are incentives SAP offers to customers moving from old products to new ones. For example, if you have a big investment in SAP ECC (the older ERP) and you’re migrating to SAP S/4HANA, SAP may let you apply the value of your existing licenses toward the new purchase. A typical offer could be “100% credit if you convert now,” meaning you don’t pay twice for equivalent functionality. However, these offers may diminish over time (e.g., only 50% credit if you wait until closer to the ECC end-of-support date). In negotiations, bring up your existing investments. Make it clear you expect recognition of the money you’ve already spent on SAP. Negotiate for maximum credits – ideally 1:1 value – and clarity on how they’re applied (are they reducing the new license cost or giving you extra user licenses?). Also, clarify what happens to the old licenses (usually, they must be retired). These credits can significantly reduce the cost of a migration, but they’re not always automatically offered; you need to ask and push for them.

Q10: How can we ensure long-term value from our SAP agreement after it’s signed?
A: Winning a good contract is only the beginning. To extract the full value over its life:

Prepare for renewal well in advance. As your contract’s end approaches, revisit your strategy: what can you cut, what new needs do you have, and what leverage exists (such as an upcoming competitive project or SAP’s sales initiatives)? Much like the initial negotiation, an early and well-informed approach to renewal will yield significant benefits.
By actively managing the SAP relationship and licenses, you ensure the negotiated benefits (discounts, flexibility) truly materialize in practice and that your company continues to optimize costs over the long haul.

Implement strong asset management by actively tracking your SAP license usage. Use SAP’s tools or third-party solutions to monitor license compliance and optimize license allocation (e.g., don’t leave users on a Professional license if they only need a Limited license).

Review usage periodically: Set quarterly or biannual checkpoints to compare what you bought vs. what you’re using. This way, if you see under-utilization, you can plan to adjust at the next renewal. If you notice overutilization in one area, you have time to discuss an interim solution with SAP before an audit forces a purchase.

Engage with SAP user groups: Other customers often share valuable tips or updates (for instance, SAP introducing a new licensing option or an amnesty program). Staying informed enables you to capitalize on new opportunities and protect against emerging threats.

Read about our SAP Contract Negotiation Service.

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