Top 20 Things Every Enterprise Needs to Know About SAP License Negotiations

Top 20 Things Every Enterprise Needs to Know About SAP License Negotiations

Introduction: SAP license negotiations can make or break your IT budget. CIOs and procurement leaders must master SAP license negotiation and SAP contract strategy to avoid overspending.

SAP’s complex agreements, from SAP S/4HANA pricing and SAP license models (e.g., SAP perpetual vs subscription) to audit clauses and indirect usage terms, are full of pitfalls.

This pillar guide covers the top 20 insights on negotiating SAP contracts, including managing SAP audit clauses, indirect access risks, support costs, and more.

By understanding these key points, enterprises can secure optimal deals, ensure compliance, and maximize the value of their SAP investments while avoiding SAP’s default overcharging tendencies. For an in‑depth overview of SAP negotiation topics, read our Ultimate Guide to SAP Contract Negotiations.

Let’s dive into the 20 essential things every enterprise should know when negotiating with SAP:

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1. SAP’s License Models (Perpetual, Subscription, Cloud, Hybrid)

SAP offers multiple licensing models, and knowing their differences is fundamental:

• Perpetual Licenses: A one-time purchase (CapEx) giving you permanent usage rights. You own the software and typically pay ~22% annual support for upgrades. Perpetual licenses are common for on-premise SAP deployments (e.g., legacy ECC). They allow you to stop paying maintenance and still use the software indefinitely if needed.
• Subscription Licenses (SaaS/Cloud): A recurring (OpEx) model, where you pay an annual or monthly fee to use the software. If you stop paying, you lose access. Subscription deals (like SAP S/4HANA Cloud or RISE with SAP) bundle software, support, and hosting into one price. There’s a lower upfront cost, but over a 5-10 year span, subscriptions can end up costing more than a one-time license plus maintenance.
• Hybrid Models: Many enterprises run a mix, for example, perpetual on-premise core ERP plus cloud subscriptions for specific apps (SuccessFactors HR, Ariba, etc.). SAP’s RISE offering is a hybrid bundle (S/4HANA as a service plus cloud infrastructure). Hybrid licensing requires careful coordination to avoid double payment for overlapping functionality.
  Tip: Map out which model fits each part of your landscape. Perpetual gives you control and the option of third-party support, while cloud subscriptions offer flexibility but can introduce a degree of lock-in. In negotiations, leverage the model differences – e.g., evaluate the Total Cost of Ownership of a subscription versus a perpetual license to make your case for better pricing.

Read SAP Negotiations: 10 Tips for Successful Licensing and Contract Strategy.

2. Know the Differences Between ECC and S/4HANA Licensing

SAP S/4HANA (the modern ERP) introduced new licensing constructs that differ from the older ECC model:

• User Categories: ECC had Professional, Limited Professional, Employee, etc. S/4HANA on-premise has redefined user types (e.g., Professional Use, Functional Use, Productivity/User). These have clearer definitions and scopes. Professional users are the most powerful (and expensive) licenses, whereas Productivity or Self-Service users are cheaper. Knowing these categories helps you avoid over-assigning costly licenses.
• Digital Core vs Add-Ons: In S/4HANA, the core ERP features are bundled under the “Digital Core” license. Extra modules (industry or LoB solutions) might require separate “engine” licenses measured by metrics (transactions, revenue, etc.). Under ECC, many of those were separate as well, but S/4’s bundles are broader. Ensure you understand what’s included in S/4HANA Enterprise Management licenses versus what’s extra.
• S/4HANA Cloud (RISE) vs On-Prem: On-premise S/4HANA uses perpetual licenses, while S/4HANA Cloud or RISE uses subscription Full User Equivalent (FUE) metrics. In RISE, user licensing is weighted – e.g., a Professional user counts as 1.0 FUE, a Functional user as 0.5 FUE, etc. You subscribe to a total FUE consumption. Overestimating FUEs or user counts will inflate costs. In contrast, on-prem lets you buy a fixed number of named users.
• License Conversion: Migrating from ECC to S/4 isn’t a simple swap. SAP offers conversion programs, but you may not get full credit for ECC licenses. In negotiations, push for credits or conversion discounts when upgrading to S/4HANA. Do not assume your ECC investment automatically carries over – it’s a point to negotiate to avoid paying twice for similar functionality.

Understanding these differences is crucial. Many companies have been caught off guard, thinking that S/4HANA licensing works similarly to ECC.

When negotiating S/4HANA deals, use your ECC baseline as leverage – SAP wants you off ECC, so negotiate hard on pricing and terms for S/4, including locking in incentives for the migration.

Read Key SAP Contract Terms and Clauses Procurement Must Manage.

3. Be Prepared for Indirect Access & Digital Access Licensing

Indirect access is one of the trickiest SAP licensing issues. It occurs when non-SAP systems or users indirectly use SAP data (e.g., a third-party app creating an SAP sales order).

Historically, SAP could claim those interactions required a license, leading to surprise fees (the famous Diageo case saw SAP demand millions for Salesforce-to-SAP integrations). Every enterprise must be aware of:

• SAP’s Digital Access Model: In 2018, SAP introduced an optional Digital Access licensing approach to address indirect use. Instead of licensing hypothetical users, Digital Access charges by documents (e.g., number of Sales Orders, Invoices, etc., created via external systems). If you opt into this model, you purchase an allotment of document records. This can bring predictability, but you must understand your document volumes.
• Old vs New Approach: If you don’t adopt Digital Access, SAP can still audit indirect use under traditional terms – meaning if a third-party system triggers SAP functionality, SAP might insist those are unlicensed users. This is a compliance risk that can result in a hefty “back-license” cost. The Digital Access license is meant to legitimize those scenarios (for a fee).
• Negotiation Strategy: Inventory all third-party integrations that interact with SAP. Discuss with SAP upfront how they should be licensed. If you choose Digital Access, negotiate which document types are included and ensure there is no double-dipping (e.g., a transaction shouldn’t require both a document license and a user license). Also, negotiate any available conversion credits if you’re moving from user-based indirect licensing to the document model – SAP has run programs (like the Digital Access Adoption Program) where they offer discounts or credit to adopt the new model.
  Key Takeaway: Indirect access fees can catch you off guard. Make it a topic of negotiation – whether through the document model or explicit contract clauses that protect certain integration scenarios. Clarity here can save your company from multi-million-dollar compliance surprises down the road.

Read How to Negotiate with SAP.

4. Navigate SAP BTP (Business Technology Platform) Licensing

SAP’s BTP is a portfolio of cloud platform services (database, integration, analytics, development tools), and it has its complex licensing schemes that you must understand to negotiate effectively:

• Consumption-Based Credits: SAP BTP offers a Cloud Platform Enterprise Agreement (CPEA) and the newer BTP Enterprise Agreement (BTPEA). These are prepaid credit models. You commit to spending a specified amount (in currency or credits) on BTP services annually. All BTP services you use are deducted from this credit pool. If you under-use, credits expire (use-it-or-lose-it); if you over-use, you pay extra (often at list price).
• Subscription Models: Alternatively, some BTP services can be licensed via fixed subscriptions (pay a set fee for a specific capacity of a service). A subscription provides cost predictability for steady usage, whereas the consumption model offers flexibility for variable needs. SAP even allows mixing the two models in one BTP contract.
• Negotiation Points: When negotiating BTP, right-size your commitment. Don’t let SAP upsell more credits than you realistically need – unused BTP credits are wasted budget. Try to negotiate provisions like rollover of unused credits or the ability to purchase additional credits at the same discounted rate if you exceed the prepaid amount (so you don’t pay a premium for overage). Also, clarify that all necessary services are included in the scope of your agreement; some specialized services may not be covered by the generic credit pool without special terms.
  Tip: Because BTP usage can be hard to predict, build in governance. Ensure you have transparency (access to BTP usage reports) and perhaps quarterly checkpoints with SAP to adjust if needed. From a negotiation standpoint, if BTP is part of a larger deal, push for volume discounts on the credits and insist on the flexibility to adjust the mix of services as your needs evolve.

Read SAP Hybrid Licensing Case Study – Swedish Telecom Provider Saves 20%.

5. Recognize Cloud Application Licensing Nuances (SuccessFactors, Ariba, etc.)

SAP’s cloud application suites (SuccessFactors, Ariba, Concur, Fieldglass, etc.) each use unique licensing metrics.

When negotiating these, you need to dive into the details:

• SAP SuccessFactors (HCM): Typically licensed on a per-user or per-employee-per-month (PEPM) basis. For core HR (Employee Central), a common model is PEPM – e.g.,. $X per employee per month. Other modules (recruitment, performance, learning) might also be priced per named user or employee. Know your employee counts and consider growth: contracts often include true-up clauses that apply if you exceed the licensed employee count. Negotiate pricing tiers so that if your workforce grows, you don’t automatically jump to a higher cost per user.
• SAP Ariba (Procurement): Ariba licensing can be based on annual spend volume through the platform or the number of documents (such as purchase orders and invoices) processed. For example, you might pay a subscription fee of up to $100 million in procurement spend per year, with higher tiers available if you exceed that amount. Ensure you understand the bands and what happens if you go over (is there an automatic price increase or the ability to true-up to the next tier during the term?). Also, be aware that Ariba involves supplier network fees (suppliers pay SAP a portion); while that doesn’t directly impact your budget, it can affect supplier relationships. In negotiations, if your spend or document count is likely to increase, try to secure a discounted rate for higher volumes or a cap on the amount of fees that can rise at renewal.
• Other Cloud Products: Concur (travel & expense) is typically billed per active user per month – you pay for each employee using the system every month. SAP Fieldglass (external workforce management) might be based on the number of contractors managed or the spend on contractors. SAP Analytics Cloud can be licensed per user or by capacity. The key is that each has a metric aligned to business usage. Always align the metric with your business reality. For example, if Concur is billed per active user, ensure you can deactivate users who leave to avoid charges, or negotiate for an average usage rate instead of a peak usage rate.
  Negotiation Advice: Do not accept cloud metrics at face value. If a metric doesn’t suit your usage pattern, ask SAP if alternatives exist (sometimes SAP has flexibility, like offering a per-user metric vs. per-employee). Also, ensure your contract has a clear definition of the metric (what counts as a “user” or a “transaction”?) to avoid ambiguity. For instance, with Ariba, define what constitutes “spend” or which documents count toward your limit. Clarity here will prevent disputes later and ensure you only pay for the actual value received.

Read SAP Cloud Negotiations: New and Renewal Contracts.

6. Inventory and Right-Size Your Licenses Before Negotiating

One of the biggest mistakes enterprises make is entering negotiations without a clear picture of their current SAP usage.

Before you even start talking numbers with SAP, do an internal license audit:

• Run SAP’s Tools: Use SAP’s License Administration Workbench (LAW) or user measurement reports to see how many users are assigned to each license type and which engines/modules are in use. You may discover, for example, that 500 users are assigned “Professional” licenses but only 300 truly need that level (the rest could be downgraded to a cheaper license type). This represents immediate savings potential.
• Identify Shelfware: Look for licenses or subscriptions you’re paying for but not using. Common culprits include modules that were purchased but never implemented, or user licenses allocated to former employees or inactive users. Many SAP customers find they’re only utilizing 70% (or less) of what they own, meaning 30% is shelfware, incurring maintenance fees. Document these and quantify the cost. This becomes a powerful argument in negotiations to eliminate or repurpose that shelfware (see item #16 on negotiating flexibility for this).
• Assess Future Needs: Right-sizing isn’t just about cutting; it’s about aligning with actual needs. Maybe you find a certain engine license is overused (risking compliance) – that’s a need to address in negotiation (perhaps by purchasing additional licenses or moving to a different metric) alternatively, if you discover that an upcoming project will require new SAP functionality, plan to include it in the negotiation rather than purchasing it ad-hoc at higher prices later.
  Action Step: Conduct an internal or third-party “License Position Assessment”. This gives you a baseline of what you have, use, and need. It equips you with facts, enabling you to negotiate from a position of knowledge. SAP sales teams are far less likely to push unnecessary products if you demonstrate you know your usage inside out. Plus, if you find you’re under-licensed somewhere (compliance gap), you can quietly address it rather than SAP discovering it during an audit and using it against you.

Read SAP Concur Case Study – UK Engineering Firm Cuts Costs by 40%.

7. Beware of SAP’s Sales Tactics and Blind Spots

SAP’s sales organization is trained in tactics to maximize revenue – you need to anticipate and counter these moves:

• “End of Quarter” Pressure: SAP often gives the best discounts at quarter-end or year-end as they race to hit quotas. They might tell you an offer or discount is only valid if you sign by a certain date (e.g., “this Q4”). This is a tactic used to create a sense of urgency. While it’s true that discounts can be higher at quarter-end, don’t let the clock force you into a bad deal. Be prepared, and use this timing to your advantage (see #8).
• Bundling and Over-selling: A classic vendor tactic is bundling extra software you didn’t plan for. For example, “If you upgrade to S/4HANA now, we’ll throw in SAP Analytics Cloud at a great price.” It sounds attractive, but it could lead to buying shelfware (paying for maintenance or a subscription to something you won’t use soon). Always ask: Do we truly need this product in this timeframe? It might be better to say no to bundles or negotiate a clause to swap it later if not used.
• Future Growth Projections: SAP reps might use optimistic projections (“You’ll have 20% more users in 2 years, let’s license them now at a discount!”). Be realistic. It’s often better to buy what you need now and add later, even if the later licenses cost slightly more, than to overcommit upfront. Otherwise, you’re stuck paying for unused capacity.
• Audit Threats and Compliance Scare: If negotiations stall, sales personnel may subtly remind you that an audit could be around the corner. Don’t be intimidated. If you’ve done your homework (see #6 and #9), you can respond confidently. It’s wise to maintain a professional tone, but make it clear that you expect a fair deal, not one under the duress of an audit threat.
  Remember: SAP’s team will have a playbook – from “friendly” approaches like touting innovation, to pressure tactics like deadlines and FUD (fear, uncertainty, doubt about compliance or support timelines). As the customer, stick to your analysis of value. Every line item in a proposal should map to a business need if it doesn’t, push back or cut it out. It’s not rude; it’s good business.

Read SAP Negotiation Strategies.

8. Leverage Timing: Use Quarter-End and Year-End to Your Advantage

As noted, timing can significantly influence the deal you get from SAP. Instead of being a victim of quarter-end pressure, make it your leverage:

• Plan Negotiations Around SAP’s Sales Calendar: If possible, align your purchase or renewal discussions so that they conclude in Q4 or at the end of SAP’s fiscal year (SAP’s fiscal year-end is usually December 31). When SAP needs that last deal to hit their number, you’re in a stronger position to demand extra discounts or concessions. One tactic is to gently slow down talks so that the final sign-off happens near a quarter-end – you may see SAP suddenly improve the offer.
• End-of-Year Specials: SAP often rolls out special promotions near year-end (or sometimes during the Sapphire conference season) – e.g., extra discounts on cloud subscriptions or conversion offers for ECC to S/4HANA. Be aware of the promotions in play; your SAP account team may not volunteer them if you don’t ask. Inquire about any global incentive programs that may apply to your deal.
• Avoid a Last-Minute Scramble: While leveraging timing, don’t put yourself in a corner with an expiring contract and no time to spare. Start early (6-12 months before the renewal or purchase deadline) to avoid waiting until the end of the quarter. If you engage SAP at the last minute, they know you have no choice, which gives them the upper hand. Starting early lets you use time as a negotiating tool rather than a weakness.
• Be Willing to Walk Past a Deadline: This is tricky, but if SAP’s quarter-end is here and the deal isn’t right, be ready to let it slip. Often, SAP will come back even after the quarter with a better proposal rather than lose the sale entirely. You must gauge this carefully (and ensure your business can afford a delay), but calling their bluff can sometimes yield surprising improvements once the new quarter starts and they still want your business.
  In summary, timing is one of your biggest bargaining chips. SAP’s urgency can translate into your savings, as long as you’ve prepared well and aren’t the one scrambling against a hard deadline.

Read SAP Negotiation Renewal Strategies for Cloud Contracts.

9. Negotiate Favorable Audit Clauses in Your Contract

Every SAP contract contains an audit clause giving SAP the right to audit your usage. You can’t remove it entirely, but you can negotiate the terms to make audits more fair and manageable:

• Limit Audit Frequency: Push for language such as “SAP may audit no more than once per year” and preferably “with at least 30 days’ written notice.” This prevents constant disruption and surprise audits. Also, ensure audits are conducted during normal business hours and do not unreasonably interfere with operations – standard language, but important.
• Define Audit Process: The contract should outline the process for conducting an audit. For example, specify that you will run SAP’s measurement tools and provide data, rather than SAP installing something invasive. Define the scope (e.g., which systems or affiliates are subject to audit) to avoid fishing expeditions.
• Negotiate a Cure Period: This is critical – incorporate a clause that if an audit finds you out of compliance, you have a specified window (e.g., 30-60 days) to purchase additional licenses to resolve the issue without penalties. Essentially, this converts an audit into a routine true-up transaction. SAP might not offer this by default, but many customers have negotiated it. It ensures you won’t get a giant surprise bill at list price; you’ll pay your standard discounted rate for any shortfall.
• Confidentiality and Finality: Ensure the audit results are confidential (SAP shouldn’t share them beyond necessary personnel) and that disputes are resolved through good-faith negotiation. If possible, have the contract stipulate that if you true-up and pay for any shortfall, SAP will consider the matter resolved (with no further retroactive fees).
  Why it matters: SAP is aggressive with audits – non-compliance fees have become a revenue stream for them. A well-negotiated audit clause protects you from that aggressiveness. It also sets the tone that you expect professionalism and fairness in compliance processes. This gives procurement and IT some breathing room to manage licenses without fearing the audit letter.

Read SAP Negotiation Mistakes to Avoid.

10. Clarify Usage Definitions and Indirect Use in the Contract

Ambiguity is your enemy in SAP contracts. Make sure the agreement clearly defines key terms around usage and indirect access:

• “Named User” Definition: Ensure the contract defines what a “user” is – typically an individual human with access. More importantly, clarify that each user license is only required for direct human access. If you have non-human service accounts or interfaces, they should not be counted as users (this may seem obvious, but it’s better to state it explicitly).
• Indirect Use Clauses: Proactively insert language about indirect usage. For example, define that access by third-party systems on behalf of licensed users is permitted. Some customers negotiate an “Indirect Static Read” clause, which allows read-only access to SAP data by external systems without requiring additional licenses. Also, if you’re using the Digital Access model (documents), explicitly state that those document licenses cover the necessary scenarios and that SAP won’t also require named users for those interactions (no double-charging).
• Engine Metrics and Measurements: If you have licenses for SAP engines (e.g., SAP WM by number of warehouse bins, or SAP Payroll by number of payslips), make sure the metric is unambiguous. Define the unit of measure in the contract and consider adding a baseline to ensure consistency. For instance, “SAP Payroll is licensed for up to 10,000 active employees per month.” If your business definition of an employee differs (e.g., contractors, part-time employees), clarify how they are counted. The goal is to avoid later arguments over how to measure usage.
• Territory and Affiliate Use: Ensure the contract’s usage scope covers your entire organization (including all subsidiaries and relevant locations). If the contract lists a specific entity or region, broaden it to include affiliates and global use if that reflects reality (most SAP contracts do allow enterprise-wide use, but double-check). Nothing is worse than finding out an affiliate’s use is considered “unlicensed” because they weren’t named in the contract.
  Bottom line: Nail down the definitions. Any vagueness in who can use the software, how, or through what interfaces can become a loophole that SAP leverages later (often during an audit or an upsell conversation). By clarifying it in writing now, you save headaches and money in the future.

Read SAP S/4HANA Negotiations.

11. Manage SAP Support Costs and Maintenance Terms

Ongoing SAP support costs (maintenance fees) can be a huge portion of your IT budget, so negotiate and manage them closely:

• Understand the Default: SAP Standard Support is typically 22% of your license net price annually. If you purchased $10M in licenses (after discount), you’ll pay about $2.2M every year for support. SAP has occasionally raised this rate or offered “Enterprise Support” at higher rates with more benefits. Know what you’re paying for and what you get (e.g., Enterprise Support includes extra services, but is it worth the premium?).
• Negotiate Maintenance on New Purchases: If you’re making a big license purchase, you might negotiate a slightly lower support fee or a phase-in (e.g. 18% maintenance for year 1, then 20%, etc.) – SAP is reluctant to budge on the 22% standard, but for very large deals or strategic customers, it’s been done. Alternatively, consider negotiating credits: perhaps SAP can offer some support services or training to offset the cost.
• Avoid Paying Maintenance on Shelfware: This ties to shelfware management (#16). If you identify unused licenses, try to terminate their maintenance at renewal. SAP’s default stance is “all or nothing” – they don’t like you dropping support on a subset of licenses. But during a big negotiation (especially if you’re buying something new or renewing a big deal), push to remove unused licenses from the support base. Even if SAP won’t refund licenses, at least stop paying annual fees on the ones you don’t use. This can save a fortune.
• Co-term and Simplify Support: If you have multiple SAP contracts with different renewal dates, consider negotiating to co-term them (align end dates) so you can consolidate and have a single maintenance renewal. This gives you more negotiating power on that renewal, rather than smaller fragments that SAP can pick off. It also simplifies administration and avoids something slipping through (like auto-renewing unnoticed).
  Lastly, be aware of any changes to SAP support policies. For example, SAP has announced maintenance fee increases (5% hikes in some years due to inflation). In your contract, try to cap those increases (see #14 on price caps). And if you ever consider leaving SAP support for third-party support (next item), factor in the long-term savings vs. the trade-offs (no new updates from SAP).

Read SAP Ariba Negotiations.

12. Consider Third-Party Support as Leverage or an Alternative

Third-party support providers (such as Rimini Street and Spinnaker) can service SAP software at a rate typically 50% of SAP’s maintenance fee.

While going off SAP support is a big decision, simply evaluating this option gives you negotiating power:

• Leverage in Negotiation: Let SAP know (subtly) that you are exploring third-party support if the maintenance costs aren’t made more reasonable. SAP does not want to lose your maintenance revenue – it’s a high-margin for them. We’ve seen cases where just raising this possibility led SAP to offer a one-time discount or incentive to keep the customer on SAP support. Even if you intend to stay, having a formal quote from a third-party support firm can be a bargaining chip.
• When to Seriously Consider It: If your SAP environment is stable and you don’t plan to upgrade to new SAP versions for a while, third-party support can be a significant cost savings. For perpetual license holders, you can drop SAP support after you’ve acquired the licenses. Third-party providers will support your existing system (including tax/legal updates and bug fixes) at a fraction of the cost. The trade-off is that you won’t get new SAP software versions or official SAP help. For some, that’s acceptable (for example, if you’re sticking with ECC 6.0 for five more years with no changes).
• Use Case – Negotiation Example: Companies have used third-party support quotes to negotiate maintenance caps or concessions. For instance, if SAP knows you can cut your maintenance bill in half elsewhere, they might agree to freeze your maintenance fee for a couple of years or include additional services (like SAP MaxAttention hours) to justify the cost. In any case, it reminds SAP that maintenance isn’t guaranteed money – you have options.
• If You Switch: Ensure you understand the contractual terms for leaving SAP support. Typically, you need to provide notice before your maintenance period is renewed. Also, note that if you leave SAP support and later want to return, SAP may charge backdated fees. Therefore, it is usually recommended to stay with a third-party provider until you are fully migrated off SAP. This is a significant strategic move, so involve your CIO, legal team, and independent advisors in weighing it.
  In summary, third-party support is both a negotiation lever and a potential cost-saving strategy. At a minimum, every SAP customer should review it as part of their due diligence, even if only to ensure SAP is transparent in pricing their support services.

Read SAP SuccessFactors Case Study – French Consumer Goods Firm Cuts SaaS Costs by 20%.

13. Benchmark Discounts and Demand “Best in Market” Pricing

SAP’s pricing is famously opaque – list prices are high, and almost no one pays them. Your goal in a negotiation is to get a discount commensurate with your market clout and the timing leverage you have:

• Typical Discount Ranges: While the discount varies, enterprise SAP deals often result in 50% or more off the gross license list price, especially for large upfront purchases. Discounts of 60-70% are not unusual for significant S/4HANA deals or when SAP wants to win the business. Maintenance (support) is then paid at the discounted price. For cloud subscriptions, the discount may appear smaller (20-40%) because SAP sometimes uses different list pricing; however, you can still negotiate for more aggressive terms.
• Use Benchmarks: If possible, get insight into what other companies in your industry have achieved. Independent SAP licensing advisors or firms often have benchmark data. For example, if peers got a 70% discount on SAP ERP licenses, you can go to SAP and make the case that you expect a similar or better deal given your volume. SAP won’t just give it to you – you have to ask for it and justify your request. Use any metrics that strengthen your case (e.g., “per user cost” or ROI needed to be viable).
• Total Cost, Not Just Unit Price: Also benchmark maintenance and cloud renewal terms. It’s not just about the initial discount – a low upfront price is meaningless if SAP hikes the renewal or adds other fees. Ensure that when comparing, you consider the 5-year or 10-year cost. One company might boast about 80% off licenses, but if they agreed to a 7% annual cloud increase, they could end up paying more over time than someone who got 60% off and a price cap. So, negotiate with a holistic view.
• Ask for Extras if List Discounts Hit Limits: SAP reps have floors they may not go below for pure discounts. If you hit that wall, consider negotiating value-added benefits, such as free training credits, additional test system licenses, or several hours of SAP consulting at no charge. These have real value and can help reduce your overall implementation or operational costs. For instance, receiving 1000 hours of SAP consulting services for free could be worth a few hundred thousand dollars, effectively a further discount.
  Remember: You likely only negotiate with SAP infrequently, but SAP negotiates deals on a daily basis. They bank on many customers not knowing the “going rate.” By coming to the table informed and pushing for best-in-market pricing, you signal that you are a savvy customer. SAP will often respond with a more competitive offer rather than risk losing a deal or damaging the relationship with a key client.

14. Negotiate Price Caps and Renewal Protections

Getting a good price today is half the battle – the other half is protecting your organization from price increases tomorrow.

Key terms to negotiate include:

• Maintenance Fee Caps: If you’re on SAP support, insist on a contractual cap on maintenance increases. SAP’s standard support percentage can creep up (they recently announced increases tied to inflation). A clause like “SAP shall not increase the support fee % for X years” or “not increase by more than 1% annually” is extremely valuable. It locks in your support costs, preventing them from escalating unmanageably. Even if SAP says “we don’t usually raise it,” get it in writing.
• SaaS/Subscription Renewal Caps: For cloud services, define what happens at renewal. SAP’s default is often to charge the then-current list price at renewal, which could result in a significant increase. Consider negotiating a clause such as “any renewal increase shall not exceed 5%” or setting the renewal price upfront for a single renewal term. If you signed a 3-year cloud deal, you don’t want a 20% surprise hike in year 4. Caps or fixed renewal rates remove that uncertainty.
• Multi-Year Price Locks: In large deals, you might negotiate price holds on certain components. For example, if you plan to buy additional users in the future, get a clause that the discount you achieved will apply to those future purchases. Conversely, watch out for any “price floor” clauses – sometimes vendors sneak in that you can’t get a bigger discount later. Do not accept that; you always want the freedom to negotiate future purchases separately, or at least not on worse terms than the current ones.
• Indexation Clauses: Be cautious if SAP proposes linking fees to an inflation index, such as the Consumer Price Index (CPI). This can lead to automatic increases outside your control. It’s better to remove such clauses and rely on explicit caps as noted. If an index clause must remain, ensure there is an upper bound (e.g., “CPI but max 3%”).
  Protecting these aspects in the contract is crucial. It preserves the value of the deal you negotiate and gives the CFO predictability. Many customers have learned too late that while they received a great first-term price, they neglected to review the renewal terms and faced a budget shock later. Don’t let that happen – bake the protections in now when SAP is more willing to accommodate (i.e, before you sign).

Read SAP Renewal Case Study – U.S. Insurance Group Saves $5M in Contract Negotiations.

15. Lock In Future Purchase Rights and Flexibility

Think ahead to what you might need from SAP in 1, 2, or 5 years and negotiate those rights now:

• Price Holds for Additional Licenses: As mentioned, secure the ability to purchase more licenses later at the same discount or unit price you’re currently getting. If you’re expanding, you don’t want to renegotiate from scratch; you want a pre-agreed rate. For example, if you’re buying 1,000 S/4HANA users now at $X/user, get a clause that you can buy up to 500 more at $X (or the same % discount) within the next 2 years. This way, growth is budgeted.
• Avoid “Most Favored Nation” Against Yourself: Ensure there’s no clause that locks you out of better deals. Sometimes contracts say future purchases will be at no more than X discount (which is a price floor). Strike that out. You should be able to negotiate better discounts if market conditions allow in the future.
• Include Modules “on approval”: If there’s an SAP product you’re interested in but not ready to commit, consider negotiating a right of first access or a pilot program. For instance, “Customer may, at any time in the next 12 months, purchase SAP Analytics Cloud under this agreement at a 60% discount off list, coterminous with the current agreement.” This kind of option can be useful if you think you might adopt a module later – you’ve pre-negotiated the terms.
• Contractual Favorites: If you got a particularly high discount due to a bundle, specify the individual component pricing in an exhibit. This prevents confusion later about the cost of each piece if you need more of a particular component. It also helps if you need to drop something – you can value it.
  By locking in future purchase conditions, you transform a one-time negotiation into a recurring benefit. It also eliminates the need to renegotiate under pressure when you suddenly require more licenses. Essentially, it future-proofs the deal for expansions.

16. Ensure Flexibility to Reduce or Reallocate Licenses (“True-down” Rights)

While planning for growth is important, so is planning for the possibility that you might need fewer licenses or different licenses later.

This is often overlooked in SAP deals (SAP’s default is to lock you into what you bought):

• Renewal True-Down: Negotiate the right to decrease quantities at renewal without penalty. SAP’s standard approach to perpetual licenses is that you own them, so you can stop paying maintenance if you drop them (though they resist partial drops). For subscriptions, they expect you to renew at the same or higher level. Push back: include a clause that allows you to reduce user counts or swap modules at renewal. For example, “Customer may reduce the number of subscriptions by up to 20% at renewal” or “may discontinue specific cloud services at the end of the term without penalty.” This way if your needs shrink, you’re not forced to keep paying for unused capacity.
• License Exchange Programs: Try to negotiate the ability to reallocate investment in shelfware. If you have on-premise licenses that you won’t use, consider asking for their value to be converted into other products. SAP has, on occasion, allowed customers to exchange unused licenses for different licenses (especially when moving to the cloud). Make it contractual if you can: e.g., “Customer may exchange up to $500k worth of unused SAP software for an equivalent value of SAP software or cloud subscriptions of other types, as mutually agreed, during the term.” Even if SAP limits it, having some formal ability to swap helps you stay flexible as business priorities change.
• Shelfware Safeguards: If you must buy a certain quantity now (perhaps to get a discount tier), negotiate a “shelfware protection.” This could be an extended timeline to activate licenses (so you don’t pay maintenance until they’re used) or a one-time give-back option. For instance, “Customer may terminate support on up to 100 unused licenses without penalty after 2 years” – meaning if those licenses truly became shelfware, you can stop the bleeding. SAP might not readily agree, but it’s worth asking, especially if you conceded to buy more upfront.
• Example: Some SAP customers successfully negotiated contract terms to discontinue support for a specific module after a year of inactivity, or to repurpose that spend for new cloud offerings. These negotiations often happen in the context of strategic deals or migrations (like moving to S/4 or RISE – SAP might allow you to ditch some old licenses to help fund the new). Use that leverage when you have it.
  The message is: you want an escape hatch. Business conditions change – if you divest a division or move some processes off SAP, you shouldn’t be stuck overpaying. Make flexibility a key negotiation point, and frame it to SAP as a “win-win” – you stay a happy customer because you’re not feeling trapped, which means you’re more likely to continue investing in SAP.

Read SAP Ariba Case Study – U.S. Retail Chain Saves 20% on Contract Renewal.

17. Create a Multi-Year SAP Licensing Roadmap (and Align Deals to It)

Don’t treat an SAP negotiation as a one-off transaction. Especially for large enterprises, you should have a 3-5 year SAP roadmap covering upgrades, migrations, and new initiatives, and your negotiations should follow that plan:

• Plan in Phases: Break down your anticipated needs over the coming years. For example: Year 1 – migrate HR to SuccessFactors, Year 2 – implement Ariba, Year 3 – consider S/4HANA migration, etc. By mapping this out, you can approach SAP with a strategic view: maybe you negotiate a global deal that covers multiple years of investments in a package (often yielding better pricing than separate small deals each year).
• Co-Term Agreements: Try to align contract end dates so that you can negotiate renewals of multiple products together. If your SAP cloud products all renew at the same time, you can leverage a larger spend in that renewal negotiation. It also simplifies the roadmap if everything is on a similar cycle. Many companies negotiate co-termination when adding a new cloud service – e.g., if SuccessFactors is mid-term and you add Ariba, request that Ariba renew on the same date as SuccessFactors. This gives you a unified negotiation event.
• Account for ECC End-of-Life: With SAP ECC support set to end by 2027 (with an optional extension to 2030 at a higher cost), most enterprises have S/4HANA on their roadmap. Use that as a planning anchor. Perhaps you’ll delay S/4 until 2026 – so you might negotiate shorter-term deals now with flexibility to pivot to S/4 when ready, or get commitments from SAP on conversion terms if you sign something now. Don’t let SAP’s agenda dictate your timing – have your plan and negotiate deals that support it. For instance, if you know you’ll drop some ECC users after an S/4 go-live, negotiate that transition right now.
• Avoid Overlapping Commitments: Stagger major projects so you’re not forced to negotiate everything at once, unless you intend to enter into an enterprise agreement. Some companies enter into a single, comprehensive ELA (Enterprise License Agreement) with SAP, covering all products for a specified period, which can simplify things but is complex to negotiate. Alternatively, spacing projects (and their contracts) can help manage internal resources and cash flow. The key is that, whatever your strategy, ensure contract terms (such as duration and scope) are designed to serve that strategy.
• Review Annually: Treat Your SAP License Strategy as a Living Document. Every year, revisit the roadmap and decide if you need to adjust or if new SAP offerings (or those of your competitors) require a change in your approach. Being proactive means that when you come to the negotiating table, you’re not reacting to SAP’s sales pitches – you’re executing your plan. SAP sales reps appreciate it when customers have a clear long-term vision (it allows them to craft bigger, more predictable deals). Use that to negotiate multi-year discounts or commitments in exchange for better terms now.

In short, know where you’re going with SAP, not just where you are. A multi-year vision helps you negotiate the current deal in a way that sets you up for future success, avoiding short-sighted decisions that you’ll regret in a year or two.

18. Master the Art of Contract Negotiation: Redlines, LOIs, and Legal Language

SAP’s contract documents (License Agreements, Order Forms, etc.) are lengthy and written in SAP’s favor.

Do not shy away from redlining and negotiating the legal terms, not just the prices:

• Identify the Key Clauses to Redline: Focus on the areas we’ve discussed, such as audit rights, price protections, usage definitions, termination, liability limits, etc. Consult with your legal counsel or licensing experts to propose alternative wording. For example, if the contract states that SAP can terminate cloud service for any breach within 15 days, consider changing it to 30 days, but only for material breaches that remain uncured. Alternatively, you can add that termination can be done for convenience with X notice (SAP may reject this, but it starts a conversation).
• Letters of Intent (LOIs) / Term Sheets: If the negotiation is complex (covering multiple products and terms), consider using an LOI or term sheet after the business terms are settled but before final contracts are signed. An LOI, signed by both parties, can outline the key deal points (discounts, key clauses, special rights). This helps ensure that when the formal contract is drafted (often by SAP’s legal team), it accurately reflects the agreed-upon terms. It’s an extra step, but it can save time in back-and-forth redlining because you already agreed at a high level. For example, your LOI might say, “SAP will provide a one-time credit of $X for unused licenses” or “Maintenance cap of 3% annually to be included.” Having that in writing (even if non-binding) gives your lawyers leverage to insist that it be included in the final agreement.
• Don’t Accept Boilerplate if It Hurts You: SAP has “standard” contracts, but almost everything is negotiable. If a clause doesn’t sit right, propose a change. The worst SAP can do is say no. Often, they will concede on minor wording changes if you press, especially for strategic customers. This includes data privacy clauses, service levels (for cloud uptime), and other relevant details, if those are important to you. Always ask: “Can we improve this clause for our protection?”
• Document All Promises: If, during negotiation, the SAP sales or product team makes a promise (“oh, we will allow that use-case, don’t worry”), get it in writing in the contract or at least in an email. Preferably, incorporate it as a clause or an addendum. Verbal assurances mean nothing once you’re locked in – only what’s written and signed counts. A classic example: a sales rep says, “We typically don’t enforce that restriction” – that’s not good enough; have it explicitly waived or permitted in your contract language.
  Approach the contract like any other business-critical contract: read the fine print, utilize experts for assistance if needed, and negotiate line by line as required. It may feel tedious, but an unfavorable clause can result in millions of dollars or significant operational headaches later. By mastering the contract details, you ensure that the deal you think you have is the one you have on paper.

19. Leverage Independent SAP Licensing Advisors

Negotiating with SAP is not a level playing field – SAP’s team negotiates deals every day and has all the pricing data, whereas your team does this occasionally.

This is where independent SAP licensing advisors prove invaluable:

• Expert Benchmarking: Firms like Redress Compliance or SAP Licensing Experts (saplicensingexperts.com) specialize in SAP contracts. They know what discounts are truly achievable, what contract terms others have obtained, and where SAP has flexibility. They can quickly tell you if SAP’s “best offer” is mediocre or genuinely good. This information asymmetry can save or cost you millions, so bringing an expert to balance it out is crucial.
• Strategic Guidance: Good advisors will help craft a negotiation strategy, for example, by determining the optimal timing, sequencing discussions of topics, when to involve higher-ups, and how to utilize potential third-party support or alternative software as leverage. They can role-play negotiations and anticipate SAP’s moves. Essentially, you get a coach who has seen the playbook before.
• License Optimization: Independent experts often begin by analyzing your current usage (as discussed in #6) to identify optimization opportunities. They might find things your team missed, like misclassified users or unused engines. This not only helps in negotiations but also ensures you’re compliant (so SAP can’t play the audit card easily against you).
• Negotiation Support: Some advisors will even interface with SAP on your behalf, either directly (front-channel) or indirectly (back-channel). This can be useful if you want to maintain a cordial relationship with your account exec – the advisor can be the “bad cop” pushing hard on terms while you stay above the fray. Or they prepare the detailed counter-proposals and redlines for you, massively reducing your workload.
• Objective Perspective: Importantly, independent advisors work for you, not SAP. They are not trying to upsell you software; their goal is to minimize your costs and risks. This contrasts with even SAP’s authorized resellers or account managers, who ultimately answer to SAP.
  For multi-million dollar SAP investments, the fees for an independent expert are typically a rounding error that pays for itself many times over in savings. They help ensure you don’t overlook critical terms or accept an inflated deal. As a best practice, enterprises should treat SAP licensing like a specialized domain, just like you’d hire legal counsel for a major contract; hiring an SAP licensing advisor protects your interests and brings seasoned expertise to the table.

20. Don’t Accept SAP’s Default Proposal – It Often Overcharges You

Finally, perhaps the overarching lesson: SAP’s initial or “standard” offer will usually over-license and overcharge your enterprise.

It’s not that SAP is malicious; it’s just how the vendor’s sales process works – maximize the deal. Common ways the default structure is not in your favor:

• Overallocation of Licenses: SAP might propose a package with more users or modules than you need, “just to be safe.” This leads to shelfware. For example, they may size your user count assuming every employee needs a Professional license, which inflates the cost. Always question their assumptions and trim to actual needs (with a buffer you’re comfortable with, but not 50% more than necessary!).
• Expensive License Mix: Similarly, the default quote may include high-cost license types. If you see a large number of Professional user licenses in the quote, ask for the breakdown of roles and see if many of those could be lower-tier licenses. Often, SAP’s quote doesn’t reflect optimization – it’s up to you to right-size the mix and push for that in negotiations.
• Bundled “Value” that isn’t Value: SAP might bundle in products (as discussed in tactics) or support services that you don’t truly need, which drives up the price. The default contract may also include onerous terms (such as auto-renewals and high escalation clauses) that can cost you later. If you simply sign it, you’re locking in these disadvantages.
• No Price Protections: By default, SAP agreements may allow list price increases or have no cap on maintenance hikes. The “default” thus leaves you vulnerable to future overcharging, even if the day-one price appears reasonable. You must actively negotiate these protections; otherwise, you will likely overpay in the long run as prices rise.
• Case in Point: Many enterprises that haven’t negotiated diligently find themselves paying for 2x the licenses they use, or stuck in a contract where costs climb 10-20% over a few years with no added value. SAP’s default sales approach encourages overselling and locking you in. It’s the savvy customers who challenge this and restructure deals to fit their actual needs and budget.
  The bottom line: Never accept the first proposal or a boilerplate contract without careful review. Treat it as a starting point. Virtually everything is negotiable – license quantities, discounts, contract terms. SAP expects customers to push back (especially large ones). If you don’t, you’re leaving money on the table and committing your organization to potentially years of overspend. By applying the strategies and insights in this list, you can transform that default overpriced deal into a well-tuned agreement that delivers real value to your enterprise.

Negotiation Checklist ✅

When heading into an SAP license negotiation, use this checklist to ensure you’ve covered all bases:

• ✅ License Inventory & Usage: Gather data on current entitlements, usage levels, and needs. Identify unused licenses (also known as “shelfware”) and any compliance gaps. Know exactly what you have and what you require going forward.
• ✅ Requirements Definition: Define what new licenses or cloud services you truly need (versus nice-to-haves). Establish an internal consensus on scope and priorities before discussing with SAP.
• ✅ SAP Licensing Model Fit: Decide the appropriate licensing model (perpetual vs subscription) for each component based on your strategy. Evaluate if you will consider RISE or stay on-premises, etc.
• ✅ Indirect Access Audit: Review all third-party systems interfacing with SAP for indirect use risk. Plan how you’ll license these (via named users, document licenses, or contract clauses) and have that ready to discuss.
• ✅ Contract Terms to Negotiate: Prepare a list of critical terms to negotiate: audit clause (frequency/notice), price increase caps, renewal terms, true-up rights, ability to reduce at renewal, license transfers or swaps, usage definitions (indirect, affiliate use), support terms, auto-renewal, and termination notice. Prioritize what are must-haves.
• ✅ Benchmark & Target Discounts: Research market benchmark pricing. Set an internal target for discount level and overall deal value that you aim to achieve. Also, decide on acceptable vs. walk-away pricing for each major item.
• ✅ Multi-Year Roadmap Alignment: Align the contract duration and structure with your IT roadmap. Plan co-terminations or phased additions. Ensure you negotiate options for future needs (additional licenses at a set price, etc.) and protections for potential downsizing.
• ✅ Internal Stakeholders: Involve all necessary stakeholders – IT (to validate technical needs), Procurement (for negotiation expertise), Finance (for budget), and Legal (for contract review). If possible, brief an executive sponsor (such as the CIO or CFO) on the strategy – their support can be invaluable if tough decisions or walk-away threats are needed.
• ✅ Independent Review: Consider having an independent SAP licensing expert review SAP’s proposal and your strategy to catch any blind spots. Their insight into fine print and pricing can validate your approach.
• ✅ Negotiation Plan: Formulate your negotiation approach: What will you ask for first? What’s your fallback? When will you introduce certain points (e.g., maybe discuss pricing after securing agreement on key terms, or vice versa)? Plan your concessions and which items you can trade. Also, schedule enough time for multiple rounds – don’t rush.

Having this checklist at hand ensures you evaluate, negotiate, and protect the key aspects of an SAP deal. It helps you stay organized and firm on critical points amid what can be a high-pressure negotiation.

Key Takeaways & Next Steps

Negotiating an SAP license agreement is a complex, high-stakes endeavor, but with the right approach, enterprises can achieve significant cost savings and flexibility.

Here are the key takeaways and next steps from our discussion:

• Be Informed and Proactive: Knowledge is power. Understand SAP’s licensing models and specific product terms before you negotiate. Don’t wait for SAP to dictate the terms – do your homework (user counts, indirect use, shelfware) and start negotiations early on your timeline.
• Every Term is Negotiable: From price and discounts to audit rights and renewal caps, assume you can negotiate it all. SAP expects savvy customers to push back. By inserting protections such as price caps, true-up rights, and clear usage definitions, you transform the contract into a tool that safeguards your interests for years to come.
• Strategize for the Long Term: Align deals with your strategic roadmap. Whether you’re planning an S/4HANA migration or maintaining ECC for the foreseeable future, craft agreements that provide flexibility for these plans (e.g., conversion credits, co-terming contracts, future purchase options). Avoid quick wins that become long-term pains.
• Leverage Experts and Alternatives: Engage independent SAP licensing advisors to level the playing field – their expertise in contract fine print and market pricing is invaluable. Simultaneously, consider leveraging alternatives such as third-party support or competitive solutions as credible options to enhance your negotiating position with SAP.
• Value over Vendor Loyalty: Remember that SAP’s default licensing approach may not align with your best interests. It’s not about being adversarial; it’s about being a prudent business leader. By negotiating assertively, you ensure a sustainable partnership with SAP – one built on delivering value to your organization, not just maximizing profits for the vendor.

Ensure to read Leveraging Third-Party Support in SAP Negotiations: A Strategic CIO’s Guide.

Next Steps: Armed with these insights, assemble your internal team and plan your SAP negotiation as you would any major project.

Audit your current state, define your ideal end state, and engage with SAP (and advisors) with a clear list of requirements and walk-away points. As a final tip, maintain a respectful but firm tone with SAP; negotiations can be tough, but both you and SAP want a positive relationship.

By demonstrating that you are knowledgeable and determined to reach a fair deal, you’ll earn SAP’s respect and set the stage for a successful, long-term partnership on your terms.

Related articles

• Key SAP Contract Terms and Clauses Procurement Must Manage
• Negotiating SAP Licensing Contracts
• Rise with SAP Negotiations: Key Strategies for Cost and Risk Control
• SAP Contract Renewal Timeline & Checklist
• What Is an SAP SUR? How to Negotiate and Manage Software Use Rights

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