CHICAGO -- Buyer beware: while SAP is more willing than ever to negotiate its fees, a noted contract expert says...
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that current deals contain more pitfalls than ever before.
Nancy Gendron, vice president at AMR Research Inc. in Boston, told attendees last week at The SearchSAP.com Conference that slumping vendor revenue means "there is absolutely no better time to buy software." Still, she cautioned companies interested in the mySAP.com e-business platform that they face a new level of complexity than they may be accustomed to from the Walldorf, Germany-based software giant.
Gendron called negotiations for the SAP R/3 ERP package "a very simple thing," in which organizations merely had to determine their number of users and the level of access those users needed.
MySAP.com, however, introduces a new wrinkle into the negotiations, one that may require the help of a corporate clairvoyant to solve. Organizations should determine which features in the e-business package they may eventually want to use because each time a new one is added -- and a new engine is turned on -- SAP increases the tab.
"SAP has built the box, but every time they put more features and functions in the box, it's going to cost you," Gendron said. Bolt-on applications need to be considered, as well as external partners and suppliers who will be charged for using mySAP.com tools.
For instance, companies may mistakenly assume that iRecruitment is part of SAP's HR package, yet once you implement it, SAP will come back for more money. Each new engine, Gendron said, comes with "a significant cost."
She recommended that businesses hold off on buying the engines they don't currently need, but that they factor the eventual costs into the SAP implementation budget.
Dawn Genian, director of information systems at speaker manufacturer JBL in Northridge, Calif., ironed out a mySAP.com contract in December 2001. She said she was disappointed that SAP had a 50% uplift in pricing for U.S. users but found the software giant willing to wiggle a bit on maintenance fees.
"You have to look at what you're willing to pay," Genian said. "Determine your bottom line and then work backwards."
Senior SAP business analyst Perry Stambler of medical device manufacturer Hollister Inc. in Libertyville, Ill., wasn't involved in writing his company's contract for mySAP.com. His firm's negotiators, however, included plans to add Advanced Planner and Optimizer (APO) next year and Product Lifecycle Management (PLM) in 2004.
"You've got to be concerned with what you're buying [in mySAP.com] because you're not buying it all," Stambler said.
Gendron said that SAP usually takes its pricing cues from competitors and that customers should look to Oracle Corp. for a preview of where SAP pricing is headed. She pointed out that SAP's current maintenance fees -- roughly 17% annually -- mirror what Oracle was charging several years ago.
Still, Gendron said SAP is usually much more inclined to negotiate than its competitors, saying that CRM market leader Siebel Systems Inc. is often unwilling to compromise and that Oracle had to write a book to explain its complex pricing.
"I would negotiate 10 SAP deals before I did one Oracle deal," said Gendron, who spent 10 years hammering out contracts for vendors before becoming an analyst.
Fresh from licensing mySAP.com, Gary Pajkos, senior SAP applications specialist at Chicago leasing company GATX Rail, cautioned his colleagues to "do their homework." He said while it's a great time to get vendors to make deals, it's harder than ever to find the money internally to spend.Other words of wisdom Gendron shared:
- Don't believe tales heard on the grapevine of incredible deals. Contract success stories spread as rapidly and can become as exaggerated as urban legends.
- Appeal beyond your individual sales rep. Certain pricing decisions may need to go up higher on the food chain.
- Let the vendor have a small victory. Yielding something important to SAP may encourage the company to compromise elsewhere.
- Don't assume the wheeling and dealing is done once the software is licensed. Save some negotiating moxie for your systems integrator.
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