During a 2021 DSAG roundtable discussion on the topics of licensing policy, metrics and models, SAP CTO Jürgen Müller recognized the difficulties of pricing and invited his DSAG roundtable audience for further input on the issue: “…We are in discussions in boards and with our pricing experts and realize that pricing is also an art and to please everyone is of course very, very difficult, but we are making an effort. If you have further input, very, very welcome.”
Despite no agreement about pricing being reached with DSAG, in September, SAP announced a 3.3% price increase for maintenance and cloud. To understand the position of SAP and the customers questioning the price increase, we’re offering insights from the 2022 DSAG Annual Conference. You can also read on for guidance on proactively optimizing your SAP costs amidst these price uplifts.
The price increase and pushback
It’s not a huge surprise to see the SAP price increase; the Consumer Price Index in relevant countries and markets has risen sharply recently. Furthermore, SAP is truly invested in growing with and via cloud services, and innovation costs money. However, DSAG and SAP customers require substantial counter-values, such as innovations for on-premises solutions. DSAG board member, Thomas Henzler, said that although SAP is “within its rights” when it comes to raising prices, “The value received for maintenance has fallen over time, making the price difficult to justify.”
The reality is that in German-speaking countries, most of the SAP customer base is not yet in the cloud. They continue to run their business critical systems, for the most part, in their own data centers or hosted by private cloud providers who have, for a long time, offered a different level of flexibility and performance parameters. It was apparent at the conference that SAP still has a long way to go to convince these customers of the benefits of cloud transition through models such as RISE for SAP, especially if they come with an annual 3.3% price increase.
So, for the time being, many SAP customers are choosing to wait or do nothing at all about moving to the cloud, as their choices seem too limited and the possible consequences cannot be reliably assessed. In the DSAG conversations between customers and SAP, one reason for their hesitancy is that customers are unsure how SAP cloud-based can help them generate more revenue or save costs. This slow adoptions is a challenge SAP needs to overcome as its desire to grow with and via cloud services is not possible without customers who have enough trust to take such a strategically important step.
Proactively optimize your SAP costs
Given this guaranteed price increase, what can proactive SAP managers do to ensure they are ready to transition to S/4HANA and be in the best position for negotiating new contracts?
To start, they should:
- Take stock of their current situation by looking at the contracts they have with SAP to understand whether they have any special clauses or rights to use they would not want to lose.
- Review which products and functions would benefit the business and what can be transformed from the SAP portfolio into more added value in short-, medium- and long-term timeframes.
- Compare the SAP roadmap to their own organization’s plans and see if they align.
Having a clear picture of your organization’s objectives can simplify your negotiations if you’re planning any mergers or acquisitions, too. SAP is often more open to negotiations if future purchases are in the mix. However, you also need negotiating skills and power. There are consultants who offer services to help with these situations, who are sometimes paid on outcomes and results. It’s also important to consider your existing investments with SAP because this is a great opportunity to include shelfware in the mix.
The power of knowing actual usage
Many SAP customers already know or suspect that they are over licensed, but how bad is it, really? Getting this information out in a valid way has proven to be very tedious and difficult in the past. SAP’s own embedded tools are of limited help, especially when it comes to assigning the right authorizations to SAP users. The tools tell us nothing about the actual use of the software. As a result, more expensive licenses are frequently issued than necessary.
Not every organization has implemented SAP license management as a practice. In many cases, ongoing measures are limited to creating employees, allocating licenses, and reassigning them either regularly or as needed. Without knowing anything about actual usage, all that remains is allocation by way of estimation. When in doubt, the user is allocated the more expensive license and costs spiral. In most cases, the compliance goal has been established, but at what price?
Simplifying license management with Snow Optimizer for SAP® Software
This procedure can be massively accelerated, simplified, and improved today. As a certified SAP add-on, Snow Optimizer for SAP Software can be easily installed in your own SAP environment. Manual intervention is reduced to a minimum and the result is a solid set of facts, so that your own license management team and external (purchasing) consultants get maximum negotiating power.
For SAP customers, this can be a game changer as the factual data allows them to make the right decision on how to move to S/4HANA and see if the 3.3% annual price increase associated with cloud products is going to outweigh the value of moving to the cloud. In negotiations with SAP, a solid, factual basis helps customers make good decisions in the transformation process with SAP.