This week I had the privilege to present to 63 senior IT executives and business managers at the Gartner Symposium in Sao Paulo, Brazil. What all 63 attendees to my seminar had in common was that their organizations run SAP. After I had asked for a show of hands on who ran SAP (to which everyone put their hand up, obviously). I then asked for only those people who had reduced their spend with SAP in the last three years to keep their hands up. I expect you can guess what happened. That’s right. Not a single hand was left in the air. Every one of the organizations represented in the theater had increased their spend with SAP in recent years.
A stark, if unsurprising, reminder of just how SAP licensing has become the ‘elephant in the room’ – or perhaps, at least the elephant in the IT budget.
I could tell from the nods, wry smiles and body language of the attendees that they shared a common purpose in line with that of my presentation – to find a way to get SAP licensing and maintenance spending under control.And there is. In fact, as my presentation outlined, there are five steps that together form a cohesive strategy for managing SAP expenditure.
At Snow Software, we believe license optimization for SAP can be achieved by:
- Preparing for battle – or, to be less confrontational, being prepared to stand your ground and act in your own best interests
- Thinking like SAP, understand their objectives and how to be a good customer without being a sucker
- Levelling the playing field in negotiations by gathering and employing real empirical data
- Shifting from being purely reactive to SAP’s moves and requirements towards proactively managing one of your largest IT vendors
- Bringing your ‘A Team’ to the negotiating table – building a team with the skills to represent your best interests
I won’t try to cram a twenty-minute presentation transcript into a short blog post, but here are the main takeaways from the five points outlined above:
Prepare for battle
As a business or IT leader, you have to make a fundamental decision that you are willing to question SAP’s continual increases in annual costs. This is going to require you to “push back” to SAP, to be better prepared, and to be more empirical. You have to decide whether this an important battle to fight. If it’s not one of your top five priorities for managing IT costs, then you should not focus here. In summary, do it properly, or don’t do it at all. If you are not willing to commit the enterprise to that direction, then you should just keep writing ever-larger checks.
Think like SAP
SAP is a public company with responsibilities to its shareholders. So they have to project leadership, growth, and “coolness”. They need to show big growth in cloud and HANA to keep the skeptics at bay. But above all, they need to drive earning faster than revenues, which means driving highly profitable maintenance revenue quicker than other revenue given the margins. So they have an agenda they try to execute against their customer base. An agenda that you need to understand as a customer.
Level the playing field
Understanding SAP usage is key to taking a position of strength when dealing with SAP. The experience of customers and our own SAP experts suggests that SAP usually arrives at an audit assuming it knows more than you.
Being able to disprove this with accurate and comprehensive data of your own is extremely powerful. But to do that, you need to be able to collect contracts and purchasing data into a single repository; you need to map out SAP deployments and interconnections to other systems; and finally you need an advanced solution like Snow Optimizer for SAP® Software to gather and collate intricate usage data from across the SAP systems. This isn’t the sort of data you will get from SAP’s ‘LAW’ (License Administration Workbench) tool. One Snow customer (a US $7 billion clothing company) recently saved US $4.5 million on its SAP bill by getting a true picture of actual and required SAP licensing before arriving at the negotiating table.
In short, being proactive with SAP licensing (at a bare minimum) means not waiting for the audit letter to arrive before you decide on a strategy. A minimum of three to six months before the audit, you need to start building the picture of the SAP environment, understand the deployed license volumes, types and categories in use.
You must adopt processes and technologies that empower you to make the right decisions based on your organization’s requirements, not just sit in hope that the next true-up won’t be too painful. Being proactive means having a monthly, or at least quarterly, review of SAP licenses, to avoid unused licenses being wasted or the wrong types of licenses being deployed. You may need to engage with professional SAP licensing experts to achieve this, but it is well worth it.
Hire the ‘A Team’
Okay, it’s a horrible 80s analogy, but you get the picture. The scale of investment in SAP means you can’t afford to let anyone but the very best experts look after your interests.
You may not have SAP licensing expertise in-house (few organizations do), but you can bet that SAP will arrive at the table with their A Team, so it’s worth looking outside the organization to find the skills you need to get you the best deal. The ROI is clear, as is the cost of not doing it. If the response to my short seminar is anything to go by, more and more organizations are deciding it’s time to acknowledge the elephant in the room and to be proactive in their management of SAP expenditure.
I joked to a Brazilian audience that managing SAP was almost like a tango (the wrong country for that particularly analogy, I know!): you want to keep SAP close, because they are critical to your business; but you also need to be strong and firm in your management of SAP expenditure, to safeguard your own best interests.
Of course, in reality, SAP licensing cannot be fixed in twenty minutes. But it needn’t take as long as you might think. That US $4.5 million saving I referred to earlier in this blog was achieved in just five days. That’s an impressive ROI in anyone’s books.
To learn more about hiring the A Team and taking control of your SAP expenditure, speak to one of Snow’s SAP experts today and let us discuss how we can help get your costs under control. Or you could just can just keep writing bigger checks…?