How Can I Cut My SAP Costs?

By Jon Winsett,

CEO, NPI

May 29, 2014

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“How can I cut my SAP costs?” It’s a question we hear routinely, and one we expect to hear more of in the coming months. SAP has done a lot to enhance its capabilities. This includes a hyper focus on cloud capabilities, as well as the development and expansion of its HANA data and analytics platform. Next week, the company is expected to announce the rollout of a new cloud-based sales force automation system. Needless to say, the innovation team at SAP has been busy these last two years.

This is, of course, good news for SAP’s loyal customers, but it’s also a signal for caution. New direction and offerings will only increase the complexity and customer-to-customer disparity in the vendor’s pricing and terms – an obstacle that has plagued SAP buyers for decades. The risk of overspending is higher than ever before.

So, back to the main question – “How can I cut my SAP costs?” The answer lies in understanding and mitigating the most common culprits.

  • Over-licensing. Most companies are overspending on their SAP user licenses in two ways: by paying for unused licenses and/or paying for higher-level licenses than they actually need. Customers need to make sure SAP user and package licenses are fully optimized from a quantity, functionality and authorization perspective.
  • Over-support. Companies routinely overpay for SAP support by buying more support than they actually need (e.g. premium versus standard) or by failing to evaluate third-party support alternatives. With cloud adoption on the rise, some customers are now double-paying for SAP professional services to handle unanticipated customizations plus in-house support resources to handle lower-tier troubleshooting. It’s important for users to determine the support level best suited for their unique SAP requirements and benchmark pricing and terms for these services.
  • Contractual misalignment. Managing SAP user licenses goes well beyond auditing utilization numbers and roles. It requires a deep understanding of SAP’s contract terms and product use rights that can either drive your SAP costs up – or rein them in. By assessing their existing license base and contract rights, customers can reduce maintenance costs, avoid additional license purchases and improve the contractual terms that govern license types, grants and exchange rights.
  • Hidden integration costs. SAP has recently started charging customers for any form of integration between their applications and those of third parties. Many companies are unprepared for this hidden cost, which can translate into significant professional service and license fees. In some cases, SAP is requiring expensive user licenses for users in other systems that wish to access information in SAP applications. Customers should be prepared to navigate this purchasing landmine to keep integration costs lower.
  • If you’re looking to reduce your SAP costs, renew or make a new SAP purchase, NPI can help. Our price benchmarking and contract/licensing optimization are critical steps in keeping license, support and professional services in check. We can also help if you face a SLAW compliance audit – they are on the rise, and can be daunting without expert assistance.