How to Negotiate a SAP License Audit
After the audit data is submitted and SAP has analyzed it, you will receive the results, which may include an audit report or a compliance letter. If the outcome is that you are fully compliant, congratulations, you’re done! But more often, SAP will identify some shortfall or compliance issue. This is where negotiation comes into play.
Negotiating the results of an SAP audit is a delicate process. The goal is to resolve any compliance gaps in a way that minimizes cost and operational impact for your organization, while satisfying SAP’s requirements.
Remember, an audit finding is not the end of the story – it’s essentially the start of a commercial discussion.
How you approach that discussion can significantly influence the financial outcome.
Here’s how to effectively negotiate a settlement or true-up with SAP after an audit:
1. Analyze and Validate the Audit Findings
Why: Knowledge is power. Before any negotiation, you must thoroughly understand what SAP is claiming and verify its accuracy. Do not assume the auditors’ calculations are 100% correct.
- Carefully review the audit report, line by line, going through the findings. Identify exactly which licenses are short (e.g., “50 Professional Users needed” or “Engine ABC is over by two units”) and which compliance areas are cited (indirect use, user misclassification, etc.).
- Reproduce the Numbers: If possible, reproduce SAP’s calculations with your data. For example, if SAP says you have 1,050 professional users but only 1,000 licensed, cross-check against your LAW report or internal records. See where those extra 50 are coming from. It could be a mistake, such as double-counting, or indeed a genuine gap.
- Identify Errors or Ambiguities: Look for anything that seems out of place. Maybe SAP counted some users as Professional that you believe should be Employee licenses – note those. Or SAP included a system that was supposed to be out of scope. Perhaps an engine’s usage was inflated due to a one-time spike, such as a test run. Document these potential discrepancies.
- Internal Stakeholder Input: Discuss the findings with relevant stakeholders. IT might explain usage nuances, procurement/legal can confirm what’s contractually allowed, etc. This helps you differentiate between legitimate compliance issues and contestable items.
- Example: SAP claims you need 100 additional “Limited Professional” user licenses. Upon review, you find that 60 of those users are former employees who left but weren’t locked in the system, so they should not require licenses. This is a strong point to negotiate – you can show that those users should be excluded (with evidence of their termination dates) and reduce the scope of non-compliance by 60 licenses.
By doing this homework, you arm yourself with facts. You can then approach SAP not as a passive recipient of a bill, but as a knowledgeable partner ready to discuss the findings.
2. Set Your Objectives and Team for Negotiation
Why: Going into a negotiation without a clear goal or the right people can result in concessions that you could have avoided.
Plan your negotiation strategy.
- Determine Your Endgame: Decide what a “win” looks like. Is it minimizing upfront cost? Spreading payments over time? Obtaining extra value (like new software) for the money you’ll spend? For example, your primary goal might be to avoid a huge one-time expense that blows your budget, so you aim for a payment plan or a deal that includes a discount on a future purchase.
- Know Your Limits: Establish your BATNA (Best Alternative to a Negotiated Agreement) – basically, at what point would you rather refuse SAP’s offer and consider other actions (such as legal pushback or even, in extreme cases, migrating off SAP in the long run). While abandoning SAP is rarely practical, having a walk-away threshold is useful. It could be a dollar amount or a principle (e.g., “We will not pay maintenance back-charges for these 50 users because they were misclassified; going forward, we will only pay for what is due.”).
- Assemble the Negotiation Team: include members from IT (to address technical points), procurement and licensing (to handle purchasing and pricing aspects), and legal (to address contract implications). If possible, also involve an independent SAP licensing expert or a consultant with negotiation experience. They can bolster your arguments or suggest creative solutions from past cases.
- Executive Support: Ensure you have executive backing – for example, the CIO or CFO is aware of the situation and supports your negotiation stance. SAP may try to escalate discussions to an executive level, so align internally first.
- Internal Unity: Decide on roles – who will lead the discussions, who will take notes, and who will speak on specific topics. A united front is important. Mixed messages to SAP (e.g., the IT guy says one thing, while procurement says another) can be exploited by the auditor or a sales representative.
Having clear objectives prevents you from being swayed by SAP’s pitches during negotiation. It also helps to prioritize: maybe you can concede on a minor point to hold firm on a major one.
Read How to Prepare for a SAP License Audit.
3. Engage with SAP – Communication Strategy
Now it’s time to open the negotiation dialog with SAP. Typically, after sending the audit report, SAP will either send a quote for the required licenses or request a meeting to discuss the next steps.
Here’s how to handle it:
- Ask for a Discussion Meeting: It’s often helpful to have a meeting or call with SAP’s audit team (and possibly your SAP account manager) to review the findings. In this meeting, listen first. Let SAP explain their viewpoint and proposed remediation (they might say “You need to purchase X licenses, costing $Y” or “We have an offer: if you purchase these new licenses, we’ll waive this and that”). Take notes.
- Present Your Analysis: Respond with your analysis, focusing on areas where you disagree or need clarification. Be factual and non-confrontational: “We reviewed the user list and found several duplicates and inactive accounts included in the count. We’d like to adjust the compliance gap from 100 users to 30 users based on this corrected data.” Provide evidence if you have it; you can share a sanitized list or summary. By doing this, you establish that you’re not blindly accepting everything – you have data to back your stance.
- Emphasize Compliance Efforts: Highlight what you have done and are doing to stay compliant: “We have a governance process, and as you saw, we’ve cleaned up a lot of users. These remaining gaps are ones we genuinely need to address, and we are willing to address them – but we want to do so in a way that makes sense for both sides.” This sets a collaborative tone – you’re not refusing to comply; you’re just negotiating how to do so.
- Explore Solutions Together: Indicate you’re open to different solutions. Instead of just “we won’t pay this,” guide the conversation to alternatives: “For those 30 users over license, perhaps we can reclassify some as lower types and purchase a smaller number of higher-level licenses. Also, we are planning to implement the AP XYZ module next year – maybe we can factor that into this discussion.” This invites SAP to think in terms of a broader commercial relationship, not just an audit fine.
- Keep Sales and Audit Linked: Be aware that SAP’s audit team often collaborates with the sales and account teams at this stage. They might offer you a deal such as: “If you sign a contract for S/4HANA migration or some cloud subscriptions, we will resolve the audit findings with minimal charges.” This can be an opportunity or a pitfall. Hear it out, but don’t commit right away. Get all proposals in writing.
Negotiation Tone: Stay professional, factual, and firm. It’s a negotiation – you can be friendly, but also assert your points. Suppose SAP sees you have done your homework (e.g., you cite a specific contractual clause or you have a detailed user analysis). In that case, they’ll realize you’re a serious customer who can’t be easily pressured into overpaying.
4. Consider Creative and Long-Term Solutions
When negotiating, don’t limit the discussion to “Licenses A, B, C cost $ X.” Use this chance to look at the bigger picture of your SAP relationship and future needs.
- Trade Compliance Gaps for Future Investment: SAP often prefers customers to purchase new products or upgrades (which helps SAP’s sales goals) rather than just pay penalty fees. For example, suppose you’re out of compliance on some licenses worth $ 1 M. In that case, SAP might be amenable to you spending $1M (or possibly less) on something like additional SAP modules, cloud services, or an S/4HANA conversion, instead of a straight-up bill. This way, you get new functionality and SAP meets revenue targets. If such a product were already on your roadmap, it could be a win-win. However, ensure the new purchase truly brings value to you and isn’t just shelfware.
- Digital Access Adoption Program (DAAP): If indirect access is a major issue in the audit, SAP’s DAAP (if still available) could be leveraged. Under DAAP, SAP offered customers a way to convert indirect usage to the digital access model, often with incentives, such as free document licenses. Negotiating to enter DAAP might resolve the immediate compliance issue and put you on a clearer path in the future. Evaluate if SAP is pushing this and whether it benefits you long-term (DAAP could reduce uncertainty around indirect access fees).
- Bundling and Discounts: Don’t hesitate to negotiate for a better price. Just because the audit report says list price for 100 licenses doesn’t mean you must pay the list price. Ask for discounts or waivers, citing your history as a loyal customer or volume of existing investment. Often, the SAP account manager can approve discounts, especially if you’re also buying something new. Aim to bundle audit true-up licenses with other purchases to get a better overall discount. For instance, “We’ll purchase the 100 Professional users and also 50 cloud licenses for SuccessFactors; in exchange, we want a 30% discount off the list price on the whole package.”
- Maintenance Fee Waiver: If you owe back maintenance (for the period you were underlicensed), try to negotiate it down or waive it. SAP sometimes waives maintenance or offers to start maintenance on newly purchased licenses, saving you that cost. This is a common concession customers seek.
- Payment Terms: If the spend is substantial, negotiate more favorable payment terms. Rather than paying all in Q2, you could schedule payments over a year or align them with your fiscal year. Alternatively, consider committing to a multi-year renewal, which can help spread the costs.
- Non-monetary Asks: You can also consider negotiating contract terms – e.g., an addendum clarifying an indirect use clause to protect you in the future, or ensuring some flexibility like a temporary license allowance for a project. During negotiations, SAP might agree to such things, since they want to close the audit issue.
Throughout these, keep in mind your leverage: SAP initiated the audit to enforce compliance, but they also want to keep you as a satisfied customer (or sell you more). If you show a willingness to become compliant (i.e., you’re not refusing outright), the conversation becomes about how you’ll comply in a way that works for both parties.
5. Common Pitfalls and How to Avoid Them
Be mindful of these mistakes that organizations sometimes make in audit negotiations, and take steps to avoid them:
- Accepting SAP’s First Offer Too Quickly: The initial proposal from SAP (whether it’s a bill or a sales pitch) is often not the best they can do. Don’t rush to agree because of fear or pressure. Negotiate methodically. Everything is negotiable.
- Insufficient Documentation: If you go into talks without documentation, you’re negotiating from a weaker position. For example, saying “we think you over-counted users” without proof won’t carry much weight. Always back up your claims with data or references, such as usage reports or contract snippets.
- Over-Focusing on Short Term: Don’t just aim to “get the audit off our backs now” by buying something unnecessary. Consider how this settlement affects your long-term SAP strategy. If you pay a lot now for shelfware, you’ll suffer later. It might be better to invest in licenses that align with your plans.
- Ignoring Indirect Use in Settlement: If the audit identified indirect access issues but the immediate settlement doesn’t address them (e.g., SAP says “just buy 100 user licenses,” which doesn’t cover indirect scenarios), you could face the same issue again. Try to include a resolution for indirect use – whether via new licenses or a contractual clarification – so it doesn’t haunt you next year.
- Not Getting It in Writing: Once you reach a verbal understanding with SAP, ensure the final agreement (contracts, quotes, etc.) reflects everything. If SAP promised something (“we won’t charge maintenance on these licenses” or “we consider the matter closed after this purchase”), get that explicitly written into the agreement or email. Memories fade; paper doesn’t.
- Rushing Under Deadline: SAP might put time pressure (“this offer is only valid if you sign by the end of the quarter”). Be cautious – it’s often a sales tactic. While timelines can be real, don’t let arbitrary deadlines force a bad decision. If needed, ask for a short extension citing internal approval processes.
6. Finalizing the Agreement
When both you and SAP come to an acceptable solution, formalize it properly:
- You may receive a revised audit compliance letter stating what was agreed upon (e.g., “the customer will purchase X licenses to resolve the shortfall, and SAP waives any other claims for the period”). Check this wording to ensure it truly closes the audit.
- You will get a quote or contract for any new licenses. Review it against what was negotiated – ensure correct quantities, discounts applied, and maintenance terms are accurate, etc.
- Sign off and ensure you receive confirmation from SAP that this resolves the audit and you are now in compliance.
After it’s all done, internally document the outcome and update your license inventory. If you added licenses, incorporate them into your plan. If you got special terms or exceptions, note them for future reference.
Negotiation Example: Company ABC was founded 200 years ago. It has 10,000 professional users. SAP’s first approach was to buy 200 at the list price of $2M, plus back maintenance of $400K. ABC analyzed the data and found that 50 were duplicates and 50 were inactive, so the actual shortage was 100. They also knew they needed to expand an SAP module soon.
They negotiated to purchase 120 Professional users (covering the 100 and a buffer) at a 25% discount, with SAP agreeing to waive all back maintenance. Additionally, ABC committed to a pilot of an SAP cloud product.
The final cost was approximately $1.2M, down from the initially proposed $2.4M, and the deal included future-oriented value. All of this was captured in a letter of agreement. This negotiation saved ABC over $1M and left them better positioned.
Recommendations (Negotiating an SAP Audit)
- Base Negotiations on Data: Enter talks with a solid understanding of the facts. Double-check SAP’s findings against your data and be prepared to present evidence of any discrepancies. Negotiations grounded in data, such as user logs or contract language, will be far more effective than generic pleas for leniency.
- Leverage Experts and Allies: If you’re not confident, involve an SAP licensing expert or consultant in the negotiation. Their experience can uncover negotiation angles you might miss. Also, use your SAP account manager as an ally – they often want to maintain a good relationship and can help get you a better deal internally, especially if you frame it as a long-term partnership discussion.
- Think Beyond the Audit: Turn the Audit Settlement into an Opportunity. For example, if you were considering an S/4HANA upgrade or a new SAP module, bring it into the negotiation. You might get incentives or credits for it as part of the deal. Aim for a resolution that not only fixes compliance now but also aligns with your future IT roadmap (so the money you spend provides future benefits).
- Aim for a Win-Win: Show SAP that you’re committed to compliance, but need a solution that works for your business. Propose creative alternatives: “Instead of buying 100 of Product A, which we don’t use, how about 50 of A and 50 of Product B (which we plan to deploy)?” This can meet SAP’s revenue goal while giving you useful licenses. A cooperative approach can yield concessions such as discounts, extended payment terms, or additional support from SAP.
- Document the Outcome: Once you reach an agreement, ensure it is documented in writing – including what licenses will be purchased, any discounts, what issues are considered resolved, and any promises (such as waived fees or future use rights). This audit closure letter or contract amendment is your safeguard. In future audits or if personnel change, you have a record to prevent the same issue from being raised again erroneously.
- Learn from and Prevent Recurrence: After negotiating, conduct an internal lessons learned review. Why did the compliance gap occur, and how can you prevent it? Consider implementing new controls for user management or investing in better license management tools. Communicate to management the value saved through negotiation (to underscore the importance of SAM efforts). Preparing and negotiating well not only saved costs in this audit but also sets a precedent for how to handle any future audits calmly and strategically.
