How to Negotiate an SAP S/4HANA Contract

Written By: Eric Kimberling
Date: February 24, 2019

It’s not every day that most of us negotiate multi-million-dollar contracts with significant cost implications for the future. When we do, it’s important to get it right.

Before embarking on an SAP transformation or bringing SAP S/4HANA consultants on to your team, it is important to understand how to negotiate an SAP S/4HANA contract. We help our clients get a handle on their contract assumptions and benchmark to costs we have negotiated for other clients, but we do not give legal advice or have the same acumen of an attorney.

With this in mind, I had a chance to discuss how to negotiate an SAP S/4HANA contract with Marcus Harris, a prominent SAP contract attorney. In this discussion, we covered some contract negotiation best practices – as well as some of the common pitfalls.

You can watch the complete discussion in the video below, but here are some of the themes that came from the discussion in the meantime.

Understand what you want from your SAP S/4HANA transformation. When negotiating your SAP S/4HANA contract, you should approach it as a true transformation rather than a technology project. This will impact how you negotiate with SAP or your system integrator. This is also an important lesson in our experience as an SAP S/4HANA expert witness.

Be sure to understand which version of the software you are buying. There is too often a disconnect between the SAP software demos and the contract phase. What you saw in the demos may or may not be the version with the same functionality that is assumed in your S4/HANA contract – especially since the product is evolving quickly. This should be an important part of your ERP software evaluation process.

Negotiate long-term SAP S/4HANA cloud and SaaS costs. It is easy to focus on initial investment costs, but it is also critical to understand and negotiate the longer-term software costs. This is especially true if you opt for a cloud or SaaS deployment of S4/HANA. Long-term costs, accelerators, and usage fees should be fully understood.

Capture as many representations as you can in your contract. A lot is presented and promised during the SAP sales cycle. It is important to capture as much of this as you can to ensure it becomes part of your contract and that your vendor is held accountable for those representations. One wonders if better focus in this area might have helped mitigate the SAP failure at Lidl, the SAP transformation problems at Haribo, and other recent transformation challenges.

Ask for help to negotiate your SAP S/4HANA contract. The average executive or internal legal counsel probably doesn’t negotiate these types of contracts often, so be sure to ask for help. People that do this for a living can be of tremendous value in helping mitigate risk and optimize vendor accountability. Marcus, for example, used to work for SAP’s contracts department and has been involved from both sides of the negotiating table.

When you negotiate your SAP S/4HANA contract, you are building a long-term partnership – with all of the associated costs and benefits. It is important to take the time to get the right contract in place to build a strong foundation for what should be a healthy relationship longer-term.

Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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