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How to Negotiate Your Enterprise Software Agreement
Why can’t we all just get along….
Nancy GendronVice President, AMR Research
Contract Negotiation & Benchmarking Service
© 2002 AMR Research, Inc. www.amrresearch.comConfidential
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Agenda
• What’s New in the Negotiation World?
• Current Customer and Vendor Focus
• SAP Negotiation Challenges
• What About Everyone Else?
• Customer Responsibilities
• Closing Thoughts
Confidential © 2002 AMR Research, Inc. www.amrresearch.com 2
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What’s New in the Negotiation World?
• Revenue down / Valuations down
• Fewer opportunities
• Higher project scrutiny and approval process
• Unforeseen events and economic uncertainty causing project delays and cancellations
• Significantly reduced customer risk tolerance
• Yet, there has never been a better buyer’s market
Confidential © 2002 AMR Research, Inc. www.amrresearch.com 3
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Software Vendor Focus
• Revenue recognition
• Expand footprint in the base
• Provide creativity only for significant commitment
• Respond aggressively to competitive situations
• Execution of Software License Agreement
• Revenue recognition
Confidential © 2002 AMR Research, Inc. www.amrresearch.com 4
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Customer Focus
• Reduce cost and level of up-front commitment
• Increase ROI
• Leverage the enterprise and current market conditions
• Play vendors off each other
• Job security
Confidential © 2002 AMR Research, Inc. www.amrresearch.com 5
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SAP R/3 - Traditional User Community
SAP USER TYPES- Operational - Information- Requisition and Confirmation - ABAP
SAP USER TYPES- Operational - Information- Requisition and Confirmation - ABAP
- Financial /Accounting
- Cash Management
- Funds Management
- Investment Management
- Controlling
- Project System
- Materials Management
- Plant Maintenance
- Sales & Distribution
- Production Planning
SAP R/3 FUNCTION BLOCKS
INDUSTRY SOLUTIONSINDUSTRY SOLUTIONS NEW DIMENSIONNEW DIMENSION
Confidential © 2002 AMR Research, Inc. www.amrresearch.com 6
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SAP R/3 Pricing
• Defined value by looking within the enterprise
• Price based on users and various levels of access
• Extended price for New Dimension products as an add-on component
Confidential © 2002 AMR Research, Inc. www.amrresearch.com 7
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R/3 to mySAP.com Financial Issues
• New license metrics
• Re-price the Enterprise
• R/3 Migration Credit
• Revise Terms and Conditions
Confidential © 2002 AMR Research, Inc. www.amrresearch.com 8
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Confidential
SAP USER TYPES- Professional - Employee
SAP USER TYPES- Professional - Employee
mySAP.com
- CRM
- SCM
- SRM
- PLM
- HR
- Financials
- BI
- Portals
SUPPLEMENTARY SOLUTIONS
SUPPLEMENTARY SOLUTIONS
BUY SIDE
BUY SIDE
SELL SIDE
SELL SIDE
INDUSTRY SOLUTIONSINDUSTRY SOLUTIONS
© 2002 AMR Research, Inc. www.amrresearch.com 9
Engines Bolt-on
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mySAP.com Pricing
• Bundled product approach intended to “win” the enterprise
• Re-defined pricing approach to account for collaboration with business partners & customers
• Established engine pricing as a method to capture value and secure future revenue stream
Confidential © 2002 AMR Research, Inc. www.amrresearch.com 10
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What about everyone else?
•Oracle - Wrote a Price Book
•i2 - “Let’s make a deal”
•Siebel - “Our way or the highway”Confidential © 2002 AMR Research, Inc. www.amrresearch.com 11
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Negotiation Scorecard
Confidential
SAP ORACLE i2
Closing
B + C - C +
MarketAdjustment B - C B -
Play wellwith others A - B - B +
CustomerRelations B + C B -
© 2002 AMR Research, Inc. www.amrresearch.com 12
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Customer Responsibilities
• Accept that it’s not all about price
• Require your team to educate themselves on the changing business practices of all your key partners
• Define and follow your own rules of engagement
• Remember the key to project success is in your implementation deal
Confidential © 2002 AMR Research, Inc. www.amrresearch.com 13
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Closing Thoughts
• Customers must exercise vendors to think about pricing in the context of utilization
• Don’t believe everything you hear
• This will never be this easy again
• Every company needs to increase its System Implementation negotiation sophistication
• Speed kills
Confidential © 2002 AMR Research, Inc. www.amrresearch.com 14