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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

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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

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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

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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

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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