In mid-May 2019, I spoke at a two-day conference on avoiding problems with SAP S/4HANA ERP software , integration and implementation projects.
Many users run into the same kind of problems with their SAP S/4Hana software implementation. As an ERP attorney whose career includes working on the vendor side of ERP as well as negotiating and drafting SAP S/4HANA contracts for users and litigating disputes when the SAP S/4HANA implementation encounters problems, we have seen many of the same issues arise repeatedly.
Negotiating your SAP S/4HANA contract may be the most important step to achieve a successful SAP S/4HANA implementation.
It may be useful for CEOs, COOs, CFOs and General Counsel considering an SAP S/4 HANA implementation or digital transformation to have a list of what not to do when talking with the sales team. Because I drafted ERP contracts for SAP early in my career, I know where the hidden traps and pitfalls are waiting for the unwary.
1 – Understand why you want a new system. Leaders need to ask “How will this digital transformation change our business?” Don’t think of SAP S/4 HANA as a technology issue because it is fundamentally about implementing software that addresses basic business needs and requirements. Remember that the goal of a software company is to sell their system. This isn’t always aligned with the user’s business goals.
2 – Know exactly what you’re purchasing. The SAP S/4 HANA system is being developed so quickly that what a user thinks they are acquiring may not be what is going to be delivered.
2 – Don’t focus on the price. Many users think they should license SAP S/4 HANA based on the price and up-front discounts for add-ons. By focusing on price, users often overlook onerous terms that restrict how the SAP S/4 HANA software may be used. Also, the discounts often leave users paying for software licenses they may not use for a long time but paying for maintenance in the meantime.
3 – Don’t sign the contract SAP hands you. The contract you will be asked to sign is written entirely in favor of SAP. There are numerous provisions that need to be negotiated. SAP’s standard form contract will have unreasonable user restrictions, limitations of liability and warranties. All of these things can be negotiated. Other standard provisions are entirely missing from SAP’s form contract. Without proper negotiating, it will be difficult to hold SAP accountable for common issues that are likely to arise.
4 – Don’t rely on representations made by a sales team. The job of the account manager and sales people is to meet their quota and sign up a new customer. It’s not unheard of for them to say they have experience in your sector or industry, or have out-of-the-box functionality to meet all of your business needs. If they say something, write something – and try to include any marketing material as an addendum to the contract.
5 – Don’t assume what you did 10 years ago works today. Users upgrading a legacy system ERP software system to an SAP S/4 HANA system sometimes overlook the reality that not only is the software different than it was when you signed your first deal, the contracts are different, as well. Use contracts with the vendor and integrator as a tool to manage the relationship for the life of the product.
6 – View the contract as a collaboration. Just as you shouldn’t sign a one-way contract, SAP and the integrator are not going to sign one either. Think of the negotiation process as you would any business deal: It has to work for everyone.
7 – Don’t let the contract dictate how you can make business decisions. Make sure that you have as much flexibility in using the software as possible. As an example, no company wants to be surprised by getting an invoice for unexpected maintenance fees or learn after the fact that you can’t use the ERP software system for certain things. This needs to be in the contract.
Whether you’re considering an SAP S/4HANA ERP system or one from another vendor, keep these seven key points in mind. If you have any questions or want help with your contract feel free to call us.