Posted by Duncan Jones on July 12, 2010
I joined an impressively large crowd at SAP’s World Tour event in Birmingham,UK, last week and was able to spend an hour with Tim Noble, head of SAP’s UK and Ireland business unit, and Chris McLain, who leads SAP’s team focusing on its 150 largest accounts in EMEA. I'm writing an update of my 2007 report "Effective SAP Pricing And Licensing Negotiation" and wanted to know what they thought about the clash between traditional deal-based sales incentives and Forrester’s clients’ need for commercial flexibility and more recognition, by their key software providers, of the wider relationship. It’s a topic I’ve raised before (http://blogs.forrester.com/duncan_jones/10-03-19-open_letter_season_sap), and I was very pleased to hear some things that SAP is doing to reduce this conflict.
I explained why, from my research, software vendors’ insatiable craving for recognizable license revenue at the expense of creating shared incentives for success is damaging to customers and to the vendor. Both Tim and Chris clearly understand the problem. Tim keeps reps on the same accounts for several years and rewards them for metrics such as customer satisfaction to avoid the revolving door sell-and-run approach that characterized software selling before the advent of SaaS. Chris has a team of Global Account Directors that works with local sales, pre-sales, and delivery teams to provide the holistic view that Forrester clients want and struggle to get from SAP’s competitors.
On the subject of license purchases to cover multiyear roll-out programs, Tim emphasized that although SAP prefers to get a single purchase order on day one, it offers other options depending on the customer’s needs. Chris made a great point that one of his priorities is securing the roll-out program’s funding — he can’t help his customer if someone else takes away the budget half-way through. No one is pretending that SAP has had a Damascene conversion, but its good to hear SAP execs discussing the need for changes to its commercial approach.
Bottom line: IT sourcing professionals should resist pressure to make irrevocable commitments or, even, pay up front for software licenses ahead of when they actually need them. Sales reps may still demand that at first but, higher up in the organization, good software companies recognize the new reality. However, that doesn’t mean that you can expect merely to pay as you go. There should be a balanced deal that involves shared commitment and incentives for the program’s success.