Imagine a machine that needs repair. In the classical enterprise resource planning (ERP world), a service technician would read data from this machine, log on to the SAP system, and enter the request “spare part needed.”
However, as many SAP customers digitize, now many of these machines can report errors, like the need for a new spare part, themselves. But if the request is processed in a system without any human interaction, how can SAP charge for it in a reasonable and fair way?
“User-based charging is not a realistic approach anymore in the digital world,” explains Uwe Grigoleit, project lead for SAP S/4HANA.
Over the past year, a cross-functional team at SAP has developed a new pricing model for the use of SAP S/4HANA by devices and third-party applications rather than human beings.
The Digital Access Model
The newly created Digital Access Model gives customers the commercial clarity and predictability needed to innovate around digital technologies with SAP ERP and simplifies an extremely important component of their decision-making processes.
Based on a defined set of transactions — called ‘documents’ — in the ERP system, SAP no longer charges for the number of parties—humans, devices, etc.—accessing the system. Charges are instead outcome-based, a first-of-its-kind model.
“Of course, you could provide every machine or IoT device in the company with its own user,” Grigoleit says. “But this is not feasible with hundreds or thousands of machines and devices. We are now charging our customers for the business usage of the system; they only pay when the system is working for them, processing transactions. This is the fundamental idea of the Digital Access Model.”
A Cross-Team effort
The team that developed the new model included employees from across the company—from Pricing to Solution Management, Development, Sales, Contracts and Legal, and License Audit.
“The best thing about working on this project? Our great cross-functional team!” says Sonya Swann, project lead for Corporate Pricing. We were able to put all our internal differences aside and truly focus on the best outcome for our customers.”
In order to develop the new model, the team had to address the risks of revenues loss, market readiness, and potential effects on SAP’s credibility. Nevertheless, they were convinced these hurdles could be overcome: “We are not just reacting to our customers’ demands anymore but addressing them head on with an innovative and industry-leading approach,” Swann said.
Is It Paying Off?
User groups, analysts, and influencers have recognized the efforts. While previous user models were perceived as non-transparent, unpredictable, and inconsistent, the new pricing model makes it easier to use and pay for SAP software licenses. In developing the model, the team reached out to a variety of experts across SAP and collaborated with external stakeholders, including key user groups and industry analysts.
Since its introduction in April, the new model has generated over €90 million of revenue and 800 transactions with a very strong pipeline. The model also makes daily life easier for SAP colleagues in Sales because the new model replaces individual negotiations by clearly defining what is charged for.
“This is not the end of a very long project, it is the beginning,” predicts team member Joseph LaRosa, vice president of Strategic Pricing and Commercialization.
“In the era of digital transformation, and after having listened carefully to our customers, we believe that an adjustment to our offerings was necessary. With the new pricing and licensing model, we can now provide even more transparency, predictability, and consistency. I trust that these aspects will encourage our customers to continue to invest in digital business models.”
– Christian Klein, chief operating officer and
member of the Executive Board of SAP SE,
Intelligent Enterprise Group
The Hasso Plattner Founders’ Award is the highest employee recognition at SAP, awarded annually by the CEO to an individual or a team.
Finalist Fast Facts
- Submission Title: Commercial Innovation for the Digital Age
- Board area: Global Business Operations / Intelligent Enterprise Group
- Team: 18 employees – Sonya Swann, Vishnu Arcot, Joseph LaRosa, Brian Earp, Sunil Gupta, Uwe Grigoleit, Dirk Kaestner, Xiaohua Wang, Ulrike Raidl, Mani Pirouz, Maribel Young, Matthias Medert, Mark Govannicci, James Prest Jr, Eckhard Farrenkopf, Norbert Nowak, Yasmin Awad
- Impact: The impact of the Digital Access Model is reflected in endorsement from user groups and customers, positive reviews from analysts and influencers, and nearly €90 million revenue since its introduction. The extremely collaborative approach has helped SAP win customer trust.