Negotiating SAP Audit Settlements
You’ve just received an SAP audit report with a hefty compliance claim. Now what? Instead of treating it as a non-negotiable bill, approach it as a negotiation.
CIOs, procurement leads, and legal teams can strategically manage an SAP audit settlement or true-up negotiation to minimize cost and even turn it to the company’s advantage.
This guide shows how to analyze SAP’s claim, leverage your contract, and craft a commercial resolution that keeps costs down while preserving a workable relationship with SAP.
Read our guide SAP License Audits – The Ultimate CIO Guide.
Understanding SAP’s Compliance Claim
When SAP’s Global License Audit and Compliance (GLAC) team issues an Audit Summary (also called a License Measurement Result), it will outline areas of non-compliance.
Typically, it includes things like:
- License shortfalls by category: e.g., SAP claims you have 500 Professional User licenses deployed, but only purchased 300.
- Indirect access usage: SAP might estimate usage by third-party systems or external users that indirectly access SAP, which they assert requires additional licensing.
- Back maintenance or penalties: Sometimes SAP’s report adds years of “back support” fees or penalties for unlicensed use.
It’s critical to separate fact from assumption in these claims. Determine what is verified noncompliance (e.g., truly more users than licenses) versus what might be SAP’s interpretation or error.
For example, SAP might claim 500 Professional users over the limit – but upon review, perhaps 300 of those users can be reclassified under a cheaper license type (like “Employee” users) or were inactive accounts.
That instantly reduces your exposure. In short, do not accept SAP’s numbers at face value; dissect their compliance claim to find any over-counting, misclassification, or contractual stretch.
Reviewing and Dissecting the Audit Report
The first step is a thorough, critical review of the audit findings. Scrutinize the methodology SAP used and probe for weaknesses or mistakes.
Key points to review include:
- Contract definitions: Check if SAP applied the correct definitions from your contract. Are they counting users or engines in a way that aligns with your agreement’s terms? If your contract defines certain user types or system limits, ensure SAP’s audit adheres to those definitions and scope.
- Scope of systems: Verify that SAP didn’t include systems that shouldn’t be audited. For instance, development, testing, or backup systems may not be included in license usage calculations in some agreements. If the audit swept in non-production environments or affiliate systems not covered under your license, that’s a point to challenge.
- Indirect access calculations: If the report includes indirect usage, examine how SAP calculated it. Sometimes, automated system accounts or interface transactions get inflated into huge “user” counts. Question the logic: are they counting an interface as if each transaction were a separate user? Ensure indirect use isn’t overestimated.
- Data and calculation transparency: Request SAP’s calculation sheet or audit logic in writing. Insist on seeing exactly how they arrived at each number – the formulas, scripts, and raw data. This transparency can reveal errors (e.g., duplicate counting of a user across systems or assumptions about user roles). If SAP is reluctant to share details, that itself is a red flag to leverage in negotiation.
- Compare to your own records: Cross-check every compliance shortfall against your internal license inventory to ensure accuracy. It’s possible SAP missed some licenses you already purchased or counted old data. For example, if you bought additional licenses last year that aren’t reflected in the audit, provide proof and have those findings corrected.
By reviewing line by line, you might find that a significant portion of SAP’s claim is debatable or incorrect. Document every discrepancy or questionable item – these become your leverage. The goal at this stage is to raise doubts about the initial audit report and establish a factual basis for negotiating a lower outcome.
Building Your Counter-Position
Before engaging with SAP on the findings, prepare your internal counterposition.
This is essentially your negotiation playbook, and it should be done before responding in depth to SAP. Build a brief that includes:
- Documented discrepancies: List out each point in SAP’s report that you disagree with or find in error. Example: “SAP claims 100 extra Professional users – our analysis shows 50 of those are inactive accounts and 30 are low-level users who should be Employee licenses.” Gather evidence for each point (user lists, system logs, contract clauses).
- Relevant contract terms: Identify clauses in your SAP contracts that support your stance. If your contract has a flexible definition of indirect users or does not require back maintenance fees for unlicensed use, highlight that. If audit rights are limited in scope or frequency, note it. Any contractual language that limits SAP’s claim is a powerful tool in negotiations.
- Your own cost model: Calculate what you believe is the correct resolution. This may be the cost to license only the confirmed shortfall (excluding disputed items), and it is likely to be applied with discounts. In other words, come up with a reasonable figure for what you truly owe, based on your validated data. This becomes a reference point – you’ll aim to steer the discussion toward this lower number.
- Assign roles on your team: Assemble a cross-functional team for the negotiation. Typically, your legal counsel will handle contract interpretation and push back on terms; a technical lead or SAP admin will validate data and explain usage details; and procurement or IT asset management will lead the commercial negotiation strategy. Having clear roles ensures you cover all angles and respond consistently to SAP.
With this preparation, you now have a counter-narrative to SAP’s audit. You’re ready to engage with SAP, armed with facts, a solid contractual footing, and a clear target outcome. Importantly, by doing this homework first, you won’t be caught off guard by SAP’s assertions, and you won’t concede points that you can dispute.
Read about SAP Audit Defense Strategy, SAP Audit Defense Strategy: How to Prepare and Respond
Engaging SAP Audit & Sales Teams Strategically
When you start communicating your position to SAP, approach it deliberately. Remember, SAP’s audit team (GLAC) and their sales/account team have different motivations. The audit team’s job is to enforce compliance (often leading to revenue from license sales).
In contrast, the account/sales team is interested in the overall customer relationship and future sales opportunities. Leverage this dynamic:
- Keep discussions factual and calm: Stick to the data and contract. Avoid emotional reactions or accusatory tones. For example, rather than saying “Your audit is wrong,” say “We’ve reviewed the findings and have questions about several assumptions.” By staying professional and data-driven, you set a collaborative tone rather than an adversarial one.
- Control the narrative: When responding, do so in writing whenever possible, and address each point methodically. This creates a documented trail and avoids any off-the-cuff admissions. If SAP requests meetings or calls, that’s fine, but follow up with summary emails to ensure mutual understanding of what was discussed.
- Segment the engagement: Initially, you will mainly deal with the GLAC auditor to clarify the data. However, as you move toward settlement, please involve your SAP account manager or sales representative. Use each team when it benefits you. For example, if the audit team is rigid, bring in the account manager to discuss how a compromise could lead to a positive future business (which the sales side likes to hear). Conversely, if sales are pushing you just to buy more licenses quickly, you can hold the line by citing unresolved audit questions that the GLAC team needs to address. Play the two sides diplomatically to get the best outcome.
- Resist “pay now, discuss later” pressure: It’s common for SAP to imply that you must purchase additional licenses immediately or face penalties. Don’t be rushed. A polite but firm response is: “We are reviewing the findings and will address any confirmed gaps once our validation is complete.” Make it clear that you are not refusing to resolve, but rather that you need to complete due diligence. This stance buys you time and shows SAP you won’t write a check without proper justification.
By managing the communication, you prevent SAP from dictating the terms of the engagement. Keep SAP engaged just enough so they know you’re serious, but don’t let them set all the deadlines and definitions. You want SAP to recognize that you are organized, knowledgeable, and willing to negotiate – not simply capitulate.
Negotiation Framework: Reducing the Liability
When it comes to the actual negotiation, your goal is to reduce the compliance bill to the minimum practical amount. Treat the audit settlement like any other deal with SAP – everything is on the table for discussion.
Here’s a framework of tactics to drive the cost down:
- Challenge the audit methodology: Start by examining the basis of the claim. Reclassify users to cheaper license types where appropriate (e.g., some named “Professional” users might only need an “ESS/Employee Self-Service” license). Remove inactive or test accounts from the equation entirely – they shouldn’t count toward licenses if they’re not actively in use. Also, clarify indirect use assumptions: if SAP counted third-party system calls as equivalent to named users, negotiate a more reasonable metric or exclude purely technical accounts. Essentially, shrink the scope of the findings before even discussing money, so you’re negotiating over a smaller, more accurate problem.
- Leverage timing for discounts: SAP, like most vendors, has sales targets at the end of every quarter and year. If you have any flexibility in timing, consider negotiating toward SAP’s quarter-end. As the quarter closes, SAP will be more motivated to finalize the deal (your settlement) and may offer steeper discounts or concessions to secure the revenue. Let SAP know that you have internal processes and approvals that take time, and tentatively aim to finalize the settlement by the end of their fiscal quarter. Without explicitly saying so, you’re positioning yourself to get a “quarter-end discount”. Just be careful: use this tactic earnestly (you do intend to settle, just on better terms), and avoid being strung along past a deadline without resolution.
- Frame it as a future investment: Shift the conversation from paying for past mistakes to investing in the future. This psychological reframing can make SAP more flexible. For example, instead of agreeing to pay $200,000 purely as a penalty for overuse, propose that $200,000 be used to purchase something new or valuable for your business. Emphasize that you want to work with SAP as a partner, not just hand over a fine. This encourages SAP’s team to think creatively about a solution that generates revenue for them while also providing value in return.
- Convert penalties into product value: One of the most effective moves is to turn the compliance fee into a purchase that benefits you. For instance, consider offering to purchase additional SAP modules, cloud services, or an upgrade (such as migrating to S/4HANA or SAP’s RISE program) as part of the settlement. In doing so, ask that the cost of the audit shortfall be offset or reduced by this new investment. Often, SAP would rather see you adopt more of their products (which have long-term value) than collect a one-time penalty. As a result, they may significantly cut or even waive the audit charges if you commit to a strategic purchase. This way, your money goes into improving your IT landscape, not just plugging a compliance hole.
Keep in mind that everything in an SAP audit quote – including license quantities, list prices, and back-maintenance fees – is negotiable. It’s not unusual for companies to negotiate a 30-50% reduction in the initial license fees as part of an audit settlement.
For example, suppose SAP initially states that you owe $1 million at the list price. In that case, you might negotiate it down to say $500k through discounting and reclassification, or even less if you bundle the settlement with a new initiative (like a cloud migration).
The key is to be creative and firm: you want to resolve the compliance issue, but on terms that make commercial sense for you.
View our SAP Audit Response Checklist & Communication Templates.
Structuring the Settlement (Commercial Options)
As you reach a tentative agreement with SAP, focus on structuring the settlement as a commercial deal rather than an admission of guilt or a penalty payment. You want the outcome to be constructive for both sides.
Common settlement structures include:
- License true-up purchase: The simplest route – you agree to purchase the additional licenses needed to cover the overuse. Aim to buy them at a heavily discounted rate as part of the settlement. This addresses the compliance gap by converting it into a legitimate license acquisition.
- Cloud or alternative licensing conversion: Instead of traditional licenses, you might convert your usage into a different model. For example, if indirect access is a big issue, you could transition to SAP’s Digital Access document licensing model or move some systems to a cloud subscription. By doing so as part of the settlement, SAP might waive certain fees. Essentially, you’re swapping the penalty for a new licensing approach that arguably delivers more value or future-proofing.
- Multi-year agreement or bundle: You can incorporate the settlement into a larger deal, such as a multi-year contract extension or a broader purchase agreement. For instance, commit to a three-year renewal of SAP support or an expansion of SAP products, and negotiate that the audit findings will be resolved within that timeframe. In return for the guaranteed future business, SAP may forgive a portion of the compliance costs or apply special discounts.
No matter the structure, insist on formalizing everything in writing. The settlement should be captured in a signed contract amendment or agreement. Avoid informal or handshake deals.
For example, if SAP verbally promises to waive a penalty if you purchase X, ensure that this waiver is explicitly stated in the final paperwork.
Also, include “full and final settlement” language – meaning once you sign and fulfill the deal, SAP acknowledges the compliance issues are fully resolved and releases you from any further claims for that audit period.
This clause is crucial to prevent SAP from resurfacing next month or next year, demanding more for the same issue.
Finally, ensure the settlement documentation is crystal clear on what you’re getting and any future obligations.
If you have converted to a new model or purchased additional licenses, clarify how maintenance fees will be handled and align renewal dates with your existing agreements, if possible.
A well-structured settlement not only resolves the immediate problem but also prevents unexpected issues down the road.
When and How to Escalate
Sometimes negotiations with the audit team hit a wall. Maybe the SAP auditor is being inflexible or dragging their feet. Know that you have the option to escalate the discussion to higher levels within SAP. This can reset the tone and bring a more business-focused perspective to the table.
If you aren’t making progress after a reasonable back-and-forth, involve your SAP account executive or a regional sales VP.
High-level SAP executives have a stake in maintaining a good customer relationship, especially if you’re a sizable client or have future projects planned with SAP. When escalating, frame your message in business terms, for example: “We want to reach a fair resolution and continue our strategic partnership with SAP, but the current audit demands don’t reflect our actual usage or the spirit of our contract.”
This approach signals that you’re a willing customer, but you expect to be treated reasonably. Often, bringing in a sales executive will shift the conversation from the rigid “compliance recovery” mindset to a more flexible, customer-oriented negotiation.
The audit team may then be instructed internally to find a compromise, or the sales side might bundle the settlement with other initiatives as discussed. Executive escalations can also expedite the process if time is dragging, as leaders won’t want a protracted dispute to sour the relationship.
Use escalation judiciously – it’s a card to play when needed. Make sure you’ve done your homework (as above) so that when higher-ups get involved, you can clearly articulate your case. The combination of a well-founded counter-position and the involvement of an executive sponsor often leads SAP to adjust its stance.
Common Mistakes and Pitfalls
During SAP audit settlement talks, companies can inadvertently weaken their position.
Avoid these common pitfalls:
- Revealing your budget or bottom line: Never disclose how much you’ve set aside or are willing to pay for the settlement. If SAP learns your budget, they’ll anchor their demands to that number (or higher). Keep your financial cards close to your chest.
- Admitting fault in writing: Be careful with your wording. Don’t send emails saying “we were using more than we should” or “we messed up.” Frame issues as misunderstandings or usage that needs aligning, not blatant violations. You want to solve a problem, not confess to wrongdoing.
- Rushing under pressure: SAP might push you to “buy now” to quickly resolve the issue. Do not agree to purchase licenses or sign anything until all points are resolved in a written agreement. If they pressure with a deadline, stick to your process—better to take a bit more time than to agree to something incomplete or unfavorable.
- Accepting back-dated maintenance fees without challenge: Often, SAP will include retroactive maintenance (support fees for the period you were allegedly unlicensed). Check your contract – most do not explicitly allow charging back maintenance for past periods of unlicensed use. This is negotiable, and many customers have successfully had SAP drop or significantly reduce these back fees. Push back on any line item that isn’t clearly justified by your contract.
- Settling without a full release: As mentioned, always secure a written clause that the settlement is full and final for the audit period. Without this, you risk SAP coming back later with “oh, we also found another issue” or trying to audit the same area twice. Close the door completely on the audit findings you’re settling.
Avoiding these mistakes ensures you don’t give SAP any extra edge in the negotiation. Stay prudent, and you’ll maintain maximum leverage.
Using Audit Pressure as Commercial Leverage
Believe it or not, an SAP audit, while stressful, can be turned to your advantage.
The situation creates a pressure point that you can use to drive commercial improvements in your SAP relationship. In other words, you can convert audit pain into long-term gain.
Consider leveraging the audit to:
- Reevaluate your license mix: Use this moment to analyze whether your current licensing model is optimal. Perhaps adopting a modern model (for example, trading some perpetual licenses for a subscription or utilizing SAP’s digital document licensing for indirect use) could save money or reduce compliance risk in the future. SAP may be more amenable to offering you a favorable deal on a new model now, as part of a settlement, than it would under normal circumstances.
- Simplify and optimize usage: The audit forces you to take inventory. If you find shelfware (unused modules) or realize you’re underutilizing certain products, negotiate to remove or swap them. Perhaps you can persuade SAP to credit unused licenses towards the ones you actually need as part of the resolution. This cleanup can reduce ongoing costs and complexity.
- Improve contract terms: Take the opportunity to address any contract ambiguities or harsh terms that led to the audit exposure. You could negotiate clearer definitions (e.g., what constitutes an “indirect user”) or more lenient audit provisions (such as longer notice or exclusion of certain systems) moving forward. SAP might grant some contract improvements if it helps close the audit deal and secure your future business.
Example: One enterprise turned an audit showdown into a catalyst for a major upgrade. SAP had claimed a large indirect access fee, but instead of paying a penalty, the customer negotiated a migration to S/4HANA Cloud.
In the deal, SAP forgave most of the audit charges, and the company committed to a multi-year cloud subscription. The result: the company eliminated the compliance issue and modernized its SAP landscape at roughly 30% lower total cost than the audit plus separate upgrade would have been. The audit pressure gave them the leverage to get a favorable transformation deal.
The lesson is to think bigger than the audit. What strategic moves were you considering (or should you consider) that SAP could assist with?
By aligning the settlement with those moves, you turn a tough audit scenario into a win-win: SAP gets a satisfied customer who’s investing more with them, and you get better terms, new capabilities, or long-term savings.
Negotiation Checklist for SAP Audit Settlements
Before finalizing any SAP audit settlement, run through this quick checklist to ensure you haven’t missed anything important:
- Validate all findings independently: Never accept SAP’s audit results without your own verification. Double-check every user count, engine metric, and indirect usage claim against your data.
- Identify disputable assumptions: Pinpoint where SAP’s claim relies on assumptions or broad interpretations (e.g., user classifications or indirect access calculations) and prepare challenges for each.
- Build a written counter-case: Document your response to the audit – the errors found, corrected numbers, contract justifications, and your proposed resolution. This becomes your playbook during negotiations.
- Escalate if you hit a wall: Don’t hesitate to involve higher-ups (internally and at SAP) if negotiations stall or SAP’s team isn’t reasonable. A fresh perspective can break deadlocks.
- Get “full and final” in writing: Ensure the settlement agreement explicitly closes the matter. All resolved compliance issues should be released in the contract, preventing any surprises later.
Using this checklist will help confirm that you’ve covered all bases and set yourself up for a successful settlement outcome.
5 Proven Tactics for SAP Audit Settlements
- Dissect the Claim: Rigorously separate confirmed overuse from inflated assumptions in SAP’s audit report – and insist SAP provides their detailed calculations. Knowledge is power; make SAP show its math.
- Convert Penalties to Value: Never pay a dollar to SAP as a pure penalty if it can be avoided. Reframe the situation as an opportunity to invest in something useful (new licenses, modules, cloud services) so your spend delivers business value.
- Negotiate on Timing: Use SAP’s sales calendar to your advantage. Aim to finalize settlements near quarter-end or year-end when SAP is eager to close deals – you’ll secure deeper discounts and more concessions.
- Keep Legal Anchored: Refocus the discussion on your contract. If SAP’s claims overreach contract terms or definitions, hold the line. Let your legal team constrain the negotiation to what your agreement actually mandates.
- Close Cleanly: Don’t leave loose ends. Only settle with a signed agreement that releases all audit claims for the period. This full release ensures the same issue won’t haunt you after you’ve paid and keeps SAP honest in the future.
Read more about our SAP Audit Defense Service.
