A SUBSCRIPTION-BASED BUSINESS MODEL FOR TOP CLIENTS

« Moritz launched and set the vision for the Global Strategic Customer organization at SAP. He established the key programs for these top tier customers including co-innovation, value delivery and strategic advisory programs to maximize the influence these customers had on the direction of SAP. He worked directly with the Global Strategic customers to define and agree the path forward for Customer and SAP success. I highly recommend Moritz’ leadership and his passion to ensure top and bottom line results. »

Stephen Kunkle

Managing Partner at SAP America | www.sap.com

In a nutshell…

Incremental sources of revenue from top accounts mechanically disappear when a group attains a dominant market share. All the while, maintaining a healthy level of business growth with these top accounts is crucial to sustaining group-consolidated results and stock market price. Moritz provided customers and SAP with a business model that enables share of wallet growth, while providing more predictability for both parties, as well as a seamless commercial transaction.

  • THE CHALLENGE

    Loyal, satisfied, well fed customers: no future?

    The large enterprise space is the greatest contributor to SAP results. Longtime customers, they have been presented with, and adopted, most of SAP’s developments, to the point that there is very little potential incremental business left to anticipate in the future.

    Large footprint, large companies, large liability

    SAP usually concludes significant transactions with these customers towards end of quarter or end of fiscal year, the weight of which directly and openly impact company results, either positively or negatively. Unfortunately, these deals are very difficult to plan and predict, introducing an unwanted uncertainty to financial results.

    No value to loyalty

    The sales policy applied to new products for important clients was steep: charge face value, incrementally to existing software and maintenance fees, with no special conditions applied. Notwithstanding the incumbent pricing complexity, top clients were beginning to complain about price levels.

  • THE ANSWER

    Easier, lighter, faster

    The idea was to allow revenue increase, while ensuring greater predictability, and simplifying the business transaction.

    The difficulty was to introduce the new business model without impacting SAP top line results, to limit the amount of resources involved, and to quicken the go-to-market.

    To this effect, Moritz conceived and tested a proposal based on:

    • A subscription model
    • A customer engagement model (solving customers’ business challenges by leveraging the vast SAP ecosystem)
    • An Advisory Board for customers
    • A dedicated SAP desk for the clients affected by the change in business model
    • A milestone based implementation plan recording progress in business model transformation

     

  • THE OUTCOME

    Beyond proof of concept

    A sales and business development desk of 15+ experts was consequently set up (GEA), which was accountable for sales, governance and the ongoing strategic management of these customers. The quota for TCV was owned by this organisation.

    Almost 20 of the world leading companies in Energy, High Tech., Manufacturing, Consumer Goods, were transitioned to this business model during the lifetime of the desk, delivering €400m in annual revenues, approximately 30% incremental revenue growth, and over €1,5bn TCV (Total Contract Value).

    Subscription now part of company genes

    SAP introduced subscription accounting as a line item into its P&L. In 2009, a larger set of customers was transitioned to the business model, thereafter called FLA (Flexible Licensing Agreement).

    As part of this organization, accounting, compensation models, target setting and reporting were adjusted to reflect the impacts of the new business model.

    The Advisory Board is considered today a testament to the strategic partnership with a vendor.