SAP Commissions
Contract pitfalls

In 2018, SAP’s acquisition of marked a pivotal moment in the evolution of their flagship Incentive Compensation Management product. Renamed as SAP Commissions, the product is undergoing a comprehensive architecture rewrite, transitioning to core SAP technologies and rebranded as SuccessFactors Incentive Management. This transformative change is a response to the ever-evolving landscape of technology and a strategic move to align with SAP’s broader ecosystem.

The crux of this transformation lies in the departure from the existing architecture, which is based on Oracle. This change is not merely a technological shift but a strategic necessity. The current Oracle-based architecture is set to lose support beyond 2026, prompting a critical decision for existing customers. They now find themselves at a crossroads, faced with the choice of either upgrading to the SAP HANA platform hosted on Google Hyperscalers or exploring alternatives within the Incentive Compensation Management (ICM) and Sales Performance Management (SPM) landscape.

Scorecard for the contract

All software vendors and systems integrators (SI) promise to deliver projects on time and within budget, but the reality is that during the sales cycle you’ll get the world, while the reality is in the project Statement of Work SOW.

In the end, “we talked about this during a call or two” loses dearly to “here’s the contractual statement”.

To measure risk of the project not finished on time and within budget, you may want to deliver a scorecard (an example is provided below) to consider the following factors:

Type of project

One of the most important considerations is the type of project. Some vendors are going for Time and Materials (T&M) option only, others are very comfortable with Fixed Price projects.

That factor alone tells you a lot about the chances of staying within project budget…

Vendors know that Fixed Price is an extremely important factor, so they put strange clauses in SOWs to cover for the fact, that SOW is in reality T&M.

Look for typical clauses like these:

  • The estimate is on a Fixed Price basis and will be validated at each phase of the project (…) through further detailed conversations in the requirements phase, parties will refine the project timeline and budget. – That basically means that the vendor does not have a full understanding of the scope and the budget is not guaranteed
  • The estimated Fixed Price fees are (…) USD excluding travel and expenses (…). The vendor will stop work when (…) USD in Service Fees have been incurred – This is a pure Time and Materials basis, because the budget is charged on Service Fees, which are T&M

There are many more ways of writing that a Fixed Price contract is in reality a T&M, so take a big magnifying glass when reading the SOWs!

Cost of migration

Some vendors agree to cover the cost of migration – but as always, you need to take it with a pinch of salt.

Something you may find in the SOW is that the cost of migration is indeed included, but the migration is on a T&M basis.

That basically means that the vendor may be interested in extending the timeline, despite verbal promises that it’s otherwise.

Data storage cost

One might think that the cost of data storage is irrelevant – and one would be making a great mistake.

Some vendors make their storage very expensive, not only that, there’s no way of telling how much storage the system will consume!

Do ask yourself a question: if the storage allowance is not only for the input data volume, but for all intermediate storage the system will use, what influence will you have to modify the system’s behavior and reduce storage consumption?

Why is the vendor charging you for everything that the system will produce, instead of only for the data you’ll load?

If you translate this scenario, what you get in reality is: “it’s a black box, you need to pay for everything it does – but we don’t know how much.”

Of course, in the course of sales calls, you’ll get a lot of statements like that from vendors:

  • The system compresses the data very well, the storage we offer initially is more than adequate.
  • If so, why does the vendor charge for intermediate storage in the first place?
  • We don’t know your business scenario, so we can’t guarantee that you won’t need to buy more storage, but we’re sure you won’t need to do it.
  • Sounds reasonable? I think not. Who makes the recommendation, and who’ll pay in case of overage?
  • We can’t charge for input data storage, only because we don’t know how much data the system will produce when calculating commissions.
  • If the vendor is not sure of it, how can you be?

Data storage cost can produce significant charges in case of overages, so vendors that charge you only for the input data volume tend to be a much safer choice in terms of running cost.

Knowledge of your business

This one looks like a no-brainer – if the vendor/systems integrator knows your business already, they sure will have an advantage over other implementation partners. As always, things are more complicated than this:

  • If the SI/vendor is already doing business with you, do they tend to deliver projects on time and within budget?
  • ICM/SPM systems are more complex and require significant experience to implement efficiently. Does the SI that operate in your enterprise have certified staff that know the system to implement? If not, then maybe it’s a good idea that they partner with another SI?
  • ICM/SPM vendors and SI should have a track record of implementations done on time and within budget. Do ask for references.
  • When talking to an ICM/SPM vendor or SI, do they get your scenarios quickly and speak your language, or do they provide generic presentations and not grasp your business concepts?

Parallel license cost

This one can get costly – it’s only natural that for a period there will be two systems running simultaneously: the old one (SAP Commissions) and the new one.

Please consider the following:

  • Even SAP will most likely charge you for both systems (SAP Commissions and SuccessFactors Incentive Management), which seems quite absurd. I mean – you’re forced out of SAP Commissions, so this really should be covered by SAP.
  • Other vendors may be negotiated with to either postpone first year charges or reduce them significantly, to alleviate the pain of two systems running at the same time.
  • Some vendors are more reasonable in this area than others, which is yet another indication that a vendor is more serious about doing business with you.

Example scorecard

Here’s an example scorecard that you may want to use – the weights can be adjusted to your specific needs:

Area Vendor 1 Vendor 2 Description
Project type 3 10 1 for T&M, 3 for capped T&M, 10 for Fixed Price
Cost of migration covered by vendor 5 0 0 if not, 5 if partially, 10 if fully
Storage 2 5 1 for limited with risk of overage, 2 if limited with low risk of overage, 5 if unlimited
Margin/Uro changes included 0 5 0 if not included (additional cost will apply), 5 if included
Client-specific implementation partner 0 5 0 if little knowledge of Client commissions or known of delays, 5 if client commissions knowledgeable partner with no/little history of delays
Parallel testing included 0 3 0 if not included, 3 if 2 months, 5 if 3+ months
Reduced parallel license cost 0 12 0 if no mitigation, 3 if mitigated for 3 months, 6 if mitigated for 6 moths, 12 if mitigated for 12 months
Total 10 140

A few practical hints from Sands Partners:

  • Vendors try to obfuscate the picture with small print, so be very diligent when going through the SOWs and verify twice what is presented on sales calls!
  • While data storage cost may seem irrelevant, in many cases the cost of storage was a significant portion of running cost!
  • Parallel license costs can become expensive– but there are ways around it.
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