Procurement Checklist: Legal & Compliance Must-Haves in SAP Contracts
Introduction:
SAP contracts are legally complex, and as a procurement professional, you can’t simply hand everything off to the Legal department. While lawyers will handle the fine print, procurement teams must understand the critical compliance clauses and legal terms at stake.
Think of this as an SAP contract legal checklist tailored for procurement: it highlights the must-have clauses and protections you should negotiate in SAP agreements. Read our complete guide, SAP Procurement & Vendor Management Strategies.
By being proactive and skeptical (in the best way), you’ll ensure key compliance clauses are covered early and your organization isn’t exposed to hidden risks.
This guide breaks down the major areas to focus on, with checklists and tips to help you navigate SAP contract negotiations strategically and confidently.
1. Data Protection & Privacy Clauses
Modern SAP contracts, especially for cloud services, must address data protection and privacy head-on. If your SAP deal involves any personal or sensitive data, insist on a Data Processing Agreement (DPA) as part of the contract.
A DPA spells out each party’s obligations for data privacy. In Europe, for example, the GDPR makes a DPA mandatory, so ensure that GDPR compliance clauses are explicitly included.
Additionally, confirm any data residency requirements: if your company requires data to be stored in specific jurisdictions (such as the EU or certain countries), the contract should clearly state where SAP will store and process your data.
Security and breach terms are equally important. Review the contract’s provisions on encryption, breach notification, and access controls.
Are they detailing how your data will be encrypted both in transit and at rest? Do they promise prompt breach notification (e.g., within 72 hours of discovering an incident)? Ensure the agreement clearly specifies who can access your data (e.g., SAP personnel or subcontractors) and under what conditions.
Vague promises like “we follow industry best practices” aren’t enough – you need concrete commitments that meet your company’s security standards.
Procurement Tip: Don’t accept vague language — demand clarity on where data is stored and how it’s protected. If SAP’s contract language around data protection is too high-level, push for specifics (e.g., exact data center locations, encryption standards, and response times for breaches).
Checklist – Data Protection
☐ DPA included
☐ GDPR compliance clauses explicit
☐ Data residency confirmed
☐ Breach notification process documented
Choose between RFP and direct negotiations, RFP vs. Direct Negotiation for SAP Contracts: Pros and Cons.
2. Liability & Indemnity Terms
Liability clauses determine who bears risk if things go wrong, and SAP’s standard approach is to limit its liability heavily. SAP often caps its liability at the fees paid (typically the fees paid over the last 12 months) for the service.
Procurement must assess whether that low cap is acceptable given the potential damages your organization could suffer from a serious SAP failure or security breach. In many cases, you may need to negotiate a higher cap or at least carve-outs so that certain critical issues (like data breaches or confidentiality breaches) are not subject to the cap.
Another key element is indemnification, especially intellectual property (IP) indemnity. Confirm that SAP provides IP indemnification for its software. This means if a third party claims SAP’s product infringes on their patent or copyright, SAP will defend and cover the costs, not your company.
SAP typically includes an IP indemnity clause; however, read it carefully to ensure it fully covers third-party claims and doesn’t contain unreasonable limitations. You want SAP to stand behind its product and protect you if using its software triggers an IP lawsuit.
Be wary of SAP attempting to disclaim excessive liability for service issues or outages. Cloud service agreements often have availability guarantees or service level agreements (SLAs), but if SAP’s liability for not meeting them is just a small service credit, consider pushing back.
If an SAP cloud service goes down and halts your business operations, the contract should at least provide meaningful remedies (credits, or rights to terminate if downtime is severe). Don’t let the contract say “SAP isn’t liable for any damages from downtime” without negotiating some form of accountability.
Risk: Without strong liability and indemnity terms, your organization could carry a disproportionate amount of risk.
The goal is to balance the risk – SAP, as the vendor, should accept responsibility (within reason) for issues under their control.
Table – Liability Scenarios
| Clause | SAP’s Default Position | Procurement Consideration |
|---|---|---|
| Liability cap | Fees paid over prior 12 months | Push for higher cap or carve-outs for critical breaches |
| IP indemnity | Included (covers SAP software) | Ensure scope fully covers third-party IP claims |
| Service outages | Limited responsibility (basic credits) | Negotiate stronger remedies or credits for downtime |
3. Audit Rights & Compliance Oversight
Nearly all enterprise software contracts, including SAP’s, include an audit clause allowing the vendor to audit your usage of the software.
Procurement’s job is to put strict guardrails around these audit rights. Why? An unchecked audit clause is a hidden risk – it could allow SAP to conduct disruptive audits or fish for compliance issues that lead to unexpected bills.
Negotiate the audit clause to be as customer-friendly as possible. Limit audits to no more than once per year and require SAP to provide reasonable notice (e.g., 30 days’ written notice) before any audit.
This prevents “ambush” audits and gives you time to prepare. Define the scope of audits clearly: for example, audits should only verify your license compliance for the SAP products you’ve deployed, and any audit should be done during normal business hours. The clause should state that SAP cannot randomly install software or access unrelated systems during an audit – keep the scope strictly to license usage verification.
Another important point is who pays for the audit. Ensure the contract says SAP bears the cost of routine audits. If you’re found to be significantly out of compliance (e.g., using far more licenses than paid for), it’s fair that you pay the shortfall or even audit costs in that case.
But if everything is in order, your company shouldn’t have to pay for SAP’s cost of checking.
Additionally, consider including that audits should minimize disruptions to your operations and that the results are confidential. This protects you from public exposure of audit findings or excessive operational strain due to an audit.
Procurement Tip: Ambiguous audit rights are a major hidden risk. Always clearly define the audit frequency, notice period, scope, and cost responsibility in the contract to avoid any surprises later.
Checklist – Audit Clauses
☐ One audit per year limit
☐ Reasonable notice period (e.g., 30 days)
☐ Defined scope of audit (license compliance only)
☐ SAP bears audit costs (if compliance is normal)
Read our guide on how to manage your SAP relationship, Managing the SAP Relationship: Keeping Your Vendor Accountable.
4. Assignment & Transfer Clauses
Business conditions change – companies merge, acquire others, divest divisions, or undergo internal restructuring.
Many standard SAP contracts restrict assignment, meaning you can’t transfer the contract or licenses to another entity without SAP’s consent.
This can become a significant issue during a merger or acquisition if not addressed up frontt. Procurement should negotiate flexibility in the assignment clause to protect your organization’s ability to adapt.
Focus on adding or modifying language to permit assignment in common scenarios. For example, if your company is acquired or merges with another, you want the SAP contract (and all your licenses) to be freely transferable to the new entity.
Aim for wording like “consent for assignment will not be unreasonably withheld or delayed by SAP” in cases of corporate reorganization.
Even better, include a clause that explicitly allows assignment to any affiliate or successor entity upon providing SAP with notice. The idea is to prevent SAP from using an ownership change as leverage to force a contract re-negotiation or extract additional fees.
Likewise, consider divestitures: if you spin off a business unit, can you transfer the relevant licenses to that entity, or at least terminate those licenses without incurring a penalty? SAP often resists splitting up licenses, but you can try to negotiate options (for example, the right to purchase additional licenses for the new entity at pre-negotiated prices, or allowing the spinoff to use the licenses for a transition period).
At a minimum, having a clear plan outlined in the contract for these situations is better than leaving it to chance.
Risk: Without assignment and transfer flexibility, you may find that during a merger or reorganization, you cannot transfer your SAP licenses, resulting in major disruption or increased costs. Always secure these rights so normal business changes don’t break your software licensing.
5. Termination & Exit Rights
Exiting an SAP agreement cleanly is just as important as signing one. Yet SAP’s default contracts often make it difficult to leave or wind down services. Procurement must negotiate termination and exit clauses that protect your company’s interests, especially for cloud services.
For cloud contracts (SAP SaaS or cloud subscriptions), ensure you have the right to get your data out and assistance from SAP when the contract ends. The contract should explicitly grant you data export rights, meaning that when your subscription terminates, you can retrieve all your data in a usable format.
Ideally, this export is provided at no additional cost and within a defined timeframe (e.g., available for download for 30-60 days after termination).
Also discuss transition assistance: if you plan to move off SAP to another solution, can SAP provide reasonable support or services to help migrate your data or integrate a new system during the switch? Even if SAP doesn’t offer formal exit services, having at least a clause that they’ll cooperate in good faith during transition can be valuable.
For perpetual licenses (software you’ve bought and host yourself), you typically own the software indefinitely, so “termination” relates more to ancillary services, such as support. Ensure you can terminate maintenance/support with notice if needed.
SAP’s standard practice is that you can drop support annually (since support is usually a yearly renewal), but double-check the contract doesn’t lock you in or auto-renew support without a chance to cancel.
You want the flexibility to stop paying maintenance fees if the software is stable or if you choose a third-party support provider later. Also, verify there’s no clause that if you stop maintenance, you lose rights to use the software – that shouldn’t be the case for perpetual licenses (you should retain usage rights in perpetuity). Clarifying these points in the contract will prevent misunderstandings down the road.
Finally, be cautious of auto-renewal terms for cloud or support contracts. If SAP’s agreement includes an auto-renewal, negotiate a clear notice period for non-renewal (e.g., “either party can terminate at the end of the term with 60 days’ notice”) so you’re not caught by surprise. Never allow an auto-renewal to go unnoticed; internally, set reminders well in advance of any renewal deadline.
Procurement Tip:
Never assume SAP’s default terms give you a clean exit — they usually don’t. You must proactively negotiate the terms of termination, or you may find yourself locked into an unwanted renewal or scrambling to retrieve data after the fact. Plan the exit strategy at the start of the contract.
Checklist – Termination & Exit
☐ Data export rights secured (for cloud services)
☐ Transition support obligations defined
☐ Termination notice periods documented (no surprise renewals)
☐ Support termination rights included (for perpetual licenses)
6. Internal Compliance & Corporate Standards
Every organization has its own internal policies and industry regulations to consider. Often, large enterprises require their vendors to comply with specific corporate standards – for instance, your company may have an internal code of conduct for suppliers, particular cybersecurity requirements, or industry-specific regulations (such as those in finance, healthcare, or government).
While SAP generally prefers not to include customer-specific clauses in its contracts, procurement should still attempt to incorporate any critical compliance terms that your organization requires.
Start by identifying non-negotiable compliance needs. For example, if you’re in healthcare, you might require a HIPAA Business Associate Agreement or strict data handling procedures. If you’re in finance or defense, there may be specific security certifications or audit rights you need SAP to agree to.
Cybersecurity obligations are a common area – you may want SAP to adhere to your company’s information security policies or standards (like requiring certain encryption levels, background checks for SAP personnel handling your data, etc.).
Additionally, many companies have ethics and compliance rules (anti-bribery, labor standards, environmental guidelines) that they ask suppliers to follow. Decide which of these are essential to include in the SAP contract or as an addendum.
Be prepared for pushback – SAP may argue that their standard contracts already cover general compliance or that they can’t change terms for one customer. However, if a compliance clause is truly important (especially due to legal regulations on your side), make it clear that it’s mandatory.
On the other hand, for less critical items, you might accept a softer commitment (for example, SAP agreeing in a side letter to acknowledge your code of conduct). The key is to raise the issue and see what you can get; don’t assume SAP will volunteer to meet your internal standards without being asked.
Decision Criteria: If industry regulations demand specific vendor compliance (e.g., financial data security laws, healthcare privacy rules), those clauses are non-negotiable must-haves in the contract.
Suppose you’re in a less regulated sector. In that case, you may not be able to implement every internal policy, but at a minimum, push for SAP to align with your corporate code of conduct or security policies. Even a general commitment is better than nothing.
7. Actionable Procurement Steps
Having identified all these key areas – from data privacy to exit rights – how should procurement proceed?
Here are some actionable steps to incorporate these legal and compliance must-haves into your SAP contract negotiation process:
- Build a Legal & Compliance Checklist Early: Before negotiations start, create your own checklist of all the critical clauses discussed above (data protection, liability, audit, assignment, etc.). This SAP contract checklist will be your roadmap. Share it with your team and stakeholders so that everyone is aware of the terms you need to address. By planning, you won’t forget important items when you’re in the heat of negotiation.
- Escalate Non-Standard Requests Sooner Rather Than Later: If you know you’ll need certain changes that SAP might consider non-standard (for example, a higher liability cap or a special compliance clause), raise them early in the negotiation. Don’t wait until the week of contract signing to introduce big changes – SAP’s reps will resist last-minute alterations. By flagging your must-have changes upfront, you give SAP (and your legal team) time to consider and work through them. Early escalation can prevent deal delays and ensure critical terms aren’t overlooked.
- Align with In-House Legal, but Own the Procurement Perspective: Work closely with your legal department throughout the process – they will craft the language and identify potential legal red flags. However, don’t completely hand off responsibility. Procurement has a unique perspective on operational risk and vendor leverage that pure legal advisors might not. Make sure the legal team understands why certain clauses (like audit limits or assignment rights) matter to your business strategy. Collaborate on negotiation strategy: Legal can suggest wording, but procurement should push on the business rationale. This partnership ensures that the final contract strikes a balance between legal soundness and practical business protections.
- Document Every Commitment from SAP: Verbal promises or sales assurances mean nothing unless they’re written in the contract. If SAP’s salesperson or account executive says, “We never actually enforce that clause” or “Of course we’d help you in that situation,” politely insist that it be reflected in the contract language. Every important commitment should be documented – either in the main agreement or an addendum. Keep track of all the points discussed and verify they appear in the final draft. It’s a lot easier to get things in writing before you sign than to argue about it afterward. Remember, if it’s not in the contract, you can’t rely on it.
End-of-Section Checklist – Procurement Legal Readiness
☐ Data protection clauses negotiated
☐ Liability/indemnity terms reviewed
☐ Audit guardrails agreed
☐ Assignment/transfer rights secured
☐ Termination/exit provisions clarified
☐ Internal compliance clauses considered
With this checklist of legal and compliance must-haves, procurement leaders can approach SAP contracts with greater confidence and control.
By being thorough and proactive on these fronts, you’ll avoid costly surprises and ensure the contract truly protects your organization’s interests – not just SAP’s. Happy negotiating!
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