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Auckland Council negotiated a series of concessions and structural changes in its new contract with key software supplier SAP, a council presentation confirms.
The presentation, delivered to the council’s revenue, expenditure and value committee on 20 August, said the previous contract limited the council’s flexibility and adaptability to make “fit for purpose” technology choices.
“[The] perpetual nature of the SAP agreement restricted our ability to explore and implement newer, more suitable technologies,” the council told the committee.
“The agreement was heavily focused on traditional SAP offerings, which did not necessarily align with our evolving business needs, especially in the context of group shared services and the need for more agile solutions.”
The licensing model also relied on single metric “true‐ups”, which did not necessarily reflect the organisation’s actual needs or usage patterns.
As a result, licensing and SAP support costs would continue to escalate as the council grew to meet increased service demands.
The council projected it would save $42.1 million over the next seven years when it announced the new contract in July.
However, gaps in the information released led Reseller News to request more information, including the overall expected cost of the deal, under the Local Government Official Information Act. That request is still being processed.
According to the new presentation, one bugbear under the previous SAP contract was that there was no mechanism to terminate SAP maintenance in favour of a solution that better met the council’s needs.
“As council processes evolve and becomes more efficient, there was no ability to partially terminate software costs that we no longer use,” the presentation explained.
The inability to shift to more suitable technologies hampered the council’s ability to do things differently and prevented it from optimising IT infrastructure for cost‐effectiveness and functionality.
“These constraints had an impact on our ability to achieve operational excellence and strategic goals,” the council told the committee.
The council had since negotiated considerably more favourable terms, including exiting a perpetual licensing model in favour of SAP Rise licensing and winning the ability to terminate software components to enable fit-for-purpose technology choices.
Vitally, the council also negotiated indirect use into its new deal, meaning council controlled organisations such as Auckland Transport and Watercare could also benefit.
Metrics used for pricing in the contract have also shifted away from revenue towards pricing that reflected business needs.
In July, Auckland mayor Wayne Brown said the new deal got the best out of existing services.
“This will contribute to the additional $20 million savings target we’ve set for council under the long-term plan,” he said.
“It creates savings by making the most of what we already have, fine-tuning the systems we have in place to serve Aucklanders more efficiently, making their ratepayer dollar go further.”
Council general manager technology services Neil McGowan said at the time the new terms were negotiated by making use of SAP’s RISE with SAP, a business transformation package that included an AI-powered cloud enterprise resource planning (ERP) solution, infrastructure and services.
“This cloud offering will see previous constraints removed, significant costs avoided, and the ability to shrink or grow the SAP function depending on the needs of the council in the future,” McGowan said.