While historically, customers paid for the SAP ERP applications based on the number of users, as more systems began to access SAP software systems, this became problematic.

The new pricing model, which will cover S/4HANA, S/4HANA Cloud and SAP ERP, will distinguish between direct/human users and indirect/digital access, which covers access via third party, Internet of Things (IoT), bots and other digital access that can be licensed based on transaction or documents processed by the system.

Following SAP’s successful pursuit of Diageo, although many customers were unsure of their license compliance position previously, there was reluctance to clarify this with their account managers as the consequences were uncertain.

SAP has also now introduced organisational changes that will separate license sales departments and procedures from the auditing function. This is expected to enable customers and SAP to have more transparent conversations about reconciling previous licensing agreements with the evolving requirements of their digital systems and procurement of new software. The vendor also plans to introduce features to enable customers to manage their own usage and license consumption.

“We believe that especially in the age of digital transformation, an adjustment was necessary after listening to our customers. By offering a new pricing and licensing model, we provide enhanced transparency, predictability and consistency to our customers. I trust that these three aspects will encourage our customers to continue to invest in digital business models,” said Christian Klein, COO and member of the executive board of SAP SE, global business operations.

The new approach, which SAP has already begun rolling out, has also informed by consultation with user groups.

While a statement by the SAP User Group Executive Network (SUGEN) welcomes the level of transparency the new model providers, it also notes there has been little progress in providing reassurance on the long-term financial impact to existing long-term customers, particularly those who until recently believed they were adequately licensed. SAP will be rolling out measurement and auditing tools over the course of 2018, meaning that customers will only be able to measure potential cost impact in Q1 2019.

“With this in mind, we urge SAP to publicly reiterate the promise it made to SUGEN in November 2017 when it said customers would be able to adopt the new model without incurring further costs if the business value/scope of their usage of SAP stays the same. This would go a long way to reassuring customers and rebuilding trust,” said Gianmaria Perancin, SUGEN chairman and USF representative.

SUGEN’s statement noted that the company has been aware of challenges regarding indirect licensing for at least six years, during which time “customers have in good faith connected SAP to third-party systems believing they were compliant due to a number of factors”, including:

• SAP personnel being aware of a third-party system connecting to SAP and not raising a potential licensing problem,
• SAP providing assistance for projects that involved connecting to third-party systems and not raising licensing implications,
• The lack of any license type for third-party system connectivity, and
• Audits being carried out by SAP that did not highlight a problem.

“Customers who believed they were compliant have been rightly been concerned after the high-profile legal action SAP took Diageo and InBev. SAP is moving in the right direction to make it easier to do business with it.

“However, expecting customers to talk to and trust account managers in an environment where SAP has admitted to having lost customer trust is asking a lot. If SAP publicly provided reassurances that customers won’t be asked to pay more for use cases and implementations that were undertaken in good faith, this would go a long way to encourage customers to engage with SAP proactively,” Perancin said.

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SAP licensing is complicated. License entitlements can be open to interpretation and contract amendments can mean that financial liability for one customer may be very different in comparison to another, even if their usage and requirements are identical. It often depends on what deal was struck at the time of purchase.

Traditionally SAP licensing reviews and system measurements have focused on direct usage of an organisation’s SAP environment. Direct usage on an individual level describes one user accessing SAP data directly through the SAP interface. The transactions which they perform determine what license type (or types) the user should be assigned. This in turn determines the associated cost for that user to perform their required tasks within the SAP system.

Even correctly managing licensing of direct users is more complicated than it might first appear. An organisation with 10,000 users of its SAP environment could have many groups of users who transact in very different ways. The users may change jobs and so need to use the SAP environment differently from one year to the next. Other users leave the organisation and of course it’s no longer necessary to have a license assigned to them.

If your organisation doesn’t keep on top of this and effectively manage licenses, you’ll almost definitely be paying over the odds for your licenses or you will be hit with a big fee following system measurement (LAW) submission or a more comprehensive SAP audit.

The risk becomes even greater when you consider indirect usage. That’s because you may face licensing liability for a far greater number of users compared to those who you know directly access the SAP system. That 10,000 user license requirement could two, three, even four times more if a third-party application accesses your SAP data.

One thing is clear. The better prepared your organisation is, the better you understand overall usage of your SAP environment from every user and the better you can map this to existing entitlements, the stronger you will be when it comes to an audit or a negotiation. To do this effectively, you need a system that can automatically consolidate all of the necessary data and automate the required tasks.

Reserve your seat for Snow Software’s SAP Audit and Licensing workshop in Singapore to be held on 31 August 2017. If you are interested to learn how to mitigate non-compliance and uncover optimisation opportunities for your existing SAP systems, then this event is for you.

This article is sponsored by Snow Software.

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The move was prompted by an increase in the number of software licensing related disputes over the last year, according to Amit Jaju, executive director, Forensic Technology and Discovery Services and head (EMEIA), Software License Forensics, EY.

“We have noticed that while companies followed standard license management practices and tools for specialised software such as an ERP system, they were caught unprepared during compliance audits. This led to disputes around the fine print in the license contract,” Jaju said.

“This inspired us to develop a comprehensive and specialised software solution to help our clients manage SAP licensing in an automated manner. Feedback from our existing clients, from not just the CIOs but also the CFOs, has been positive.”

Managed by EY’s Forensic Technology and Discovery Services arm, EY SAPPHIRE will assist customers to maintain compliance, control license costs and optimise their existing license landscape.

“Today, businesses are operating amidst an enhanced risk landscape, and effective compliance is no longer just a ‘good to have’ measure, but a norm. As the influx of technology has permeated through to every division within the company, it has become inherently impossible to track information without automation,” said Paul Walker, partner and head (EMEIA), Forensic Technology and Services, EY.

“This has prompted EY to devise comprehensive tools such as EY SAPPHIRE, for businesses to effectively decipher loopholes and thereby enhance their levels of compliance around SAP licenses.”

EY’s Software License Forensics team has managed SAP license compliance engagements for global companies across verticals in telecommunications, fast-moving consumer goods, manufacturing, utilities, and software services.

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