By Gaurish Dessai, Enterprise Solutions Architect
Hundreds of product SKUs, conflicting advice from SAP and system integrators, lack of
clarity on product roadmaps, constantly changing product names and lengthy licensing
documents make understanding SAP licensing feel like a dark art.
SAP licences are based on 3 core tenets:
- Software solutions that you want to use
- Deployment option to deploy the solution
- Licensing model applicable for the usage.
Currently, there are 3 main licensing models for SAP products:
- Perpetual | Most widely used, purchased one-time with fixed maintenance/support
fees. - Subscription | Annual recurring, term based, specific usage metrics and commonly
used for cloud solutions. - Consumption based | Term-based with credits purchased upfront for usage against
specific SAP services, commonly used for SAP BTP services – specific overage is
charged if the usage exceeds. - There is also the (relatively new) digital access licensing model for indirect access,
which allows for connecting non-SAP systems to SAP ECC or S/4 core.
Having worked with multiple vendors, such as Salesforce and Oracle, I can safely say that SAP’s licensing is one of the most complicated and non-transparent out there. The commercial complications could be buried in the purchase agreement, order forms, bill-of-material,
addendums, appendices, and hyperlinks within the documents, which means things can get mind boggling very fast.
SAP is pushing more and more customers towards S/4 Cloud, RISE and GROW models, but doesn’t provide clear guidance on how the perpetual licences should be handled in this move.
Large SAP customers have invested tens, if not hundreds, of millions buying these perpetual licences (which are reported in their accounts as assets). How they will be transformed as part of S/4 HANA migration should be a big part of the business case. CFOs would need to have an honest discussion with SAP and their SI partner about what they would get in return for giving away the perpetual licence asset on their books.
Recommendations for SAP customers:
- Audit and optimise your SAP licence usage before planning the S/4 move – question every user type and get justification from the functional heads on if it’s really needed.
- Dedicate a big part of your business case on how the licence model would be impacted by an SAP S/4 move and the implications at least 10-15 years into the future.
- Implement an SAP licence training programme for your SAP team to ensure they don’t run afoul of any restrictions & entitlements.
- Check the SAP contract/addendum for the definition of middleware/indirect access/static and get expert advice when planning to connect non-SAP systems.
- Build capability to have an SAP licensing expert in-house or on-call to cross-check
licence implications ahead of big projects.
Recommendations for SAP:
Prioritise simplicity
Each customer should be able to see all its SAP licence usage in one place and model the usage and costs of their SAP estate and products that it wishes to buy.
Transparent pathways
Provide a transparent migration path from perpetual licence to cloud licences. Without which, large customers would be hesitant to buy into SAP’s cloud strategy.
Navigating the maze of SAP licensing requires a strategic approach and a deep commercial understanding of the evolving landscape. As businesses embark on their SAP journeys, whether it’s optimising current licence usage or charting a path to S/4, RISE or GROW, the recommendations outlined here should support you in maximising value and minimising complexity.
