Case Studies in SAP Third-Party Licensing

Case Studies in SAP Third-Party Licensing

• Understanding SAP Licensing Terms: Review SAP’s licensing structure to avoid compliance issues.
• Tracking Usage Regularly: Monitor user activity to ensure proper license allocation.
• Documentation of Agreements: Keep accurate records of all SAP agreements.
• Third-Party License Compliance: Regular audits help avoid licensing penalties.
• Expert Consultations: Work with SAP specialists to optimize licensing.

Case Studies in SAP Third-Party Licensing: Lessons from Major Disputes and Solutions

Third-party licensing with SAP systems can be a minefield if not carefully managed. To illustrate this, let’s look at some major case studies that shaped the SAP licensing landscape.

These real-world examples offer important lessons on risk management, compliance, and the potential financial consequences of third-party integrations.

The Diageo Case: A Landmark Decision

One of the most high-profile cases was SAP UK v Diageo Great Britain in 2017. This case redefined how businesses approach SAP third-party licensing, especially around indirect usage.

Diageo, the well-known beverage company, faced a £54.5 million claim from SAP. The dispute arose after Diageo connected its Salesforce-based systems to its SAP ERP system.

The key systems involved were:

• Connect An online platform that allows Diageo’s customers to place orders.
• Gen2: A sales platform that enabled staff to access customer data using iPads.

The crux of the issue was that Diageo’s customers, even though they were using Salesforce, indirectly accessed data held in SAP. The High Court ruled that these customers needed named user licenses, even if they weren’t directly using SAP software. This case set a precedent that highlighted how indirect access could trigger significant licensing fees.

This ruling significantly impacted how companies now approach software integration, leading to a stronger emphasis on user license compliance and integration oversight.

Businesses began reassessing their third-party solutions to avoid similar pitfalls. They ensured that every potential point of SAP data interaction was compliant with licensing terms.

The Anheuser-Busch InBev Dispute

Following the Diageo case, SAP turned its sights on Anheuser-Busch InBev, one of the world’s largest brewers. The company faced a demand of nearly $600 million in licensing fees. Much like Diageo’s, the dispute revolved around third-party systems accessing SAP’s core ERP.

This case never went to court. It was settled privately for an undisclosed amount. However, the sheer size of the potential financial penalty emphasized the significant risks of underestimating third-party access.

Companies integrating external solutions with SAP systems must be especially vigilant in avoiding unintended indirect access violations.

The Anheuser-Busch InBev case illustrated the importance of proactive measures in handling third-party access. A large-scale settlement like this demonstrated that licensing issues could pose material financial risks to companies, affecting their bottom line and leading to unanticipated legal battles.

Businesses began seeing the need for more detailed compliance assessments and engaging SAP-specific legal expertise to review their contracts and ensure all clauses were understood and adhered to.

The Exela Technologies Case: A Success Story

Not all third-party licensing stories are disputes. Exela Technologies offers a success story. Exela, known for business process automation, faced rising costs with SAP support. To solve this, they made the switch to third-party support, and it paid off:

• 60% reduction in support costs.
• Faster and more responsive service.
• Improved support quality.

This case shows that third-party support can be a viable solution, allowing companies to cut costs without sacrificing quality.

Exela’s experience also emphasizes the value of negotiating better support arrangements and benchmarking costs against industry standards.

By leveraging third-party support, Exela achieved cost savings and enhanced operational efficiency by gaining more control over its support processes.

SAP’s Evolution: Digital Access Licensing

In response to the issues raised by these disputes, SAP introduced its Digital Access Licensing model in 2018. This model, described in the “SAP ERP Pricing for the Digital Age” document, focuses on:

• Document-based pricing: Instead of focusing solely on users, SAP prices access based on document creation and processing.
• Nine document types: Only specific documents, including sales orders and invoices, are counted.
• Weighted multipliers: Different categories of documents carry different weights, making cost estimation more nuanced.

This change aimed to provide more transparency and fairness, especially for businesses dealing with modern integration requirements.

The introduction of Digital Access Licensing was meant to reduce ambiguity. However, many organizations have found this model to be just as complex. A detailed understanding of document workflows is required to grasp the cost implications fully.

SAP intended to shift from user-based pricing to activity-based, but this has often required companies to perform a complete audit of document lifecycles, from creation to usage.

Read about SAP licensing for external platforms.

Key Lessons and Best Practices

1. Proactive License Management

Successful companies approach SAP licensing proactively by:

• Regularly auditing system access to understand who or what is accessing SAP.
• Document all third-party integrations, focusing on user categories and access rights.
• It is crucial to understand user categories and which types of users and systems interact with SAP.

Organizations have found that license management tools can be particularly effective for continuous monitoring. These tools allow companies to analyze access patterns and ensure their SAP usage aligns with licensing requirements.

Furthermore, these tools can simulate audits, allowing companies to address issues before SAP’s official audits occur.

2. Strategic Integration Planning

Integration must be approached with caution:

• Evaluate alternatives: Before connecting third-party systems to SAP, evaluate whether the integration is necessary.
• Consider different integration methods: Middleware solutions can help manage access, providing a buffer that minimizes direct SAP interactions.
• Thorough documentation: Each integration point should be thoroughly documented to avoid confusion during audits.

When implementing third-party systems, a clear data flow diagram outlining every point of interaction is vital. Some companies have benefited from creating an integration matrix showing how data moves between SAP and other applications.

Such tools are invaluable for identifying high-risk areas where indirect access might inadvertently be triggered.

3. Financial Impact Analysis

Here’s a quick look at how traditional SAP support compares to third-party support:

Exela Technologies’ case shows that switching to third-party support can result in notable cost reductions, though careful assessment is required to maintain compliance.

Financial planning for SAP licensing now requires understanding license types, support contracts, and indirect usage risks.

Companies must engage financial and IT experts to draft a comprehensive cost analysis that considers the many different aspects of SAP licensing, including user behavior and integration touchpoints.

Legal Considerations for Third-Party Licensing

The Diageo and Anheuser-Busch InBev cases also underline several legal aspects crucial for any company:

1. Contract Review

• Carefully review contracts to understand indirect access clauses.
• Document usage rights and establish clarity on what is permitted by SAP contracts.
• Engage legal experts who understand SAP’s licensing intricacies.

Contract negotiation is essential, and many organizations are now working with SAP to customize their contracts. For instance, some companies have negotiated custom clauses that allow for specific types of integration with third-party systems without triggering indirect access penalties. Engaging a legal team that is well-versed in SAP’s contractual language is crucial for avoiding pitfalls.

2. Compliance Strategy

• Conduct regular internal audits to keep track of third-party connections.
• Maintain clear governance procedures and document every integration and access pathway.

Compliance strategies often include setting up compliance committees that review third-party access quarterly. These committees ensure that new software purchases, integrations, or system modifications do not inadvertently lead to licensing breaches.

Technical Solutions for Managing Licensing

Technical strategies play a huge role in mitigating SAP licensing risk:

• Integration Architecture: Use middleware to create a buffer between SAP and third-party systems. This ensures that data requests are processed without directly accessing SAP in ways that could be interpreted as user access.
• Access Monitoring Tools: Implement tools to monitor how SAP data is accessed. These tools help ensure compliance by providing visibility over system access.
• Separation of Systems: When possible, keep systems separate to reduce the complexity of potential licensing claims.

Middleware solutions like API gateways have proven especially useful in decoupling systems. By routing all third-party system access through an API gateway, companies can add a layer of oversight and ensure that all interactions with SAP are compliant. Access monitoring also allows IT departments to visualize access trends and pinpoint any potential risk of non-compliance before it becomes a significant issue.

Risk Mitigation Strategies

Organizations can significantly reduce risks by employing best practices:

1. Documentation and Monitoring

• Regularly audit system access and maintain detailed records of every integration.
• Monitor document creation volumes: The new SAP Digital Access model considers document creation, so monitoring the number of documents generated is essential to avoid unforeseen costs.

Companies are also developing automated tracking systems that monitor the volume of generated documents. By providing real-time alerts when document creation thresholds are nearing, these systems allow businesses to adjust workflows or implement controls to avoid unexpected licensing costs.

2. License Optimization

• Review licenses regularly to cover active users and systems while unnecessary or redundant licenses are removed.
• Optimize license types, choosing the best fit based on users’ access needs.

Another important strategy is to optimize license types by periodically reassessing the roles and activities of all users within SAP. For instance, some users might require limited access but have full licenses. Optimizing these licenses can significantly reduce overall costs.

Future Considerations: Keeping Ahead of SAP Licensing

SAP licensing continues to evolve, and companies must adapt:

1. Digital Transformation

• The shift to digital means more indirect access scenarios. Companies must be vigilant about how integrated systems interact with SAP.
• Cloud solutions are becoming the norm, impacting licensing models and costs.

As cloud-based systems become more popular, hybrid cloud models are becoming common.

Companies must ensure their licensing agreements cover scenarios where data is transferred between on-premise SAP systems and cloud environments. Understanding the licensing implications of cloud migration will be crucial for companies in the coming years.

2. Compliance Tools

• Automated monitoring tools can provide real-time insight into licensing and compliance.
• Companies are developing specialized compliance tools to track usage and provide advanced reporting.

Compliance tools increasingly incorporate machine learning to predict potential non-compliance based on historical data. These predictive compliance tools can identify areas where indirect access could inadvertently occur, helping companies take action before SAP issues an audit.

Recommendations for Organizations

Based on these lessons, organizations integrating third-party systems with SAP should:

• Conduct regular license audits: This ensures all access remains compliant and no unexpected licensing gaps exist.
• Maintain thorough documentation of every integration to keep track of potential points of indirect access.
• Implement robust monitoring tools that can track access in real-time.
• Consider third-party support options, especially if cost control is a priority.
• Engage SAP in proactive discussions regarding the business’s licensing needs. This can help preempt potential compliance issues and clarify the ever-changing rules.

Additionally, companies should train staff in managing SAP systems to understand the implications of indirect access.

Proper training and awareness can reduce the chances of accidental non-compliance, especially in large organizations with complex IT environments.

Read about SAP Third-party support.

FAQ: Case Studies in SAP Third-Party Licensing

What is SAP third-party licensing?
SAP third-party licensing refers to the legal terms under which SAP allows companies to use their software with third-party applications.

Why is it important to understand SAP’s licensing structure?
Understanding SAP’s licensing terms helps avoid legal issues and unnecessary costs associated with improper usage.

How can I track SAP system usage for compliance?
Regular audits and usage monitoring tools can help track system access, ensuring compliance with the license terms.

What happens if SAP licensing rules are violated?
Violating SAP’s licensing terms can lead to audits, penalties, and potential legal action from SAP.

Should I consult with SAP experts for licensing?
Working with SAP licensing experts ensures you navigate complex licensing terms and avoid costly mistakes.

How often should I audit SAP usage?
It’s a good practice to conduct regular audits to ensure compliance, ideally every six months or annually.

What are the main challenges in SAP third-party licensing?
The challenges include understanding complex terms, ensuring correct license allocation, and managing third-party software integrations.

How do third-party applications affect SAP licensing?
Third-party applications can introduce additional licensing requirements depending on their integration with SAP.

What is the role of SAP license consultants?
SAP license consultants help businesses optimize their licenses, ensure compliance, and avoid over- or under-licensing.

Can third-party vendors help manage SAP licenses?
Yes, third-party vendors can offer tools or services that help monitor and manage SAP licensing effectively.

What should I do if I receive an SAP audit notice?
Review your usage against the licensing terms, ensure compliance, and consider consulting an SAP expert to guide you through the process.

Is there a way to reduce SAP licensing costs?
Optimizing license usage, consolidating systems, and negotiating better terms with SAP can help reduce costs.

What documentation should I keep for SAP licensing?
Keep copies of contracts, amendments, and any communications related to SAP licensing agreements.

How do SAP license violations typically occur?
Violations can occur through incorrect license assignments, overuse of user licenses, or failure to track third-party usage.

Can SAP licensing be renegotiated?
Yes, businesses can renegotiate their SAP licenses to reflect their current usage and needs, potentially reducing costs.