Customizing SAP Licensing Metrics

Customizing SAP Licensing Metrics

• Understand Business Needs: Align licensing metrics with company goals.
• Select Proper License Types: Match metrics with user activities and systems.
• Track Usage Trends: Regularly monitor metrics to avoid over-licensing.
• Adjust Metrics for Changes: Adapt as business processes evolve.
• Implement Automated Tools: Automate license allocation and monitoring.

Customizing SAP Licensing Metrics

Customizing SAP licensing metrics can be challenging, but it can also be an opportunity to align your business needs directly with SAP’s powerful tools.

Although SAP’s licensing structure can seem complex, it can become a vital instrument for optimizing costs and achieving operational efficiency if handled properly.

This article explores how organizations can customize and optimize their SAP licensing metrics to fit their unique usage patterns and goals.

Let’s examine key elements, such as license types, optimization strategies, monitoring, and best practices, to help you leverage your SAP investment.

SAP Licensing Fundamentals

SAP’s modular licensing model allows organizations to pay for only what they use. Understanding this modular structure is crucial before customizing anything.

At the core of SAP’s model are two primary licensing components:

• Named User Licenses
• Package Licenses

Named User Licensing

Named User licenses form the bedrock of SAP’s licensing model. These licenses are tied to individual users and permit them to access the SAP system. The twist?

The licenses are linked to usernames, not physical people. This means a single individual could have multiple usernames across different systems, complicating license management.

The key is understanding exactly how many usernames and licenses you need. Often, organizations realize that they’ve assigned multiple licenses to the same person without even knowing it. Tracking named users is a crucial starting point for customizing SAP licensing.

Properly classifying user types is essential to ensuring you have the correct licenses. User licenses come in various forms, such as Professional, Limited Professional, and Employee. Each has different permissions and associated costs.

Understanding which user category fits your organization’s requirements can help to prevent unnecessary expenditures. For example, allocating a Professional license to an employee who only performs basic data entry could result in wasted resources.

Package Licensing

On the other hand, package licenses allow organizations to unlock specific functionalities and capabilities within the SAP ERP system. They operate on a metric basis, selling each package in blocks. For instance, SAP Invoice Management licenses might be sold in units of 1,000 invoices tailored to metrics that reflect the organization’s operational needs.

Each package license type can be customized depending on the unique parameters an organization wants to use, such as invoice volume or transaction types.

Package licenses are typically linked to functionalities such as Financial Management, Human Resources, Supply Chain Management, or Sales. It is key to understand which functionalities are critical to your business operations.

For example, a logistics company may prioritize the supply chain management modules, whereas a retail-focused organization may need additional customer management or inventory tracking functionalities.

Customizing License Metrics

Customizing SAP licenses involves adjusting metrics to reflect your organization’s usage patterns. This requires a combination of user classification and metric customization.

Usage-Based Classification

Organizations can customize license allocation based on the following approaches:

• Activity Volume focuses on how much users interact with the system. Users with high activity volumes often need more comprehensive licenses than casual users. If a user logs hundreds of transactions each day, a low-tier license doesn’t make sense.

High activity volume also applies to specific departments. Sales and accounting departments tend to generate high volumes of transactions compared to HR or administrative teams. It’s crucial to monitor departmental activities and assign the right type of licenses collectively and ensure cost-effectiveness.

• Activity Diversity: The diversity of user activity matters too. A user who only performs a few basic tasks will need a different license than someone accessing multiple modules. Consider these levels:
  • Less than 3 activities: Employee License
  • 3 to 10 activities: Limited Professional License
  • More than 10 activities: Professional License

Assigning licenses based on activity diversity can prevent unnecessary over-licensing. For instance, an HR executive who only processes payroll might be over-licensed if assigned a Professional License instead of an Employee License. By customizing based on diversity, organizations can minimize costs while ensuring users can still do their jobs efficiently.

• Activity Type: The complexity and criticality of the user’s activities determine the level of license required. High-value activities, like financial closures or core HR management, warrant higher-level licenses. SAP licensing is not just about the volume of activity but also about its importance.

Complex activities require higher-level licenses to ensure access restrictions do not hinder business-critical operations. For instance, employees handling complex procurement processes need a high level of access, which requires more sophisticated licensing options. Customizing user roles to match these activities ensures optimal functionality without overspending.

Optimization Strategies for SAP Licensing

Optimizing your SAP licensing setup saves costs and ensures that your operations are seamlessly supported.

Here are some core strategies:

Metric Selection

SAP offers nearly 100 different metrics for pricing its licenses. Picking the right ones for your organization is essential. Some of the most common metrics include:

• Number of Employees
• Annual Revenue
• Yearly Order Volume
• Storage Usage (in GB)
• Number of Processor Cores

Choosing the right metrics requires analyzing how they align with your organizational data. For instance, if your business scales up or down frequently, metrics based on yearly revenue might provide better flexibility than those based on the number of employees.

Another aspect to consider is seasonal usage. If your organization has fluctuating workloads throughout the year, it might make sense to base your metrics on parameters like yearly order volume or transaction count rather than employee numbers.

For instance, retail businesses that experience peak activity during holiday seasons may find metrics based on transaction volumes more reflective of their licensing needs.

Read about SAP license metrics in audits.

Indirect Access Consideration

Indirect access occurs when users or systems interact indirectly with SAP software through third-party applications. Many organizations have overlooked this aspect until they face penalties during an SAP audit. It’s critical to consider indirect access when selecting licensing metrics to avoid pitfalls.

Consider defining clear access pathways and determining whether such interactions warrant separate metrics. This is especially important in modern IT infrastructures, where APIs and integrations are significant.

Many third-party systems interact with SAP, including CRM systems, web services, and other ERP applications. Appropriate licensing is required when these systems access SAP data or perform transactions within SAP through indirect access.

Ensuring these access points are licensed correctly will protect your organization from costly non-compliance penalties and ensure that every system integration remains fully legitimate.

Implementing an Effective SAP Licensing Framework

Implementing an effective licensing framework is a balancing act between keeping operational costs low and ensuring users have adequate system access.

License Monitoring

Effective monitoring is at the heart of license optimization. Tracking the following helps in maintaining an optimal license structure:

• User Activity Levels: Identify which users are actively using the system and which are not.
• System Usage Patterns: Track frequent users and determine their most frequent transactions.
• Access Frequencies and Transaction Volumes: Use metrics to determine how frequently users access specific functions.

User activity analysis tools are invaluable here. With automated license tracking and monitoring tools, organizations can easily identify underutilized licenses or unassigned access, which can be adjusted to save costs. Real-time dashboards allow for effective oversight, providing insights to drive proactive license adjustments.

Compliance Management

SAP audits annually through the System Landscape Audit Workbench (SLAW) and performs an enhanced audit every three years. Organizations must implement a compliance management system that tracks actual system use against their license entitlements to avoid surprises.

Frequent reviews of these metrics are essential to ensure that your licensing strategy stays compliant with SAP’s expectations.

In addition to SLAW, organizations should leverage tools like the System Measurement Program (USMM) to check compliance status regularly.

These tools help create transparency and can even simulate audits to help prepare for real scenarios. Staying audit-ready means fewer headaches and a lower risk of financial penalties, which can be a significant burden during a compliance audit.

Cost Optimization Strategies

Optimizing licensing costs is an ongoing process that demands constant reevaluation and adjustment.

License Rationalization

License rationalization involves identifying which licenses are underutilized or redundant. Regularly assessing license usage provides insights that can help:

• Identify Over-licensed Areas: Pinpoint where users have been allocated licenses they don’t fully use.
• Spot Underutilization: Identify when certain users or departments are not using their assigned licenses and possibly downgrade their license types.
• Identify Usage Trends: Understand usage patterns to forecast future needs and avoid unnecessary purchases.

Automated tools that analyze license usage data in detail can make rationalization more effective. These tools can show precisely where licenses are wasted and recommend appropriate reallocations.

For example, license analytics software can identify patterns of underuse in administrative departments, suggesting that some users could be moved to less expensive licenses without losing essential functionalities.

Deployment Considerations

The model used for deploying SAP also affects licensing costs:

• On-Premise Deployment: This comes with perpetual licensing rights and typically higher upfront costs.
• Private Cloud Deployment: Offers both perpetual and subscription-based licensing options, providing more flexibility.
• Public Cloud Deployment: Often involves a subscription model that provides access to SAP on a pay-as-you-go basis, which can be more cost-effective for certain businesses.

Organizations must evaluate their infrastructure plans before committing to a specific deployment model. Due to server hardware requirements and perpetual licenses, on-premise deployments can be expensive. On the other hand, public cloud options provide greater scalability, enabling organizations to adjust their licensing quickly without large upfront costs.

Preparing for Future SAP Requirements

Organizations need a future-proof strategy for SAP licensing to keep up with the evolving IT environment.

Digital Access Licensing

With technologies like IoT, AI, and machine learning increasingly becoming part of enterprise workflows, it’s critical to account for the digital access required. Digital access licensing is designed to cover scenarios where non-human entities (such as sensors or AI tools) interact with SAP. These interactions must be managed efficiently to prevent any gaps in licensing.

Proper licensing considerations are needed for IoT sensors, robotic process automation, and machine learning models that feed data into the SAP system. As automation grows, so does the demand for digital access licensing. Proactively understanding how these new technologies interact with SAP ensures you avoid costly reassignments or emergency license purchases.

Commercial Flexibility

SAP provides programs to help organizations maintain commercial flexibility. For instance:

• Conversion Credit Policy: Companies can convert old licenses into new ones while retaining their commercial value.
• Extension Policy: SAP’s extension policy helps organizations expand functionality without losing value from previous investments.

Additionally, SAP offers a subscription-based licensing model, which can benefit organizations with fluctuating usage. This model allows companies to scale their licenses up or down based on actual need, preventing overpayment and enhancing flexibility.

Planning and leveraging SAP’s policies can yield significant benefits if growth is part of your business strategy.

Managing SAP Licensing Effectively

Tools and Resources

SAP provides a set of tools to help organizations manage their licenses effectively:

• License Administration Workbench (LAW): Helps consolidate system data for license measurement.
• System Measurement Program (USMM): Used to measure user licenses in a system.
• SAP License Keys Management: Allows efficient allocation and management of license keys.

Third-party tools are also available to help with SAP license management. Solutions from companies like Snow Software or Flexera provide enhanced analytics and optimization capabilities.

They offer deeper insights into usage patterns and facilitate more effective decision-making regarding license allocation.

Regular Assessment

A regular assessment cycle is necessary to:

• Monitor Usage: Track the actual use of licenses and match it with entitlements.
• Identify Opportunities for Optimization: Look for ways to reduce costs without affecting performance.
• Ensure Compliance: Always prepare for SAP audits by maintaining updated records.
• Plan for Growth: Align future license purchases with the company’s growth plans.

Regular audits and assessments allow businesses to preemptively adjust their licensing strategies to align with business objectives. Organizations can prevent licensing issues from snowballing into costly problems by implementing quarterly reviews.

Best Practices for Customizing SAP Licensing

Strategic Planning

Regarding SAP licensing, a proactive approach is better than a reactive one. The best practice is to develop a strategic plan that:

• Aligns Licensing with Business Goals: Ensure your licensing needs support current and future business objectives.
• Accommodates Growth: Forecast your licensing needs based on projected growth.
• Maintains Cost Efficiency: Regularly evaluate your licensing setup to identify potential savings.
• Ensures Compliance: Stay audit-ready by keeping your license usage and assignment well-documented.

Strategic planning also involves being forward-thinking about technology integration. Businesses undergoing digital transformation need to anticipate the licensing impacts of IoT devices, machine learning models, and new ERP modules.

Documentation

Maintain detailed documentation of:

• License Assignments: Keep records of which licenses have been assigned to whom and why.
• Usage Patterns: Track actual system use by user and department.
• Compliance Reports: Document compliance activities, including any potential issues and resolutions.
• Audit Findings: Keep track of audit outcomes and follow-ups.

Detailed documentation can help organizations identify trends in license use. For instance, if a particular department’s usage is steadily declining, it may make sense to redistribute licenses. This continuous documentation and analysis process helps keep licensing aligned with current needs while preparing for future requirements.

FAQ: Customizing SAP Licensing Metrics

What are SAP licensing metrics?
SAP licensing metrics measure how users or systems interact with SAP applications, determining the number and types of licenses required.

Why are customized licensing metrics important?
Customizing metrics ensures you only pay for what you use, avoiding unnecessary costs and ensuring compliance.

How do I determine which metrics to customize?
Analyze user roles, business needs, and system usage to decide which metrics are necessary for your organization.

What activities should be tracked in licensing metrics?
Track user logins, transactions, data processing, and the number of active users or systems interacting with SAP.

Can I adjust metrics as my business grows?
Yes, SAP licensing metrics should be regularly adjusted to reflect your organization’s structure, usage patterns, and system expansion changes.

What are the user roles in licensing metrics?
User roles help identify what permissions or access levels are necessary, ensuring you only assign the correct licenses.

How can I monitor SAP license usage?
Use SAP’s built-in tools or third-party software to track usage and ensure compliance with the licensing terms.

How often should I review my SAP licensing metrics?
Regular reviews are necessary, typically annually or during any significant business changes.

What happens if I overuse SAP licenses?
Overuse can lead to non-compliance, resulting in fines, audits, or unexpected costs.

Is it possible to consolidate SAP licenses?
Yes, consolidating licenses avoids unnecessary duplication and aligning licenses across different departments or systems.

Can automation help in managing SAP licenses?
Yes, automated tools can help allocate licenses, track usage, and make necessary adjustments as your needs change.

What role do access levels play in customizing metrics?
Access levels define what users can do within SAP, helping you assign the right type of license based on their activities.

Can I use metrics to forecast future license needs?
Yes, analyzing trends in usage can help predict future license requirements based on business growth and system changes.

How do I ensure compliance with SAP licensing?
Regularly monitor usage, track license consumption, and update your licensing metrics according to business needs.

What should I do if I have unused licenses?
Review user roles and business processes to identify and eliminate unnecessary licenses, optimizing costs.