How SAP Measures License Usage

How SAP Measures License Usage

• Track System Access: Monitor system login patterns.
• Usage Audits: Analyze frequency and duration of feature use.
• Match Licenses to Activities: Align actual usage with assigned licenses.
• System Logs Review: Evaluate SAP logs for task-level insights.
• Periodic Self-Assessment: Perform internal checks for compliance.

How SAP Measures License Usage

Understanding how SAP measures license usage is crucial for organizations that want to control costs and comply with licensing agreements.

SAP’s license measurement process, which includes several specialized tools and methodologies, helps companies track usage effectively and ensure that they use their licenses correctly. 

In this article, we will explore how SAP measures license usage, the tools involved, the different types of license metrics, and the best practices for optimizing this process.

Key Components for SAP License Measurement

SAP employs two key tools for measuring license usage: Usage and System Measurement Management (USMM) and the License Administration Workbench (LAW). Together,

These tools create a detailed picture of how an organization uses its SAP software.

• USMM (Usage and System Measurement Management): This is the core measurement tool for system-by-systems. It determines the number of users and chargeable objects within each system. USMM collects data on:
  • User activities and classifications
  • System transactions
  • Application usage metrics
  • Engine measurements
  • Indirect access patterns
• LAW (License Administration Workbench) consolidates measurement data from multiple SAP systems, providing a holistic view. It is crucial for preparing for audits and generating compliance reports. With LAW, companies can aggregate data from several systems to produce a consolidated report, which makes it easier to understand organization-wide license usage.

License Measurement Process Overview

1. User License Measurement

SAP user licenses are measured primarily based on authorization assignments rather than the software’s actual usage.

This is important because users may have access to functions they never use, but the licenses are still allocated based on their permissions.

• User Classification: This involves analyzing all active users, evaluating their assigned roles, and classifying them into license types, such as Professional, Functional, or Productivity users. SAP determines which license type each user falls into based on the assigned authorizations.
• Authorization Assessment: SAP systems undergo detailed assessments to check access rights. This means analyzing granted permissions and verifying role assignments against actual system usage. The objective is to ensure that users are not over-licensed or under-licensed based on their roles.

2. Package License Measurement

Package licenses are handled differently from user licenses, focusing on the specific usage metrics for each SAP module or function. This type of measurement includes monitoring actual usage volumes, such as:

• Revenue or order counts for business process-specific metrics.
• Comparing actual usage against purchased license blocks to ensure compliance.

This approach helps SAP determine if an organization is underutilizing or over-utilizing its purchased licenses.

S/4HANA Licensing and Measurements

SAP S/4HANA presents unique licensing challenges due to its authorization-based licensing model.

Here are some key aspects to keep in mind:

• Authorization-Based Classification: License classifications are simplified, focusing primarily on Professional, Functional, and Productivity users. The license type is determined entirely based on the authorizations granted to each user.
• Full Use Equivalent (FUE): In the S/4HANA Cloud environment, an additional metric known as Full Use Equivalent is used. This metric helps organizations gauge the relative weight of different license types and calculate their overall licensing obligations accordingly.

Cloud License Consumption

In the case of cloud-based SAP deployments, measuring license usage is a bit different due to the unique nature of cloud subscriptions:

• Automated Measurements: SAP takes regular automated snapshots of usage patterns to help organizations stay in compliance.
• Consumption Types: SAP tracks different intensities of usage, such as regular consumption, over-consumption, or low activity levels, and ensures that all forms of consumption are accounted for.

Best Practices for SAP License Measurement

Managing SAP licenses effectively requires a proactive approach and a solid understanding of measurement best practices.

Below are some actionable steps companies can take to optimize their license management processes.

1. Preparation Phase

Preparation is key to making the license measurement process smoother and more efficient.

• System Readiness:
  • Regularly update user classifications to reflect any changes in roles and responsibilities.
  • Block or remove inactive users to avoid unnecessary license charges.
  • Review authorization assignments to align with each user’s role and responsibilities.
• Documentation:
  • Keep detailed records of license entitlements to understand what licenses have been purchased.
  • Maintain documentation of the system landscape to facilitate license measurement processes and ensure a smooth audit.
  • Track historical usage patterns to spot trends and identify opportunities for license optimization.

2. Execution Phase

Once systems are ready and documentation is in place, the next step involves executing the measurement effectively.

• Regular Measurements:
  • Conduct periodic internal measurements to verify usage against license entitlements.
  • Use USMM at the system level to capture granular details about individual systems.
  • Consolidate data through LAW to comprehensively view the organization’s usage.
• Validation:
  • Cross-check measurement results to identify any discrepancies in user classifications or usage.
  • Verify user roles to ensure proper alignment between assigned licenses and actual needs.
  • Validate package license tracking to avoid surprises during official SAP audits.

Maintaining Compliance and Optimizing License Usage

Compliance is not just about following the rules. It also ensures organizations do not waste resources or face unexpected penalties.

The following are essential measures for maintaining compliance:

1. Ongoing Compliance Monitoring

• Regular Audits: Organizations should implement regular internal license reviews to preempt issues arising during an SAP audit. This includes:
  • Authorization cleanups to remove unnecessary permissions.
  • Ensuring inactive users are blocked after extended periods of inactivity.
• Documentation: Accurate records are essential to proving compliance. This includes tracking license assignments and documenting efforts to optimize the licensing setup.

2. Optimization Strategies

To avoid over-purchasing or under-utilizing licenses, companies should consider the following optimization strategies:

• User Management:
  • Block inactive users after a specified period (e.g., 90 days) to prevent unnecessary costs.
  • Reassign unused licenses to new users rather than purchasing additional ones.
  • Regularly review roles and authorizations to ensure users have only the necessary access.
• License Allocation:
  • Match each user’s license type to their needs to avoid over- and under-licensing.
  • Monitor indirect access, a common point where organizations unknowingly exceed their license limits.
  • Keep track of package license usage and adjust where needed to stay within contractual limits.

Indirect Access Measurement

Indirect access occurs when a third-party system interacts with SAP systems through other software applications, web services, or automation tools.

SAP’s measurement tools are equipped to track indirect access effectively.

To manage this, companies should:

• Monitor integration points: Know where external systems are interacting with SAP.
• Track data flows: Understand how data is exchanged between SAP and other systems, as indirect access could have major licensing implications.
• Measure digital access scenarios: Digital access involves scenarios where data is accessed indirectly, and tracking these scenarios is essential to ensure compliance.

SAP License Measurement Challenges

Measuring SAP license usage is not without its challenges. Here are some common pitfalls and how to avoid them:

• Complex User Roles: SAP environments are often highly customized, making role assignments complex. Organizations need to focus on simplifying roles and properly assigning license types.
• Managing Indirect Access: Indirect access has become a significant challenge, especially with the rise of interconnected systems. SAP’s recent shift to Digital Access licensing for indirect scenarios has added complexity, requiring careful tracking and alignment with contractual terms.
• Automation Tools: Automation can help streamline the measurement process, but over-reliance on automated tools without manual cross-checks can lead to errors. Combining automated insights with manual verification is key to ensuring accuracy.

Additional Insights: SAP Measurement Tools in Detail

To gain a deeper understanding of license measurement, it’s helpful to explore more details about the key tools involved.

USMM (Usage and System Measurement Management)

The USMM tool is an integral part of the SAP system and is pivotal in accurately measuring license usage at the individual system level. SAP administrators often configure USMM to run periodically, either quarterly or annually, depending on the organization’s compliance requirements.

USMM gathers critical data, including:

• User Metrics: Details about user accounts, including their last login times, assigned authorizations, and whether they are active or inactive.
• Activity Monitoring: Information on the types of activities performed by each user. For example, USMM can capture how often a user performs high-value activities, such as financial transactions, or if they are accessing modules that require a premium license type.
• Engine Utilization: SAP software often has components known as engines, adding-on features or modules requiring additional licenses. USMM records the utilization of these engines to ensure compliance with purchased entitlements.

USMM results can be exported in formats that allow organizations to compare their internal metrics with those expected by SAP, allowing for early detection of discrepancies.

LAW (License Administration Workbench)

The License Administration Workbench (LAW) aggregates the data collected by USMM across multiple systems, allowing large organizations a unified overview of their licensing status.

LAW plays an especially critical role for enterprises with multiple SAP instances, as it helps:

• Centralized Management: The LAW tool allows central control over the measurement process, reducing the manual workload and ensuring consistent measurement standards.
• Audit Reporting: LAW generates detailed reports that can be directly used for SAP audits. These reports include user classifications, authorization profiles, and package license usage. By providing these comprehensive reports, LAW minimizes the chance of discrepancies during an audit.
• De-duplication: One major benefit of LAW is that it helps de-duplicate user counts across different systems. In large environments, a single user might have multiple IDs across several SAP systems, and LAW ensures that these are counted only once for licensing purposes.

Additional Challenges: Hidden Costs and Over-Optimized Licensing

Organizations face additional challenges with SAP licensing regarding hidden costs and over-optimized licenses.

Hidden Costs of Indirect Access

Indirect access has become a focal point for SAP audits. This type of access often incurs unexpected costs as third-party tools and automated processes interact with SAP data. Hidden costs arise when:

• External Applications: Organizations often use CRM systems, automation tools, or web services to pull data from SAP without a direct license. While this interaction might seem harmless, it is still considered license usage, which can result in significant costs if left unchecked.
• Digital Access Licensing: With the introduction of SAP’s Digital Access model, organizations are now required to pay for data consumption scenarios that previously were not measured. This includes invoices generated automatically, data extracted for reports, or any data accessed indirectly through integrated applications.

Over-Optimized Licensing: A Double-Edged Sword

To reduce costs, organizations may inadvertently over-optimize their license usage. Over-optimization can lead to:

• License Downgrades: Reducing users to a lower license tier based on minimal system usage, even when their role might require broader access in the future. This may result in employees being unable to perform essential functions when their responsibilities change.
• Missed Opportunities for Innovation: By restricting licenses too tightly, organizations may discourage departments from exploring new functionalities within SAP. The fear of incurring additional costs may stifle innovation and limit the potential benefits of utilizing advanced SAP modules.

Long-Term Strategies for SAP License Optimization

To achieve both compliance and cost-effectiveness, organizations should think strategically about their SAP license usage in the long term. Here are some strategies to consider:

1. Scenario Planning for License Needs

SAP environments evolve with organizational growth, and so do license requirements. Companies should conduct scenario planning to assess different potential future states and their impact on licensing needs. For example:

• Mergers and Acquisitions: When acquiring another company, new SAP licenses may be required, or existing licenses may need to be consolidated.
• Digital Transformation Projects: Implementing new technologies, such as IoT or machine learning within SAP, may require additional engines and new types of user licenses.

By forecasting these scenarios, companies can make better-informed decisions about the licenses they need and avoid scrambling to procure licenses at the last moment.

2. Leveraging Automation for License Management

Automation can help improve the efficiency of license management by:

• Regular Monitoring: Automated monitoring scripts can keep track of user activities and alert administrators when unusual spikes in system usage occur, helping identify potential license overages before they become a problem.
• Self-Service Reporting: Providing departmental leads with self-service dashboards showing their team’s current license usage can encourage more responsible management across the organization.

3. Negotiating with SAP for Flexible Licensing Terms

Finally, effective negotiation with SAP is essential for managing license costs. Organizations should consider:

• Contract Flexibility: Negotiating for terms that allow the organization to adjust license quantities annually rather than being locked into fixed amounts for the entire contract duration.
• Indirect Access Terms: If indirect access is a major component of SAP use, negotiating specific terms for digital access can lead to cost savings. In some cases, it may be possible to obtain bundle discounts for digital access scenarios that might incur separate charges.

FAQ: How SAP Measures License Usage

What is SAP license usage monitoring?
SAP license usage monitoring ensures that licenses align with user activities and compliance is maintained.

How does SAP track user activities?
SAP tracks activities using system logs, feature access data, and transactional reports.

Why is it important to measure license usage?
It prevents over-licensing and under-licensing and ensures the proper allocation of resources.

What tools does SAP provide for license tracking?
SAP provides tools like License Administration Workbench (LAW) for detailed usage reporting.

How often should companies review SAP license usage?
Regular audits, ideally semi-annually or annually, help maintain compliance.

Can system logs provide license usage details?
SAP logs reveal login details, feature usage, and task-level activities.

What happens if license usage is non-compliant?
Non-compliance may lead to financial penalties or contractual disputes with SAP.

Are there third-party tools for measuring SAP license usage?
Yes, several third-party tools offer in-depth analysis and reporting for license optimization.

How can companies avoid license misuse?
Define roles clearly, align licenses with tasks, and regularly review assignments.

Does SAP provide alerts for improper license usage?
Certain SAP tools include alert features to flag discrepancies in usage patterns.

What is indirect access in SAP licensing?
Indirect access occurs when third-party systems use SAP data without direct user activity, impacting licensing.

How do businesses handle unused licenses?
Unused licenses can be reassigned or consolidated to reduce costs.

Can automation help in license usage measurement?
Yes, automation simplifies tracking and aligns licenses with user roles efficiently.

What is role-based licensing in SAP?
Role-based licensing assigns licenses based on specific tasks or job functions.

What challenges arise in SAP license measurement?
Challenges include system complexity, indirect access, and aligning licenses with dynamic business needs.