Reduce SAP Licensing Costs
- Analyze usage: Identify unused or underused licenses.
- Optimize user roles: Align user roles with actual needs.
- Audit regularly: Spot unnecessary expenses.
- Negotiate contracts: Renegotiate terms for better pricing.
- Switch to indirect access: Use third-party systems to reduce direct access costs.
How to Reduce SAP Licensing Costs
SAP licensing can be complex and costly if not managed well. Organizations often struggle to navigate the pricing structure and pay for licenses they do not fully utilize. Fortunately, there are ways to control and reduce SAP licensing costs effectively.
Here, we will explore different strategies for achieving this goal, breaking each step down straightforwardly. Let’s dive in!
1. Current SAP Licensing Agreement
The first step to reducing SAP licensing costs is understanding what you already have. SAP licensing agreements can be intricate, with various types of licenses available.
- License Types: SAP offers Named User, Package, and Enterprise licenses. Each has different pricing metrics.
- Usage Tracking: Identify the exact number of licenses your company owns and how each is used. SAP systems often have tools that allow administrators to generate user activity reports to help track license utilization.
Example: If your company owns 100 Professional User licenses but only 70 employees use SAP, you’re overpaying for 30 licenses. Being aware of this discrepancy allows you to initiate changes.
Quick Tip: Make a point to audit your license usage every six months to maintain control over costs.
2. Conduct a Thorough License Audit
To reduce costs, you need to know where you’re overspending. Conduct a comprehensive internal audit of your SAP licensing.
- Identify Underutilized Licenses: Find licenses not being actively used and determine whether they can be reassigned or eliminated.
- Consolidate User Accounts: Users with multiple accounts may consume unnecessary licenses. Identify these duplicates and merge them to save costs.
- Analyze License Types: Ensure that users are assigned the correct type of license based on their actual SAP use. Some employees might be assigned Professional User licenses when a Limited or Employee Self-Service license would suffice.
Actionable Insight: Use SAP’s built-in License Audit Workbench (LAW) to generate audit reports and review usage data. It helps identify where licenses can be consolidated or downgraded.
3. Optimize License Types and User Assignments
SAP licenses take different forms based on users’ roles and responsibilities. It’s crucial to assign licenses matching each user’s usage pattern.
- Downgrade High-Level Licenses: Review the users assigned higher-level licenses like “Professional” or “Developer.” Determine if their role can function adequately with lower-cost licenses, such as “Employee” or “Limited User.”
- Rightsizing Licenses: Only assign expensive licenses to employees needing advanced features.
- License Recycling: When employees leave the company or change roles, reclaim and reassign their SAP licenses rather than purchasing new ones.
Example: Certain back-office users may only use SAP for a few administrative tasks. Assigning them a Limited User license instead of a Professional User license could significantly reduce unnecessary costs.
4. Monitor Indirect Usage
Indirect access is a common source of unexpected SAP licensing costs. Indirect usage occurs when a third-party system interacts with SAP.
- Identify Areas of Indirect Use: Check integrations with third-party applications such as CRM systems, supplier portals, or HR management tools.
- Negotiate Specific Terms: During contract renewals, try to negotiate specific clauses regarding indirect usage to prevent surprise fees.
Example: If your website retrieves SAP data for order status inquiries, that could be considered indirect usage. Be mindful of these interactions to avoid unplanned licensing fees.
Quick Tip: Look into SAP’s Digital Access model, which offers simplified metrics for indirect usage. Consider whether transitioning to this model could save your organization money.
5. Implement a License Management Tool
A dedicated license management tool can make a big difference in managing SAP costs efficiently.
- Real-Time Insights: These tools help monitor the exact usage of each SAP license in real time, offering insights into how licenses are being used and where waste is occurring.
- Automated Optimization: Tools like Snow Software, USU, or Aspera can automatically recommend or perform optimization actions, such as reallocating underutilized licenses or identifying optimal license types for each user.
Example: A license management tool may alert you that a group of users is utilizing only 20% of their Professional licenses’ capabilities. This allows you to consider downgrading those licenses immediately.
Tools to Consider:
- Snow License Manager
- Aspera License Control
- Flexera One
6. Negotiate Contract Terms with SAP
The way you negotiate your contract with SAP can greatly affect your overall licensing costs.
- Renewals & Reviews: The best time to negotiate lower prices is during renewal or review. Prepare usage reports to demonstrate what you need.
- Bundle Licensing: Negotiate bundled pricing for multiple licenses and products to reduce overall costs.
- Leverage Future Purchases: If you plan to buy more SAP products in the future, use your buying power to negotiate a better deal on the current contract.
Example: Suppose your organization is expanding to use SAP S/4HANA. Instead of purchasing new licenses separately, negotiate a better deal by bundling existing license renewals with new purchases.
Quick Tip: Consult with SAP licensing experts or third-party advisors to help navigate negotiations.
7. Review and Optimize SAP Maintenance Costs
SAP Maintenance fees can be a significant part of overall licensing costs. Reviewing maintenance agreements and exploring alternatives can help reduce costs.
- Switch to Third-Party Maintenance: Consider switching to third-party maintenance providers such as Rimini Street or Spinnaker Support, which may offer similar services at lower costs.
- Negotiate Discounts: SAP may offer discounts on maintenance agreements, especially if you plan to upgrade or renew your software contracts.
- Analyze ROI on Upgrades: Only upgrade SAP systems if they provide a tangible benefit to your business operations. Sometimes, the latest version isn’t necessarily a must-have.
Example: If your current SAP version supports all your processes without issues, sticking with it and switching to a third-party maintenance provider could lead to substantial savings.
8. Utilize Licensing Metrics for Better Cost Management
Understanding and strategically using SAP’s licensing metrics can be a game-changer in reducing costs.
- Named Users vs. Concurrent Users: Understand whether named-user licenses or concurrent-user licenses better serve your organization. You might be overpaying for named-user licenses if only a few users access the system at any time.
- Pay-Per-Usage: Some licenses are structured to be usage-based rather than user-based. Analyzing these metrics can help determine if switching to usage-based pricing models would benefit your cost-saving goals.
Example: If your organization sees a significant fluctuation in SAP usage throughout the year, using a concurrent-user model may help optimize costs, as you only pay for what you use when needed.
Quick Tip: Always evaluate the licensing metrics during peak and non-peak usage to determine the most cost-effective options.
9. Rationalize Your SAP Environment
SAP environments can become bloated over time, with unnecessary systems and licenses driving up costs. A rationalization effort can help.
- Remove Unnecessary Systems: Evaluate and decommission older SAP systems that are no longer used or whose functions have been consolidated into newer systems.
- Consolidate Landscapes: Merging different SAP environments into fewer systems can reduce licensing needs and decrease support and maintenance costs.
Example: If you run multiple instances of SAP for different departments or subsidiaries, consider consolidating them into one global instance to cut licensing costs.
10. Leverage SAP’s License Audit Tools
SAP offers tools like System Measurement and the License Administration Workbench (LAW) to help manage licenses.
- Use System Measurement Regularly: Regularly measure and report your SAP license usage using SAP’s measurement tools. This ensures you stay compliant and have accurate data to negotiate renewals.
- Adjust as Needed: Utilize LAW to adjust license types based on real user activity, which can help prevent over-allocation.
Example: Running monthly system measurements gives you better insight into license usage trends, making it easier to adjust or right-size licenses before issues arise.
11. Train Employees on Efficient License Use
The way employees use SAP affects license consumption. Training staff on efficient usage can help reduce licensing costs.
- Educate on License Policies: Ensure employees understand what licenses they need and avoid practices that lead to indirect usage fees.
- Reduce Unnecessary Logins: Users should log off SAP when not actively using it to free up concurrent licenses for others, which can optimize overall license costs.
Example: Training an employee to avoid repeatedly logging into the system and using multiple accounts can prevent the overuse of concurrent licenses.
12. Consider Cloud and Subscription Models
SAP offers cloud and subscription-based licensing models that might align better with your business needs.
- SAP Cloud Platform: Consider moving to SAP’s cloud solutions, which often have more flexible and predictable pricing than traditional licenses.
- Subscription-Based Pricing: With SAP S/4HANA, subscription-based licensing could reduce upfront costs and align spending more closely with actual system usage.
Example: If you are a growing company unsure of future SAP needs, adopting a cloud subscription model might offer flexibility that traditional licenses don’t provide.
FAQ: How to Reduce SAP Licensing Costs
What is the first step in lowering SAP costs?
Conduct a detailed audit of your current licenses and their usage.
How can user roles affect SAP costs?
Incorrectly assigned roles may lead to higher license fees. Assign roles based on actual usage.
Is it possible to return unused SAP licenses?
Yes, but it depends on your contract terms. Check your agreement to see if you can terminate unused licenses.
How often should I review SAP licenses?
Review them annually or after major business changes to avoid overpaying.
Can negotiating with SAP reduce costs?
Yes, negotiations can help secure discounts or more favorable terms.
What is indirect access, and how does it save costs?
Indirect access uses third-party tools or systems to access SAP data, reducing direct user licenses.
Are there alternative license types for cost savings?
Yes, SAP offers different license types. Choosing the right one for your usage can lower costs.
Can third-party audits help with SAP licensing?
External experts can identify inefficiencies and provide actionable advice.
Is switching to cloud SAP solutions cost-effective?
It might be, depending on your needs. Cloud solutions often have flexible pricing.
How can customizations increase SAP costs?
Customizations may require additional licenses or resources, increasing costs.
What happens if I violate SAP license terms?
You may face penalties or additional fees. Regular audits help avoid this.
Is outsourcing SAP license management worth it?
For complex environments, outsourcing can save time and prevent costly mistakes.
How can I leverage volume discounts in SAP contracts?
Combine purchases or negotiate enterprise-wide agreements for better pricing.
Does SAP provide usage reports?
Yes, use SAP’s tools to track usage and identify potential savings.
What should I focus on during contract renewals?
Assess actual needs, address unused licenses, and negotiate better terms to reduce costs.
