Introduction to SAP S/4HANA Licensing
- User-Based Pricing: Costs are determined by the number and roles of users.
- Digital Access Fees: Covers indirect usage by third-party systems.
- Cloud vs. On-Premise: The Cloud uses subscription-based pricing, whereas on-premise requires perpetual licenses.
- Add-Ons: Costs vary based on additional functionalities required.
- Support and Maintenance: Typically bundled in cloud models, separate for on-premise
Introduction to SAP S/4HANA Licensing
SAP S/4HANA is a next-generation enterprise resource planning (ERP) solution designed to help businesses run more simply, efficiently, and in real time.
However, understanding the licensing for SAP S/4HANA can be daunting due to its complexity and the variety of options available.
In this guide, we’ll explain the intricacies of SAP S/4HANA licensing to help you understand what suits your organization’s needs.
Whether you are new to SAP licensing or need a refresher, this article covers everything from the basics to specific scenarios.
What is SAP S/4HANA?
SAP S/4HANA is SAP’s flagship ERP system, built on SAP HANA’s in-memory database technology. It provides integrated modules for finance, supply chain, sales, procurement, production, and more, allowing seamless business process management.
Unlike its predecessor, SAP ECC, S/4HANA is designed with simplicity and innovation. It leverages real-time analytics and intelligent automation.
Overview of SAP S/4HANA Licensing
Licensing for SAP S/4HANA can be a complex process involving various models, metrics, and factors that determine the pricing. SAP has transitioned from a traditional perpetual license model to more flexible options like subscription-based licensing. Let’s break down the different aspects of SAP S/4HANA licensing.
1. Licensing Models
There are two primary licensing models for SAP S/4HANA:
- Perpetual Licensing
- Subscription-Based Licensing
1.1 Perpetual Licensing
In this model, you pay a one-time fee for the software, which gives you the right to use it indefinitely. You also pay annual maintenance fees for support and updates. This model is ideal for organizations that prefer capital expenditure (CapEx) over operational expenditure (OpEx).
Advantages:
- Long-term cost predictability
- Ownership of the license
Disadvantages:
- High upfront cost
- Additional costs for ongoing maintenance
1.2 Subscription-Based Licensing
In a subscription model, organizations pay a recurring fee based on the number of users, the scope of usage, and other parameters. This is a common choice for cloud deployments, where businesses prefer predictable monthly or annual costs.
Advantages:
- Lower upfront investment
- Flexible scaling
Disadvantages:
- Costs may increase over time
- No ownership of the software
2. Licensing Metrics
SAP S/4HANA uses various metrics to determine licensing costs. Below are some of the key metrics you need to understand:
2.1 User-Based Licensing
User-based licensing is one of the most common metrics. Licenses are issued based on the number of users accessing the system. SAP divides users into different categories, such as:
- Professional Users: These users have full access to all system functionalities. An accountant who works extensively in the SAP Financial module would be a professional user.
- Functional Users: These users have limited access to specific functionalities. For instance, a sales representative who uses the system to view orders and customer information might be classified as a functional user.
- Developer Users: Developers who use SAP S/4HANA to customize and build new functionalities.
2.2 Digital Access (Document-Based Licensing)
In addition to user-based licensing, SAP introduced a new concept called Digital Access. This model accounts for system usage based on the number of documents users or external systems create. Examples of documents include sales orders, purchase orders, and invoices.
Digital access provides a flexible way to account for indirect access, which happens when third-party applications interact with SAP. This change helps organizations avoid compliance issues related to indirect access, which has historically been a challenging aspect of SAP licensing.
Example: If a third-party CRM system creates sales orders in SAP S/4HANA, this would fall under the digital access model.
On-Premise vs. Cloud Licensing
SAP S/4HANA can be deployed both on-premise and in the cloud, and each deployment model has its licensing options.
1. On-Premise Licensing
In an on-premise deployment, you can opt for perpetual or subscription licenses. The licensing model here is primarily based on user roles, meaning you pay based on the number of users and the type of access they require.
Benefits:
- Control over infrastructure
- Customizable deployment
Challenges:
- High initial cost
- In-house infrastructure maintenance required
2. Cloud Licensing
SAP offers a subscription model for cloud deployments. These can be public (multi-tenant) or private (single-tenant). Depending on the choice, the licensing might include different service levels.
Benefits:
- Lower upfront costs
- Automatic updates and patches
Challenges:
- Limited customization options in comparison to on-premise deployments
- Potential for increased long-term costs if scalability isn’t managed effectively
SAP RISE with SAP: A Comprehensive Cloud Solution
SAP introduced RISE with SAP as a comprehensive business transformation-as-a-service package that includes S/4HANA licensing and other tools and services.
The goal of RISE is to simplify the customer journey to the cloud, providing a single subscription that covers all the major components, including:
- SAP S/4HANA License
- Technical Services (such as migration support)
- Business Process Intelligence
RISE with SAP is attractive for companies looking for an all-in-one offering that reduces complexity and bundles everything into one predictable cost.
Example: A manufacturing company wanting to move its ERP system to the cloud, optimize business processes, and reduce complexity could benefit from RISE with SAP by getting all necessary services in a single package.
Factors Influencing Licensing Costs
Several factors influence the licensing costs of SAP S/4HANA:
- Number of Users: More users mean higher costs, particularly for professional users.
- Deployment Type: On-premise or cloud deployment impacts the type and cost of licenses.
- Scope of Usage: The extent of functionalities used and the specific modules required will determine the licensing costs.
- Indirect Access: Interactions with external systems that access SAP data will be calculated through digital access.
Common Licensing Challenges and Tips
Licensing SAP S/4HANA can be challenging due to its complexity. Below are some common challenges and tips to navigate them:
1. Complexity of User Types
Organizations often struggle to define which user type fits which role. Misclassifying users can lead to over-licensing or non-compliance.
Tip: Conduct a User Audit: Regularly review user roles to ensure employees have the right type of access.
2. Indirect Access Concerns
Indirect access has historically been a pain point for SAP customers, resulting in compliance issues and unexpected costs.
Tip: Consider adopting the Digital Access Adoption Program (DAAP), which provides incentives for transitioning to document-based licensing.
3. License Utilization
Many companies purchase licenses they do not fully utilize, leading to unnecessary costs.
Tip: Monitor Usage: Utilize SAP tools or third-party software to track usage and identify underutilized licenses.
Key Considerations When Choosing an SAP S/4HANA License
When choosing a licensing model for SAP S/4HANA, consider the following:
- Business Growth: Will your company grow in the next 3-5 years? If so, a subscription model may offer more flexibility.
- Capital vs. Operational Expenditure: If you prefer CapEx, a perpetual license is suitable, whereas a subscription fits OpEx.
- Cloud Strategy: RISE with SAP could be a comprehensive option for companies pursuing cloud-first strategies.
- Customization Needs: On-premise deployment offers greater customization compared to cloud options.
Steps for Licensing SAP S/4HANA
- 1. Assess Business Requirements: Understand what functionalities your organization needs and how many users will require access.
- 2. Choose the Right Deployment Option: Depending on your IT infrastructure and business goals, choose between on-premise and cloud deployment.
- 3. Determine the Licensing Model: Select perpetual or subscription-based licensing based on your requirements.
- 4. Consider Digital Access Requirements: Assess if you have multiple third-party systems interacting with SAP.
- 5. Negotiate with SAP or a Partner: Work with SAP or a certified partner to understand the cost implications and negotiate a pricing package that fits your budget.
FAQ: SAP S/4HANA Licensing
What are the main licensing models for SAP S/4HANA?
SAP S/4HANA offers cloud subscriptions and on-premise perpetual licenses.
How is digital access different from user-based licensing?
Digital access licenses cover external systems generating SAP data, while user-based licenses depend on user roles.
What does the on-premise licensing model include?
On-premise licensing includes a perpetual license and typically requires separate maintenance fees.
How does cloud subscription licensing work?
The cloud model charges a recurring fee, including software, updates, and support.
What factors influence SAP S/4HANA licensing costs?
Key factors include the number of users, digital access, deployment type, and additional features.
Are there different user types for licensing?
Yes, user types such as developers, end-users, and limited users are priced differently.
What is the role of add-ons in licensing?
Add-ons like advanced analytics, machine learning, or IoT require additional licensing fees.
Can businesses switch from on-premise to cloud licensing?
Yes, but it may involve converting licenses and adapting deployment requirements.
What is indirect access, and how is it licensed?
Indirect access refers to data creation or usage by external systems requiring digital access licenses.
How can businesses ensure compliance with SAP licensing?
Regular audits and monitoring usage against license terms help maintain compliance.
Is support included in cloud subscription licenses?
Yes, cloud subscriptions generally include support and updates.
What happens if there’s a licensing audit issue?
Non-compliance can lead to additional fees, penalties, or revised licensing terms.
Are free trials available for SAP S/4HANA?
SAP sometimes offers free trials or limited-time access for specific products.
How do businesses calculate their licensing needs?
They assess user roles, deployment type, and required add-ons using SAP’s tools or consultants.
What should companies consider before licensing SAP S/4HANA?
Key considerations include scalability, user needs, deployment strategy, and future growth plans.
