Key Metrics in SAP Licensing
- License Types: Understand named user vs. package-based models.
- Usage Levels: Monitor actual usage to avoid overpaying.
- Indirect Access: Assess third-party system interactions.
- License Compliance: Track against purchased entitlements.
- User Classification: Verify proper user assignments.
- Contract Terms: Review renewals and price caps.
- Audit Readiness: Prepare for SAP’s audit demands.
Key Metrics in SAP Licensing
Navigating the complexities of SAP licensing can be daunting, even for seasoned professionals. SAP’s licensing model is known for its intricate structure, diverse metrics, and constant evolution.
Understanding key SAP licensing metrics is essential for organizations looking to maximize their return on investment while staying compliant.
This article dives deep into the core elements of SAP licensing, providing a clear overview of the critical metrics that influence costs and compliance.
Understanding SAP License Metrics
SAP licensing is recognized as one of the most challenging models among major software vendors. Its complexity arises from the numerous metrics and components that govern the licensing structure.
These metrics are crucial for cost control, compliance, and effective license management.
Here, we explore the key metrics that define SAP’s licensing structure.
Named User Licenses
Named user licenses form a significant part of SAP’s licensing costs, constituting roughly 40-70% of total SAP contract expenses.
Every SAP user is assigned a named user license, with different license types offering various levels of access and functionality. Let’s take a closer look at the primary named user license categories:
- Professional User: This is the most comprehensive and expensive license type. Professional users have access to perform operational tasks, system administration, and system management roles as defined by the agreed license metrics. If no specific license is assigned to a user, SAP’s system automatically assigns the more costly Professional license during system measurement.
- Limited Professional User: Historically, this license allowed users to perform more restricted operational roles than Professional users. It was often regulated by the purchased quantity or agreed ratios, typically an 85% to 15% split between Professional and Limited Professional users. However, this license type is no longer available for new SAP customers.
- Employee User: Employee licenses are used by individuals who need access to perform activities only for their use, not on behalf of other users. This license type provides basic functionality and is designed for limited interactions with the SAP system.
Engine and Package Licenses
Named user licenses are just one component of SAP licensing. Many SAP applications require additional licenses for specific engines or packages.
These licenses are billed based on various metrics, making managing them effectively quite challenging. Some common metrics used for SAP engine and package licenses include:
- Number of employees
- Number of orders
- Yearly revenue
- Yearly spend volume
- Barrels of oil per year
- Processors or cores
- Storage volume in GB
These metrics are essential because they dictate the overall licensing cost for engines and packages. Properly managing these metrics and ensuring accuracy during system measurement can help optimize licensing costs and avoid unexpected charges.
Digital Access and Indirect Use
The advent of Digital Access Licensing represents SAP’s modern approach to handling indirect usage scenarios. Historically, indirect use—where non-SAP systems access SAP data—was a major point of contention, leading to confusion and compliance risks.
With Digital Access, SAP introduced a more predictable approach to managing these scenarios.
The key aspects of Digital Access Licensing include:
- Indirect Access: Digital Access applies when external applications or users access SAP systems indirectly. This type of access is no longer dependent on the number of users but is instead based on creating nine predefined document types.
- Document Packages: Customers can exchange named user licenses for Digital Access document packages, which offers flexibility and allows organizations to better align their license portfolio with actual system usage.
System Measurement and Compliance
SAP requires organizations to regularly verify their license compliance through system measurements. There are two primary methods for conducting these compliance checks:
- Annual System Measurement: This process is typically required annually and is initiated by SAP. It involves executing system measurement through the SLAW (SAP License Audit Workbench) tool, which collects usage data to ensure compliance with the contractual agreement.
- Enhanced License Audit: Conducted approximately every three years, enhanced license audits are performed on-site by SAP’s Global License Audit and Compliance (GLAC) team. These audits are more thorough and include interviews with key stakeholders and the execution of SLAW. The customer must sign off the resulting audit report, which can significantly impact licensing strategy and compliance efforts.
License Optimization Considerations
Optimizing the license landscape is critical, given the complexities and costs associated with SAP licenses.
License optimization involves ensuring that each user is assigned the appropriate license type, eliminating waste, and preparing for compliance audits. Key optimization areas include:
Named User Classification
Proper classification of named users plays a major role in license cost management. Users who are not classified correctly are often assigned the most expensive Professional license by default, which can lead to unnecessary costs.
To avoid over-licensing, organizations should regularly review user activities and ensure appropriate license assignments based on the tasks users perform.
Activity Monitoring
Activity monitoring is another key aspect of optimization. By tracking system activity and usage patterns, organizations can identify where adjustments can be made to reduce licensing costs. Monitoring should include:
- System Activity: Track the overall amount of activity in the system.
- Activity Types: Identify different types of activities users perform.
- Usage Patterns: Analyze usage patterns and group activities to understand the necessity of certain license types.
Multi-level License Management
Multi-level license management is particularly important for organizations operating in multiple locations. This approach allows subsidiaries to manage and optimize their licenses locally, enabling the parent organization to maintain overall control and achieve global optimization.
Multi-level license management allows regional units to adapt to local needs without jeopardizing enterprise-wide compliance.
Cost Management Strategies
Optimizing SAP licensing also involves implementing effective cost-management strategies. Here are some approaches to minimize over-licensing and optimize costs:
Prevention of Overlicensing
Overlicensing is a common issue that can inflate costs unnecessarily. Organizations can mitigate this risk by:
- Regular Usage Assessments: Continuously assess actual usage patterns and reassign licenses accordingly.
- Inactive User Identification: Identify users who have not logged in or used the system for a considerable time and either deactivate or downgrade their licenses.
- Indirect Access Management: Properly classify indirect access scenarios to avoid costly compliance issues.
License Consolidation
Consolidating multiple user accounts and eliminating duplicate licenses can yield substantial cost savings.
Users may sometimes have multiple accounts with overlapping licenses, leading to unnecessary expenses. Consolidating these accounts ensures that licenses are used more efficiently and reduces non-compliance risk.
Compliance and Audit Preparation
Organizations must proactively prepare for SAP audits to maintain compliance and avoid unexpected penalties.
Compliance preparation involves:
- Maintaining Accurate License Portfolio Information: Ensuring all information regarding licenses and users is current and accurate.
- Regular Updates to Measurement Tools: Keeping system measurement tools, like SLAW, updated and properly configured.
- Documenting Indirect Access Scenarios: Recording all instances of indirect system access to demonstrate compliance during audits.
- Tracking Engine Metrics and Usage: Monitoring engine metrics such as the number of orders, employees, or revenue to ensure accurate license calculations.
Future Considerations
SAP licensing continually evolves, and organizations must stay informed about the latest developments to ensure ongoing compliance and cost control.
Some areas to watch for in the future include:
- Changes in Licensing Models: SAP may introduce new license models or modify existing ones, especially with the growing adoption of cloud solutions. Understanding these changes and their impact on existing agreements will be crucial.
- New Measurement Tools and Methodologies: SAP continues to improve the tools available for license measurement and compliance. Organizations need to stay current with these tools to avoid discrepancies during audits.
- Digital Access Requirements: As Digital Access continues to evolve, understanding its impact on indirect access scenarios will be key to effectively managing licensing costs.
- Cloud Deployment Options: With the increasing shift towards cloud-based SAP solutions, organizations must understand how licensing differs between on-premise and cloud deployments and the implications of hybrid environments.
FAQ: Key Metrics in SAP Licensing
What is the difference between named user and package-based licenses?
Named user licenses are for individuals, while package-based licenses cover specific functionalities or transaction volumes.
Why is tracking usage important in SAP licensing?
Monitoring usage helps avoid overpaying for unused licenses or under-licensing, which could lead to penalties.
How does indirect access affect SAP licensing?
Indirect access involves third-party applications connecting to SAP. It can result in additional fees if not managed correctly.
What is the importance of user classification in SAP licensing?
Incorrect classification (e.g., assigning a professional license to a casual user) can lead to unnecessary costs.
What steps can be taken to prepare for an SAP license audit?
Maintain updated usage reports, ensure agreement compliance, and review license allocations regularly.
How do contract terms impact licensing costs?
Terms such as price caps and renewals directly influence long-term costs, making negotiation crucial.
What is SAP Digital Access, and how does it work?
SAP Digital Access charges are based on document generation by external applications, replacing some indirect access charges.
Can unused licenses be adjusted or refunded?
It depends on your contract. Some agreements allow for adjustments; others do not.
How does SAP licensing handle third-party integrations?
SAP requires a license for every interaction with external systems. These are often subject to indirect access fees.
What tools can help in SAP license management?
Tools like SAM (Software Asset Management) platforms assist in monitoring and optimizing usage.
What happens if a company is under-licensed?
Under-licensing can result in penalties, backdated fees, or increased costs during audits.
Why are user license assignments critical?
Improper assignments may lead to over-licensing or underutilization of purchased licenses.
How often should SAP license reviews be conducted?
Annual reviews are recommended, but quarterly assessments can provide better control.
What is the role of SAP’s License Administration Workbench (LAW)?
LAW consolidates license usage data across systems, aiding in compliance tracking.
How does cloud-based SAP licensing differ from on-premise models?
Cloud licensing often uses subscription models, offering flexibility but requiring careful monitoring to control costs.
