License Consolidation Strategies for SAP

License Consolidation Strategies for SAP

License consolidation in SAP environments is a strategy that streamlines software licensing across the entire enterprise.

By consolidating SAP licenses and contracts, organizations can eliminate duplicate user licenses, secure better volume discounts, and simplify compliance management.

The result is a reduction in total cost of ownership and a stronger negotiating position with SAP for future contracts.

Fragmented SAP Licensing: Hidden Costs and Risks

Many enterprises struggle with fragmented SAP licensing. Different business units or regions might maintain separate SAP contracts and license pools, leading to inefficiencies:

• Duplicate Users: The same employee often has separate SAP user accounts in multiple systems (e.g., ERP, CRM, BW), resulting in the company paying for multiple licenses for a single person.
• Multiple Contracts: Decentralized licensing means various contracts with different terms and end dates. This fragmentation results in missed volume discounts and higher maintenance fees.
• Compliance Gaps: Overlapping agreements create complexity. It’s easy to lose track of who is licensed for what, increasing the risk of non-compliance during audits.
• Administrative Overhead: Juggling separate renewals and tracking usage across silos drains IT resources. The effort that could be spent optimizing usage instead goes into managing contract complexity.

In short, a fragmented SAP license landscape drives up costs and audit risks. Consolidation directly addresses these pain points.

Read How to Right-Size SAP Licenses.

Why Consolidation Matters for SAP Environments

Cost Savings: The most immediate benefit of consolidating licenses is the reduction in costs.

By eliminating redundant licenses and combining purchasing power, companies spend less:

• No Redundant Licenses: Each unique user should have one SAP named-user license covering all systems, rather than multiple licenses for the same user. Consolidation ensures you’re not double-paying for the same person or usage.
• Lower Maintenance Fees: SAP typically charges ~22% of license value annually for support. Removing duplicate or unused licenses means you stop paying maintenance on shelfware.
• Volume Discounts: Purchasing a larger, unified license can unlock deeper discounts. For example, combining two regional license orders into a single global deal can result in a discount of 50% or more, significantly reducing unit costs.

Simplified Management: Fewer contracts and a consolidated license pool make life easier:

• One set of contract terms and a single renewal date simplifies administration.
• A unified license inventory allows centralized tracking of usage and compliance.
• It’s easier to enforce standard policies (such as how users are assigned license types) across the entire organization when everything is under one umbrella.

Compliance and Audit Readiness: Consolidation also mitigates compliance risks:

• Clarity on Usage: A single consolidated view of license deployment helps identify any under-licensed areas before SAP does. It prevents surprises in official audits.
• Unified Reporting: SAP’s audit tools (such as the License Administration Workbench) work best when you can compile all usage data together. A consolidated approach allows you to run a single audit report for the entire enterprise.
• Contractual Coverage: By negotiating enterprise-wide usage rights (covering all subsidiaries and systems), you ensure that all SAP usage is properly licensed under the agreed contract. This avoids gray areas where one division’s users access another division’s SAP system without explicit permission.

Negotiation Leverage: When licenses are consolidated, organizations gain a stronger hand in negotiations:

• SAP’s sales team will view a single large contract as higher strategic value than many small ones. This often translates into more favorable terms and flexibility.
• With a clear, enterprise-wide license picture, you can confidently push back against SAP’s proposals to “pad” license counts. You know exactly what is needed, which prevents overselling.

Read Common Mistakes in SAP License Optimization.

Key Strategies for SAP License Consolidation

Consolidating SAP licenses enterprise-wide prevents paying twice for the same users and streamlines contract management. The graphic illustrates a unified approach replacing fragmented license puzzles.

To successfully consolidate SAP licenses, companies should adopt a multi-faceted strategy:

1. Centralized License Management:

Establish a central team or designate a single point of contact for SAP licensing.

This group should maintain a consolidated view of all SAP users, license entitlements, and usage across the organization. Central governance prevents the silos that lead to duplicate purchases.

It also enforces standard processes (e.g., every new SAP user request is checked against the global user list to prevent creating duplicate accounts).

2. Audit and Inventory All Users:

Begin by obtaining a definitive count of unique SAP users and their current licenses. Use SAP’s System Measurement tools (USMM) on each system and then combine results with SAP License Administration Workbench (LAW).

LAW is designed to detect duplicate users across multiple systems and produce a merged compliance report. An internal audit using LAW will reveal how many unique individuals actually use SAP versus how many accounts (and licenses) are recorded.

This forms the baseline for consolidation – for example, you might find 10% of your named users are duplicates who can be eliminated from the counts.

3. Co-Terminate and Unify Contracts:

If you have multiple SAP contracts (for instance, after acquisitions or regional purchasing), plan to consolidate them into a single master agreement.

This may involve aligning contract end dates (co-terming) and negotiating a new contract that covers all business units. A Global License Agreement or enterprise agreement with SAP can consolidate all licenses under a single set of terms.

The benefits are significant volume discounts and a single maintenance stream. (Be prepared: SAP may use this opportunity to propose moving you to newer products or cloud subscriptions like RISE with SAP as part of the new deal. Weigh those offers carefully against your strategic roadmap.)

4. Eliminate Duplicate and Idle Accounts:

As part of the consolidation, actively retire redundant user accounts and licenses:

• If two SAP accounts belong to the same person, keep one and remove or deactivate the other. This ensures that the person consumes only one license.
• Identify users who no longer require access (due to a role change or departure from the company) and revoke their licenses. Reclaiming those licenses means you might avoid buying more.
• For technical or system accounts, ensure they are properly classified (SAP provides special license types or exemptions for certain background users – use them so these accounts don’t count as full users).

5. Right-Size License Types:

Through the audit, review each user’s activities and make sure they have the appropriate license type:

• If a user only performs low-level tasks (e.g,. an employee who just enters time sheets or views pay stubs), they should have a low-cost Employee Self-Service license, not a Professional license.
• Reserve expensive Professional User licenses for power users or those who truly need broad access. Many users can be downgraded to Limited Professional or similar mid-tier licenses if their job doesn’t require the highest level of access.
• This reclassification can yield major savings. For example, if 200 users can be downgraded from a $3,000 Professional license to a $1,500 Limited license, that’s a one-time savings of approximately $ 300,000, plus $ 66,000 less in annual support costs.

6. Tackle Indirect Usage:

Ensure you address indirect access during the consolidation process. Indirect access refers to non-human or third-party systems that interact with SAP (for instance, data being created in SAP via an e-commerce site or a CRM integration).

Map out all such integrations and decide on a licensing approach:

• SAP now offers Digital Access licenses that charge based on the number of documents created (such as sales orders, invoices, etc.) from external systems. Consolidating your licensing should include evaluating if the Digital Access model or classic named user licensing is more cost-effective for your integration scenario.
• Proactively monitoring interfaces helps prevent unexpected license liability. Include indirect use in your consolidated license audits so that these are accounted for under the right license type (named user, partner access, or digital document licenses).

7. Utilize Tools to Automate Optimization: In a large SAP estate, third-party Software Asset Management (SAM) tools can significantly aid ongoing consolidation efforts.

Solutions like Flexera One, Snow Optimizer for SAP, or VOQUZ LicenseControl continuously scan your SAP environment to flag duplicate users, inactive users, and mismatched license assignments.

They can provide analytics and even simulate how changes (like adding a new system or migrating to S/4HANA) would affect your license consumption. Automation ensures that once you consolidate, you sustain the benefits by identifying and addressing any new duplication or excess in real-time.

8. Educate and Enforce Policies:

Finally, make license consolidation part of your IT policy. Train regional SAP administrators and project teams on the importance of avoiding duplicate user creation.

Enforce a process where all requests for new SAP licenses or upgrades are submitted for central approval. By building awareness, local teams become allies in maintaining a clean, consolidated license environment rather than reintroducing sprawl.

Leveraging Consolidation in SAP Contract Negotiations

A consolidated license position not only saves costs day-to-day, it becomes a powerful bargaining chip in your SAP contract negotiations.

When you approach SAP with a clear understanding of your actual license needs (and a unified contract in mind), you can secure much better terms.

Consider a before-and-after scenario of two companies that merged and then consolidated their SAP licenses:

In this illustrative example, consolidating contracts and licenses resulted in approximately $2 million in upfront license cost savings and $ 440,000 per year in reduced support fees. The unified contract also means one negotiation instead of two, and ensures all users fall under the same terms.

Negotiation Best Practices:

When renegotiating with SAP for consolidation:

• Bundle Purchase for Discounts: Combine planned purchases or upgrades into one large negotiation. SAP’s discount tiers improve with larger deal sizes, so consolidating needs can pay off. Be transparent about consolidating and expect pricing that reflects the larger volume.
• Seek Flexible Terms: Leverage your improved position to negotiate terms like price protections, flexible uptick allowances, or the ability to reallocate licenses globally. For instance, request a clause that allows for a 5-10% increase in users with the same discount, to cover any unforeseen needs without penalty.
• Address Redundant Maintenance: If you have identified shelfware (unused licenses), negotiate a plan for handling them. While SAP may not let you simply cancel licenses mid-term, you can often trade their value – e.g., apply the support value of unused licenses as credit toward new software (SAP might agree if you are adopting cloud products or S/4HANA). At minimum, ensure you’re not continuing to pay maintenance on assets you don’t use.
• Document Everything: Come to the table with data. Show SAP the LAW reports and internal audit findings that justify your optimized user counts. When SAP sees that you have done your homework and have an accurate license inventory, they are less likely to challenge your numbers and more likely to focus on the future relationship. This credibility can translate into smoother negotiations and potentially lead to concessions.

Sustaining the Benefits of License Consolidation

Consolidation is not a one-time project but an ongoing discipline. To sustain the benefits:

• Periodic License Reviews: Schedule regular (e.g., quarterly or semi-annual) internal license reviews using SAP’s tools or SAM software. Continuously weed out any new duplicate accounts or unused licenses.
• Stay Aligned with Organizational Changes: Mergers, acquisitions, or divestitures will alter your license needs. If you acquire a company using SAP, plan immediately how to fold them into your consolidated license structure (and engage SAP early to update contracts). Conversely, if you spin off a business unit, ensure that licenses are properly carved out to avoid compliance issues.
• Monitor SAP’s licensing policies, as they evolve (for example, changes in indirect access rules or new offerings, such as modular cloud subscriptions). Monitor SAP announcements and adjust your strategy accordingly. What is consolidated and optimized today might need tweaking tomorrow if SAP introduces new metrics or audits a new area.
• Optimize Before New Purchases: Establish a protocol that requires the team to confirm existing entitlements are fully utilized before purchasing additional SAP licenses or subscriptions. Often, internal reallocation or cleanup can free up capacity and avoid the need for a purchase. Only buy more when you’ve demonstrated a genuine need for it, and even then, use the opportunity to consolidate that purchase with your main contract to secure the maximum discount.

By treating license management as an ongoing process and enforcing enterprise-wide oversight, you ensure that the hard-won savings from consolidation are not only maintained but also extended over time.

Recommendations

• Establish Central Governance: Create a centralized SAP license management function or committee responsible for all licensing decisions and compliance.
• Co-Terminate Contracts: Align all SAP contracts to a single renewal date and negotiate one enterprise agreement to maximize discounts and streamline terms.
• Use LAW and Audits Regularly: Run SAP’s License Administration Workbench across all systems at least annually to identify duplicate users and correct license counts proactively.
• Clean Up User Accounts: Routinely remove or reassign SAP access for employees who have left or changed roles, and merge any duplicate accounts to prevent double licensing.
• Right-Size License Assignments: Periodically review user roles to ensure each person has the most cost-effective license that meets their needs; downgrade licenses as needed.
• Monitor Indirect Usage: Inventory all third-party integrations to SAP. License them appropriately (e.g., via SAP’s digital access model) and review these interfaces for compliance on an ongoing basis.
• Leverage Expert Tools: Invest in SAM tools specialized for SAP to automate usage tracking and alert on inefficiencies. Use the findings from these tools in negotiations to validate your position.
• Plan for M&A Early: If a merger or acquisition is on the horizon, include SAP license consolidation in the integration plan from the outset to avoid compliance surprises and eliminate redundant spending quickly.
• Engage SAP Proactively: Don’t wait for an audit. If your internal analysis reveals that you’re over- or under-licensed, engage SAP or a licensing advisor to adjust terms or purchases on your timeline, rather than under audit pressure.
• Educate Stakeholders: Train IT and procurement teams about SAP licensing rules and your internal policies, so everyone works toward the common goal of an optimized, consolidated license estate.

FAQ

Q1: What is SAP license consolidation?
A1: It is the process of combining and optimizing SAP software licenses across an organization. This means ensuring that each user or system is licensed only once (eliminating duplicates) and often merging multiple SAP contracts into a single global agreement. The goal is to reduce waste, simplify management, and gain better pricing from SAP.

Q2: How do we identify duplicate SAP licenses or users?
A2: Start by running SAP’s built-in audit tools. Use USMM on each system to gather usage data, then combine results with the License Administration Workbench (LAW). LAW will highlight duplicate user accounts across systems. You can also employ third-party license management tools that automatically flag if the same person appears more than once. These steps reveal where you’re double-counting users, allowing you to correct the issue.

Q3: What cost savings can be expected from consolidation?
A3: Savings vary, but they come from multiple areas. First, eliminating duplicate user licenses directly saves on license fees and the 22% annual support per license. Second, a unified contract typically achieves higher volume discounts (e.g., moving from 30% to 50% off SAP’s list prices). Companies have seen overall SAP spend drop by 20–30% after a thorough consolidation. There are also soft savings in reduced administration effort.

Q4: How does contract consolidation improve our negotiating position with SAP?
A4: When you consolidate, you’re essentially turning several small deals into one big deal. SAP values larger contracts more – you’re a more important customer when all your spend is in one negotiation. This gives you leverage to ask for better discounts and more flexible terms. Also, having clear data on what you need (post-consolidation) means SAP can’t easily upsell you on unnecessary licenses, as you have the facts to push back.

Q5: What are the risks of not consolidating our SAP licenses?
A5: Without consolidation, you likely pay for more licenses than you actually use (wasting budget on duplicates or shelfware). You also risk non-compliance if users access systems outside the scope of their license agreements. Fragmented licensing makes it difficult to determine your true license position, increasing the likelihood of an SAP audit identifying shortfalls or inconsistencies, which could result in substantial penalty fees. Moreover, you miss out on volume pricing, so you’re paying higher unit costs than necessary.

Q6: Can we consolidate licenses during a cloud migration or move to S/4HANA?
A6: Yes. Major transitions, such as moving to S/4HANA or RISE with SAP (SAP’s cloud subscription offering), are prime opportunities to consolidate. SAP will often propose a new contract for these changes. You can use that moment to fold all existing licenses into a single agreement or subscription, negotiate credits for old licenses, and ensure the new model covers your entire footprint. Just be careful to evaluate the new licensing metrics – cloud models are different, so do a cost comparison to confirm it’s beneficial.

Q7: How do mergers and acquisitions affect SAP licensing?
A7: After an M&A, companies often find they have duplicate SAP systems and contracts. By default, SAP licenses from one company cannot simply be used by the other – you must get SAP’s approval (usually via a contract novation or new agreement) to combine usage. The consolidation strategy post-merger includes negotiating one contract for the merged entity and eliminating overlapping licenses (for example, if both companies had 500 licenses but together only 800 unique users, you’d seek to retire the 200 excess). Planning this early helps avoid compliance issues and unnecessary costs within the combined organization.

Q8: What tools can help manage SAP license consolidation?
A8: Aside from SAP’s own LAW tool, there are specialized Software Asset Management tools. Solutions like Snow Optimizer for SAP, Flexera One, USU SAP License Management, and others can automate the detection of duplicate users, continuously monitor license utilization, and even simulate audit results. These tools provide dashboards and reports that make it easier to govern a consolidated license environment and flag any anomalies before they become problems.

Q9: Is it possible to reduce SAP maintenance fees through consolidation?
A9: Indirectly, yes. SAP’s maintenance fee is a percentage of your license purchase price. If you eliminate licenses or negotiate a lower net license cost through volume discounts, your maintenance base goes down. Additionally, if you identify unused licenses, you can potentially terminate their maintenance at the next renewal (or negotiate a swap for something else of value). Some companies also negotiate caps on maintenance increases or even temporary maintenance holidays on redundant licenses as part of consolidation deals. The key is not to pay for support on software you aren’t using.

Q10: How long does SAP license consolidation take, and when should we start?
A10: The timeline depends on the size of your SAP landscape. Internal analysis (running LAW and cleaning data) may take a few weeks to a few months. Renegotiating contracts with SAP could also take a few months, especially if aligning multiple agreements. It’s wise to start consolidation efforts well in advance of any major contract renewal or expansion project. Ideally, begin a year before your next big renewal – this gives time to inventory licenses, execute internal cleanup, and approach SAP with a solid plan. Starting early also means you can realize cost savings sooner rather than later.