Named User vs. Engine Licensing in SAP
Introduction: SAP licensing has two fundamental dimensions: licenses tied to individual users and licenses tied to specific software functions (often called “engines” or “packages”).
Understanding the difference between named user licensing and engine licensing is vital for managing compliance and optimizing costs. Most SAP environments use a combination of both.
Named User Licensing
A named user license is assigned to a specific person (or occasionally a system account) who accesses SAP. Each user must have an appropriate license type corresponding to their role (e.g., Professional User, Limited Professional, Employee Self-Service, etc.).
Every individual who uses an SAP system – directly or indirectly – must have a named user license. These licenses often make up a significant portion of an organization’s SAP spend (commonly 40–70% of total licensing cost).
Named user licenses can be thought of as general access licenses. For example, a finance clerk might have a “Limited” user license that grants access to only certain SAP transactions.
In contrast, a power user or developer would need a “Professional” user license for broad access. The cost difference can be substantial, so organizations try to assign the lowest sufficient license type per user.
Pros of Named User Licensing:
- Straightforward Concept: One license per user is easy to understand and aligns with how companies staff their operations.
- Covers Broad Access: A user license allows that person to use multiple SAP modules within their authorized tasks without needing separate licenses for each module.
- Auditable with Tools: SAP provides automated tools to count active named users and license types, simplifying compliance tracking for user licenses.
Cons of Named User Licensing:
- Potential Over-licensing: You must license every person with access. Even users who only occasionally use SAP still require a license, which can lead to paying for many infrequent users.
- Role Management Required: It’s important to ensure users are not assigned higher license roles than necessary. If everyone is given a Professional license by default, you might be overpaying significantly.
- Indirect Usage Gaps: Traditional named user licensing struggled with scenarios where external systems access SAP data (indirect use). Those external users weren’t named in SAP, leading to ambiguity and audit risk until SAP introduced alternative licensing (discussed later).
Read Choosing the Right SAP License Model.
Engine (Package) Licensing
An engine license (or package license) grants the right to use a specific SAP product or component based on a usage metric rather than per user. Unlike named users, which are generic, engine licenses cover particular functionality (engines) – each measured by a defined unit. SAP’s price list includes around 100 different metrics for various engines.
Examples of engine metrics:
- Transactions/Documents: For instance, SAP Extended Warehouse Management might be licensed based on the number of warehouse orders processed annually or SAP Global Trade Services based on the number of trade documents.
- Master Data Count: SAP Human Capital Management engines (like Payroll) are often licensed by the number of employees in the system. Another example is the SAP CRM marketing engine licensed by the number of contact records.
- Volume/Revenue: Some industry solutions use business volume metrics – e.g., an insurance engine might be based on the number of policies or premium volume, or a sales engine on annual revenue processed through SAP.
- System Capacity: Technical engines like the SAP HANA database are licensed by memory size (e.g., 256 GB increments) or CPU cores.
When you purchase an engine license, you agree to a metric ceiling. For example, you might license SAP Payroll for up to 1,000 employees. You can use that engine as long as you stay within 1,000 employees on the system; if you grow beyond that, you are expected to purchase additional capacity.
Engine licenses are typically used for add-on modules or specialized components. Named users cover core SAP ERP functionality, but if you add SAP Treasury or SAP Transportation Management, SAP will likely license those via an engine metric (transactions, shipments, etc.).
Pros of Engine Licensing:
- Pay for What You Use (to a point) aligns cost with usage. Smaller companies pay less (because their volumes are lower), and costs increase as the business grows.
- Covers All Users/System Interactions: Engine metrics capture all activity related to that functionality, regardless of which user or system triggers it. This can simplify licensing for processes involving external systems or many automated transactions.
- Modular Adoption: You can enable a specific SAP capability without licensing it for every user. Only those who use that engine indirectly contribute to its metric.
Cons of Engine Licensing:
- Monitoring Complexity: Tracking usage against the metric can be challenging. Not all engines have automated counters in SAP. Often, companies must generate reports (e.g., count total sales orders) to ensure compliance.
- Unexpected Overruns: Business growth or activity spikes can quickly overshoot an engine’s licensed metric. For instance, if sales orders exceed your licensed amount, you can become non-compliant and face a hefty true-up bill.
- Rigid Usage Bands: If your usage is well below the licensed metric, you’ve essentially paid for capacity you aren’t using (wasted spend). Metrics usually come in tiers or blocks, so you might have licensed more than needed to be safe.
- Additional Cost Layer: Engine licenses are an additional cost on top of named user licenses (users still need base access). This can complicate project cost calculations since both user and engine costs must be considered.
Read SAP Consumption-Based Licensing.
Compliance and Management
Managing both license types requires different approaches:
- Named Users: Regularly audit user accounts. Remove or reassign licenses for departed employees and adjust license types if a user’s role changes. SAP’s user measurement tools (USMM and LAW) help gather system user counts. Many companies perform internal license audits before SAP’s official audit to true-up any issues. Also, watch for duplicate users across systems (LAW helps combine these) so you don’t double-count one person.
- Engines: Keep an eye on the business metrics. This might involve working with business departments – e.g., HR can report current employee count for an HR module license, or finance can report total invoice count for a billing engine. Aim to review engine usage at least quarterly. Suppose an engine metric is nearing its licensed limit. In that case, you have time to purchase additional capacity or implement controls (for example, archiving old data or limiting transactions) to stay compliant.
During SAP audits, you’ll typically provide the results of user counting and any required metric figures for engines. To have an audit trail, it’s wise to document how you calculated engine usage (screenshots of reports, etc.).
Digital Access (Indirect Use): SAP’s introduction of Digital Access licensing is an example of engine licensing addressing an area that used to fall under named users.
Digital Access licenses certain document types (sales orders, invoices, etc.) created indirectly by external systems. Instead of needing named user licenses for those external users, companies can opt to license the documents via an engine metric.
This has been SAP’s response to the indirect usage challenge and shows how user and engine licensing can interplay, sometimes substituting one for the other to achieve compliance.
Best Practices
- License Inventory: Maintain an inventory of all named user licenses (by type and how many are in use vs purchased) and all engine licenses (with their metric limits and current consumption). This serves as your baseline.
- Align IT and Business: Ensure IT license managers collaborate with business process owners. For example, if a sales module is licensed by orders, the sales operations team should regularly feed usage data to IT.
- Optimize License Assignments: Periodically review whether users have the appropriate license types. Tools or services that analyze usage patterns can suggest whether some users could be downgraded to a cheaper license type.
- Contract Clarity: Ensure you understand each metric’s definition in your SAP contract. Sometimes metrics have specific inclusions or exclusions (e.g., “employees” might exclude contractors in some definitions, or “orders” might exclude quotes). Clear definitions prevent disputes later.
- Plan for Changes: If you anticipate changes (like a big increase in workforce or transactions), engage SAP early to adjust licenses. It’s better to negotiate the expansion of an engine license before an audit finds you over the limit.
