SAP Industry Solutions Licensing

SAP Industry Solutions Licensing

Introduction:
SAP offers a range of industry-specific solutions (often known as SAP Industry Solutions) designed to extend its core S/4HANA ERP for specialized sector requirements.

Unlike standard S/4HANA modules, which provide broad, generic business functionality, these industry solutions deliver tailored capabilities for particular industries—from retail merchandise management to utility billing or oilfield operations.

They enable organizations in sectors such as Retail, Utilities, Oil and Gas, Healthcare, and Aerospace and Defense (among others) to manage industry-specific processes natively within their SAP environment.

However, with this specialized functionality comes distinct licensing considerations.

This article explains SAP’s Industry Solutions, how they differ from standard modules, how they are licensed, and how they interact with S/4HANA’s core and other SAP offerings.

We also provide practical guidance—including examples and common pitfalls—to help CIOs, IT licensing managers, and procurement leaders effectively manage these licenses.

What Are SAP Industry Solutions?

SAP Industry Solutions (often abbreviated as SAP IS) are add-on modules or extensions to SAP’s ERP, designed for the unique processes and requirements of specific industries.

Historically, under SAP ECC (ERP Central Component), these came as separate solution sets (branded as SAP IS-Retail, SAP IS-Utilities, SAP IS-Oil & Gas, SAP IS-Healthcare, SAP IS-A&D, etc.), which could be activated to provide industry-specific functionality on top of the core ERP.

In the S/4HANA era, many industry solution capabilities have been technically integrated into the S/4HANA core product, but they remain distinct in terms of licensing and scope.

Key differences between standard S/4HANA modules and industry solutions include:

• Industry-Specific Functionality: Standard S/4HANA modules (such as Finance, Sales, and Procurement) address generic business processes applicable across various industries. In contrast, industry solutions deliver specialized functions (e.g., retail assortment planning, utility meter reading, oil well production accounting, and hospital patient management) that are not covered by the generic modules.
• Add-On Nature: Industry solutions often require activating special business functions or installing additional components. They extend or enhance core modules to handle industry nuances (for example, IS-Utilities extends core Finance and Customer Management to handle utility billing cycles).
• Separate Product Codes: SAP typically treats industry solutions as separate products or extensions on its price list. Even if they run on the same S/4HANA system, they typically have their licensing line items and metrics separate from the base S/4HANA Enterprise Management license.
• Specialized Updates: Some industry solutions follow their release cycles or are industry-focused versions of S/4HANA (for example, SAP S/4HANA Retail for Merchandise Management is a variant of S/4HANA with retail-specific features). SAP’s development roadmap often includes industry-specific enhancements delivered in these solutions.

In summary, SAP Industry Solutions enable SAP to tailor its ERP for various verticals, ensuring that, for example, a retail company or a utility provider can utilize SAP with industry-best-practice processes out of the box. Next, we examine examples of these solutions and what they entail.

Examples of SAP Industry Solutions

Below are some prominent SAP Industry Solutions and the industries they serve:

• SAP IS-Retail: Designed for the retail industry, this solution provides functionality for merchandise category management, pricing, promotions, store operations, and supply chain processes tailored to retail (like distribution centre and store replenishment). It is now available as SAP S/4HANA Retail for Merchandise Management, integrating retail-specific data objects (articles, sites) and processes into S/4HANA.
• SAP IS-Utilities (IS-U): Tailored for utilities companies (energy, water, gas providers), IS-U offers capabilities for customer service, billing and invoicing, device management (meters), energy data management, and contract accounting specific to utilities. This enables handling high-volume consumer billing, rate tariffs, and regulatory reporting required in the utilities sector.
• SAP IS-Oil & Gas: Built for the oil and gas industry, this set of solutions supports both upstream operations (exploration & production) and downstream operations (refining, distribution, trading). For example, it includes modules for hydrocarbon product management, upstream project management, revenue distribution, and workbenches for traders and schedulers to support commodity trading logistics.
• SAP IS-Healthcare: Developed for the healthcare sector (hospitals and clinical providers), this solution (also known as SAP for Healthcare) supports hospital administrative processes such as patient management, admissions, discharges and transfers, billing for medical services, and integration with clinical systems (SAP’s IS-H component can work with partner hospital systems like i.s.h.med). It extends core ERP to manage patient master data and healthcare-specific billing, which are critical in a hospital environment.
• SAP IS-Aerospace & Defense (A&D): Aimed at aerospace manufacturers, defense contractors, and related industries, SAP’s A&D solution (part of SAP’s Discrete Industries portfolio) provides functionality for complex manufacturing projects, configuration management for aircraft or defense systems, maintenance repair and overhaul (MRO) processes, and compliance with defense regulations. It builds on core logistics and project systems to handle lengthy production cycles, sophisticated quality control, and product lifecycle management required in the aerospace and defense (A&D) sector.
• Other Industry Solutions: SAP also offers industry-specific solutions for many other sectors, such as Automotive (handling vehicle management, dealer supply chain, and VIN-specific processes), Banking (core banking processes and banking services), Insurance (policy management, claims processing), Public Sector (tax and revenue management, social services), Consumer Products, Manufacturing, Engineering & Construction, and more. Each comes with specialized capabilities aligned to that industry’s needs.

These examples demonstrate how SAP provides tailored functionality for industries with distinct needs.

Importantly, each solution may be considered a separate component in an SAP deployment and, therefore, may carry separate licensing requirements, which we will explore next.

Licensing Models for SAP Industry Solutions

Licensing SAP Industry Solutions involves a combination of user- and package-based licenses tied to industry metrics.

Understanding these license types is crucial:

• Named User Licenses: Like standard SAP ERP, every user accessing an SAP industry solution requires a named-user license. Users are categorized (e.g., Professional, Limited Professional, Employee Self-Service, etc.) based on their level of access. Named user licensing forms the foundation – typically, industry solutions are not licensed solely by users, but user licenses cannot be ignored. For instance, if a utility company has call centre agents using SAP IS-U for customer service and billing, each agent requires an appropriate named user license (such as SAP Customer Professional or a similar license) and the solution’s engine license. User licenses are generally consistent across SAP, meaning the same user license can entitle a user to access multiple modules for which they are authorized. Still, the industry solution usually has an additional cost component beyond user counts.
• Package/Engine Licenses: Industry solutions typically include what SAP refers to as “package” or “engine” licenses. These are licenses based on a specific usage metric or volume rather than per-user. In other words, the right to use the industry-specific functionality is tied to an objective measure of activity or capacity in that industry domain. SAP has hundreds of metrics defined across its price list, and industry solutions heavily use them. For example, a retail engine might be licensed by the number of retail stores or point-of-sale (POS) locations the system manages. A solution for the Oil & Gas (downstream) industry might be licensed based on the annual volume of oil throughput (barrels processed per year) or the number of wells in an upstream scenario. A Utilities solution could utilize a metric such as the number of active customer contracts or meter installations being billed. Similarly, an Aerospace & Defense extension might be tied to the number of manufacturing projects or equipment assets managed in the system. These engine metrics align the cost of the software with the scale of the business operations – essentially, the larger the operation (in that metric), the higher the license cost.
• Full Usage Equivalents (FUE): In recent years, SAP introduced the FUE concept, especially for S/4HANA subscription licensing (including RISE with SAP and S/4HANA Cloud offerings). FUE stands for Full User Equivalent – a sort of credit system aggregating different types of user licenses into a single metric for contract simplicity. For instance, instead of buying 100 Professional and 200 Limited user licenses separately, a contract might specify a total of 140 FUEs, where 1 Professional user might count as 1 FUE and 1 Limited user as 0.2 FUE, and so on. In theory, FUE-based licensing can cover the core S/4HANA usage, including standard modules. However, it’s essential to note that FUE counts often do not fully encompass industry solution components – they may still require separate engine metrics or additional licenses. Depending on the contract, some industry functionality might be included or discounted if you have a high FUE subscription. Still, specialized modules (e.g., Utilities or Retail extensions) typically remain add-ons. CIOs should clarify with SAP how any industry engines factor into a FUE-based S/4HANA deal (in some cases, SAP might bundle certain industry capabilities in an all-inclusive deal, but otherwise, they’ll be separate line items even in an FUE model).
• License Metrics Examples: To illustrate, SAP’s price list defines metrics such as the number of stores, contracts, barrels of oil, patients, revenue, etc., depending on the solution. Suppose a company licenses the SAP Customer Activity Repository (CAR) (often used in Retail). In that case, SAP might charge based on the data volume (transactions) in the repository and the number of retail sites integrated. A utility company using SAP S/4HANA Utilities might pay based on a band of how many million customer records are managed in the system. These metrics are usually tiered – e.g., a base fee for up to X units, followed by higher tiers for additional units. It differs from a straightforward per-user cost; it requires understanding one’s business volumes.
• Perpetual vs. Subscription: SAP offers most of these solutions under traditional perpetual licenses (a one-time license fee, plus annual maintenance) or subscription licenses (as part of cloud offerings or time-bound term licenses on-premise). For on-premise S/4HANA, many customers still use perpetual licensing for industry solutions, whereas SAP’s cloud (or RISE) deals would include them in the subscription. The underlying metric (users, engines) still applies regardless of the commercial model.

How Industry Solution Licensing Differs from Standard Modules:

In standard S/4HANA Enterprise Management, a lot of functionality (finance, logistics, basic HR, etc.) is covered once you have user licenses for your employees.

With industry solutions, simply having those user licenses is not sufficient – you must also license the industry engine. The industry engine license gives you the legal right to use those specialized transactions and data objects.

Technically, if the software is installed, you may be able to view or execute some industry transactions; however, without the proper license, your usage is not compliant.

This is a critical point: industry modules often need a specific license key or contract provision to be legally usable.

To summarize, licensing for industry solutions employs a layered approach: Named users cover the individuals using the system. In contrast, industry engine metrics encompass the industry functionality based on the extent of your usage.

S/4HANA’s newer licensing models (like FUE) aim to simplify user counting but do not eliminate the need to account for industry-specific usage.

Next, we will discuss how these industry modules coexist with the S/4HANA core and other SAP products.

Interaction with S/4HANA Core and LoB Solutions

One common point of confusion is how industry solutions relate to the main S/4HANA core (sometimes called “digital core” or S/4HANA Enterprise Management) and to SAP’s Line-of-Business (LoB) solutions (such as SAP’s cloud products for procurement, HR, etc.).

Integration with S/4HANA Core:

Regarding technology, most industry solutions are now integrated into the S/4HANA core codebase. SAP has merged many industry-specific enhancements into the core product as optional components.

This means that when you install S/4HANA, you often have the technical ability to activate industry business functions without needing a separate software installation.

For example, S/4HANA includes retail and fashion industry functionality at its core (which can be activated for retail deployment) and similarly includes utilities-specific components.

However, technical availability does not equal license entitlement. Because the software for IS-Retail is present in your S/4 system, you are not automatically allowed to use it unless you have included it in your SAP license agreement.

In practice, moving from ECC to S/4HANA doesn’t “magically” make previously licensed industry solutions free – companies must still ensure they have the contractual rights to those industry functions in S/4HANA.

SAP has provided Compatibility Packs for certain industry and LoB solutions during the transition to S/4HANA.

A compatibility pack is a temporary usage right that allows existing customers to continue using an older SAP solution in the S/4HANA environment until SAP delivers a true S/4 replacement.

For instance, if some industry functionality wasn’t yet natively available in early S/4 releases, SAP granted the customer permission to run the ECC version under their S/4 license for a limited time (generally until the end of 2025).

This meant no additional license fee for that interim period. However, these compatibility usage rights are time-bound.

As SAP delivers native S/4HANA versions of industry solutions, customers must transition off compatibility packs and properly license the S/4HANA-native solution (or an alternative).

CIOS needs to check if any of their industry solution usage is via a compatibility pack and note the expiration date to avoid compliance issues when the grace period ends.

Interaction with LoB Solutions:

SAP’s LoB solutions (such as SAP SuccessFactors for HR, SAP Ariba for procurement, SAP Customer Experience (CX) for commerce and CRM, etc.) are separate products that typically integrate with S/4HANA but have their licensing (often subscription-based).

Industry solutions typically reside within the S/4HANA environment rather than as separate cloud services (although SAP is expanding its industry cloud offerings shortly). For example, SAP IS-Utilities includes customer care and billing within the S/4 system.

In contrast, an external LoB solution, such as SAP CRM (now SAP CX) or Salesforce, would interface with customer data.

From a licensing perspective, implementing an industry solution does not automatically cover any LoB product – those must be licensed separately.

Conversely, having a LoB cloud solution doesn’t cover the on-premise industry engine either. They are complementary: an energy company might use IS-Utilities in S/4 for billing and SAP’s cloud platform for asset analytics; each requires its own license.

It’s worth noting that SAP is moving toward an “Industry Cloud” strategy, where certain specialized capabilities (especially analytics, machine learning, or collaboration features for industries) are delivered as cloud services that augment the core S/4HANA.

Examples include the SAP Asset Intelligence Network for sharing asset data in manufacturing and SAP Rural Sourcing Management for the agribusiness sector.

These are sold as cloud subscriptions separate from the S/4HANA license.

This hybrid landscape means organizations may manage traditional on-premises licenses for core and industry modules, as well as subscriptions for new industry cloud applications. Ensuring that these are all accounted for is part of the licensing challenge.

In summary, industry modules interact functionally with the S/4HANA core (often installed within the same system and integrate with core finance, logistics, etc.), but they remain distinct commercially.

Companies must explicitly license them in addition to the core S/4HANA license. And if you’re also using SAP’s LoB or industry cloud solutions, those are additional pieces of the puzzle, each with its contract.

Industry-Specific Licensing Considerations

Every industry solution comes with its licensing nuances.

Below, we highlight considerations and common metrics for some key industries:

Retail Industry (SAP IS-Retail)

Retailers using SAP will leverage S/4HANA Retail for Merchandise Management (the S/4 successor to IS-Retail) alongside related components like Customer Activity Repository (CAR) and possibly SAP’s Fashion Management (if in the apparel business).

Key licensing points include:

• Merchandise Management Core: The core retail ERP functions (such as assortment management and store inventory) are licensed as an engine on top of S/4HANA. SAP often licenses retail solutions based on the number of retail locations (stores) or the number of integrated POS terminals. Large retailers must be mindful that every new store they open might require an increase in licensed store count.
• Customer Activity Repository (CAR): The CAR is a platform that stores omnichannel transaction data for analytics purposes, such as demand forecasting and real-time inventory management. CAR typically has its license metric, often tied to transaction or data volume, and possibly the number of stores feeding data. Retailers implementing CAR to support in-store and online analytics should factor these costs into their decision-making.
• Omnichannel and POS Integration: If a retailer integrates multiple point-of-sale systems or e-commerce channels, indirect usage (documents created in SAP from external sales channels) may trigger SAP’s Digital Access licensing (document-based licensing for indirect use). Retail is one sector where sales orders may originate outside SAP (e.g., cash register or web store) and then flow into S/4HANA. Companies must address this either via SAP’s Digital Access licenses or by ensuring that those systems’ interactions are covered contractually.
• Seasonal Users: Retailers often have a fluctuating workforce (for example, more users during holiday seasons). Named user licenses should be assigned carefully—perhaps using lesser license types for basic tasks or a worker user type—to optimize cost. The FUE model can sometimes help treat part-time or occasional users in an aggregated form.
• Industry Extensions: Retailers in fashion or grocery might use further extensions (SAP for Fashion, SAP Dairy Management, etc.). Each comes with additional license considerations. For example, SAP’s fashion add-on (for size/colour matrices and fashion-specific processes) was historically separate.

Licensing Tip for Retail: Determine a clear count of the stores, POS systems, and channels that require licensing.

Negotiate a buffer if possible (e.g., license a slightly higher number of stores than you currently have if you plan to open more to avoid mid-term additions).

And keep an eye on those indirect usage documents from external sales—consider SAP’s document licensing or include an agreed-upon allowance for such documents in your contract.

Utilities Industry (SAP IS-Utilities)

Utilities (electric, gas, and water providers) typically use SAP for Utilities to handle billing and customer care (sometimes known as SAP IS-U and the newer S/4HANA Utilities).

Key licensing considerations:

• Customer/Contract Metric: The primary metric for IS-Utilities is often the number of active customer contracts or meter points managed in the system. SAP charges more for a utility serving 5 million customers than one serving 500,000. This metric aligns with the scale of the utility’s consumer base.
• Tiered Volume Licensing: Typically, the contract will specify ranges (for example, up to 1 million contracts, 1–5 million, etc.), each with a corresponding price. As the utility expands its customer base (either organically or through acquisition), it may need to migrate to a higher band, triggering a license upgrade. This makes growth planning and M&A licensing impacts a vital consideration.
• Device Management: Some utility-specific components (like advanced meter infrastructure integration or energy data management) might have separate metrics (for instance, the number of smart meters managed). These are typically add-ons to the core IS-U billing license.
• User Licenses for Utilities: Different utility roles (call centre reps, field service technicians, billing clerks) will require appropriate user licenses. Call center or billing staff often need Professional-level licenses as they perform complex transactions. Field technicians who receive work orders on a mobile device may use a lighter license category (or even a specialized SAP Work Manager user license, if that solution is used).
• SAP CRM vs S/4 Customer Management: In the past, utilities often used SAP CRM as a front-end for customer interactions. SAP has since provided SAP S/4HANA for Customer Management (an add-on to S/4 that replaces CRM for utilities). Adopting that is another component that is licensed (though it may be bundled with the IS-U package, depending on SAP’s offering).
• Regulatory Reporting and Analytics: Ensure that any extra tools (for regulatory compliance or consumption analytics) are accounted for. Some may be part of the base, and others (like SAP BW/4HANA for Utility analytics) would be separate.

Licensing tip for Utilities: Monitor your customer numbers and meter counts closely. Implement a process (with your billing department) to regularly report how many active contracts you have relative to your licensed entitlement.

This way, if you approach a threshold, you can plan a contract adjustment proactively rather than face an audit surprise.

Also consider long-term energy transition changes – e.g., if you start offering new services (solar installations, EV charging), check if those processes introduce new SAP functionality that isn’t covered under your existing license.

Oil & Gas Industry (SAP IS-Oil & Gas)

Oil and Gas companies leverage SAP’s industry solution to manage complex production and distribution processes.

Key licensing aspects:

• Upstream Operations: For exploration and production (E&P), SAP’s solutions might include modules for production sharing, revenue accounting (often known as PRA), and Joint Venture Accounting. Licensing for upstream components can be tied to several wells or fields managed, or potentially the barrels of oil equivalent (BOE) produced per year, if based on production volume. If new wells are drilled or acquired, the metric count goes up.
• Downstream Operations: For refining and distribution, SAP may be licensed based on throughput volume (e.g., the number of barrels refined or transported annually) or by the number of distribution terminals or petroleum depots managed in the system. For example, if an implementation covers three refineries and 10 distribution terminals, the license might be based on those numbers.
• Trading and Scheduling: The Oil & Gas solution includes specialized tools, such as the Trader’s and Scheduler’s Workbench (TSW), for managing commodity trading and logistics. Depending on SAP’s packaging, these could be licensed by several “traders” (users) or simply included as part of the overall engine metric.
• Downstream Retail (Secondary Distribution): If the company operates gas stations or retail fuel outlets, there may be an overlap with retail licensing considerations (e.g., the number of gas stations as “stores”). SAP has modules for secondary distribution (fuel delivery to stations), which may use their metric or be part of an industry package.
• Joint Venture Accounting: This is critical to upstream finance (managing shared costs/revenues among exploration partners). If you use it, ensure your SAP license covers the JVA component. Sometimes, it’s bundled with the core IS-Oil license; however, please clarify this in your agreement.
• Growth and Expansion: Oil and gas operations can change with discoveries or acquisitions. Much like utilities, licensing must scale. For example, acquiring a new oil field means more wells and higher output; the SAP contract needs to be updated accordingly. Monitor usage as business units expand or merge.

Licensing tip for Oil and gas: Negotiate flexible volume tiers if possible. Oil production volumes can fluctuate with market and operational factors.

If you have a down year, you don’t want to be locked into paying for peak capacity you aren’t using. If you have an unexpectedly good year, you want cost predictability.

If you anticipate new projects coming online, structure license volume bands in the contract to accommodate that growth without a punitive price jump.

And maintain good records of production volumes or well counts as part of your annual license compliance process, so there are no surprises.

Healthcare Industry (SAP IS-Healthcare)

Healthcare providers (like hospital networks) that use SAP often implement SAP for Healthcare (which includes patient accounting and related modules).

Noteworthy licensing points:

• Patient Volume Metrics: Healthcare solutions may be licensed based on metrics such as the number of hospital beds, patients (or admissions) per year, or similar measures. The idea is to align costs with the size of the hospital or network. A larger hospital with 1000 beds might pay more than a clinic with 100 beds, as it handles more patients through the system.
• Clinical vs Administrative Split: SAP’s healthcare offering primarily covers administrative (patient admin and billing) processes, not the clinical electronic medical record. If a hospital uses SAP with a clinical system (like Cerner or i.s.h.med), the SAP licensing covers only the ERP side. If additional SAP modules are used (for example, HR for managing hospital staff or finance for controlling), those fall under normal user licensing (not a healthcare-specific license).
• Public Sector Healthcare: Some public healthcare providers leverage SAP’s public sector industry solution (for example, for managing grants or public health programs) in conjunction. If applicable, these solutions may introduce additional metrics (such as population served or cases managed), but they are often part of separate SAP offerings for the public sector.
• Transition in SAP’s Strategy: in recent years, SAP has partnered more with dedicated healthcare IT providers rather than heavily investing in new SAP Healthcare modules. For instance, SAP signalled that S/4HANA might not get a full native hospital management module and that SAP would rely on partners for clinical systems. For licensing, this means that existing ECC IS-H customers can continue on compatibility licenses in S/4HANA, but new customers may consider third-party healthcare solutions integrated with SAP. If you’re in healthcare, clarify SAP’s roadmap and ensure you’re licensing the components that SAP will support in the long term.
• Regulatory Compliance Modules: Ensure that any necessary compliance or data privacy tools are properly licensed. Healthcare data is highly regulated; therefore, include these considerations if you use SAP add-ons for data anonymization, archiving, or consent management. These might not be healthcare-specific (e.g., SAP ILM for data retention applies to all industries), but are crucial in healthcare.

Licensing Tip for Healthcare: Align SAP licensing with your key hospital statistics. If beds are licensed, be clear on what counts as a “bed” (e.g., staffed beds, bassinets, etc.). If by patient count, please clarify the period (e.g., per year, concurrent, etc.).

When negotiating, if your hospital or network is expanding, factor the future bed or patient count into the deal to get a better rate upfront.

Also, leverage any user group insights – the healthcare SAP community is smaller, and SAP may offer special considerations or programs if you ask.

Aerospace & Defense Industry (SAP for A&D)

Aerospace and defense manufacturers often utilize SAP’s A&D solution, which is part of the broader suite of discrete manufacturing solutions.

Key points:

• Project/Unit-Based Metrics: A&D manufacturing often runs on a project or program basis (e.g., building several aircraft or defence systems under a contract). SAP’s licensing here may not be as clearly volume-defined as in other industries, but you may encounter metrics such as the number of end items (units) managed or the number of active projects in the system. SAP’s Project Systems module is part of the core ERP, but some A&D extensions (like advanced project budgeting or scheduling tools) could be licensed separately by project count or value.
• Maintenance and Asset Management: Defense organizations doing MRO (Maintenance, Repair, and Overhaul) for fleets might use specialized SAP modules (for complex depot maintenance or configured asset structures). Check if these metrics are engine-specific—possibly the number of equipment assets or the number of maintenance plants or sites covered. For example, managing 100 aircraft in SAP might carry different licensing considerations than managing 10.
• Export Compliance and Security: A&D firms must manage export-controlled data (ITAR regulations in the U.S., for instance). SAP provides tools for compliance (like SAP Global Trade Services). While GTS is a cross-industry product, it’s highly relevant in A&D. Remember that GTS is licensed by transaction or trade volume (documents), separate from your A&D solution. It needs to be included if you use it for defence export compliance.
• Use of MES/PEO: Many A&D companies integrate shop-floor Manufacturing Execution Systems or use SAP’s Production Engineering & Operations (PEO) module for detailed production control. Several production lines or work centres might be licensed by PEO (from SAP’s acquisition of Visiprise) and managed. It’s essential to consider all supplementary components when planning your license needs – they may require separate licenses beyond the core A&D package.
• Long Product Lifecycles: A&D products may be in service for decades. This has two implications: ensure your SAP license covers long-term data access (you don’t want data to become unlicensed if a project ends, but data needs to be retained). Two, consider the total cost of ownership for these industry solutions over a long horizon – sometimes subscription models might become costlier over 10–20 years than a perpetual license. Work with SAP to structure a deal that accounts for the long lifecycle (for instance, a perpetual license with standard maintenance might make more sense for a 20-year support requirement of an aircraft program).

Licensing tip for A&D:

Map out the scope of your SAP usage – from engineering to manufacturing to maintenance – and identify which modules are core vs. add-on. Where functionality overlaps with core S/4HANA, confirm if the core suffices or if the industry version adds needed capabilities (justifying its cost).

For each add-on (e.g., SAP PEO for manufacturing execution or SAP GTS for trade compliance), negotiate metrics that match how you operate (if you do low-volume,

high-complexity production, avoid metrics designed for high-volume scenarios).

Also, the plan is to collaborate with partners (suppliers and maintainers). If they need access to your SAP system, factor that into your named user or indirect usage licensing strategy.

Common Licensing Pitfalls and Challenges

• Assuming “Built-In” Means Included: Don’t assume that because an industry solution module appears available in your S/4HANA system, it is automatically covered under your license. Many industry functions still require explicit licensing, even if technically present. Always verify that your contract covers any industry-specific transactions you plan to use; otherwise, an audit could flag unlicensed use of those features.
• Unmonitored Usage Metrics: Industry-specific engine metrics, such as customer counts or throughput, are often not automatically tracked by SAP, requiring you to report them. If you aren’t actively measuring your usage against your licensed metric limits, you risk exceeding them unknowingly. Growing businesses (e.g., opening new stores or adding customers) can quickly surpass license thresholds. Without proper monitoring, the result may be a costly true-up when SAP eventually detects the overuse.
• User License Misclassification: In complex environments, it’s easy to assign the wrong user license types (for example, giving a basic user a higher “Professional” license or vice versa). This can lead to either inflated costs or compliance gaps. In industry scenarios, ensure that roles such as casual users, heavy power users, and external partners are correctly licensed. In an FUE model, misclassifying many users can cause you to exceed your FUE allotment once SAP recalculates during an audit.
• Indirect Access Surprises: Industry processes often involve external systems (such as smart devices, customer portals, or supplier systems) that create data in SAP. Be wary of indirect access – for instance, a sensor network that triggers thousands of maintenance notifications in SAP Plant Maintenance or a web storefront feeding orders into SAP IS-Retail. If these are not covered by named user licenses, you should consider SAP’s Digital Access (document-based licensing) or another legal mechanism. Indirect use is a common area for surprise audit findings if left unaddressed.
• Poor License Negotiation: A common pitfall is accepting SAP’s first offer on industry solution licensing without alignment with your specific circumstances. If you don’t negotiate, you might have metrics definitions or volume bands that don’t align with your business needs (or pay for unused capacity). For example, you may be paying for an Oil & Gas volume tier that is far above your actual production, or not have price protections as your usage increases. Always negotiate the contract to clarify metrics and include flexibility for growth or changes.
• Ignoring Migration Implications: When transitioning from legacy SAP ERP to S/4HANA, don’t ignore the need to re-evaluate industry solution licenses. Some customers assume that previously licensed industry functionality will be grandfathered into S/4, but you may need to license the S/4 version of that solution anew. Failing to plan for this can result in unlicensed functionality in the new system or lead to unexpected costs later. Work with SAP during migration to ensure all critical industry modules are accounted for under your S/4HANA agreement.

Recommendations

To effectively manage SAP industry solution licenses and avoid unnecessary costs or compliance issues, consider the following actions:

• Audit and Baseline Current Usage: Begin with a comprehensive audit of your existing SAP licenses and usage. Inventory all named users and their license types, and catalogue all industry solution engines you have licensed (including their metrics and allowed quantities). Establish a baseline of current usage for each metric (e.g., current number of customers, stores, barrels, etc.) against what you’re entitled to.
• Monitor Continuously and Update Proactively: Implement a regular review process (e.g., quarterly) to compare actual usage with licensed metrics. Track seasonal or growth-based fluctuations in your business. Proactively adjust your SAP licenses when nearing metric limits—it’s better to negotiate an expansion with SAP ahead of time than to be caught in non-compliance after the fact.
• Right-Size User Licensing: Ensure each user in the system has the appropriate type of SAP-named user license for their role. Avoid “license inflation” by giving users higher-access licenses than necessary, and prevent under-licensing. Periodically recertify user roles to confirm that, for example, only those truly performing advanced tasks have a Professional (or “Advanced”) license. In an FUE model, double-check that your user classifications (e.g., Core vs. Advanced users) accurately reflect their usage to ensure compliance with your contracted FUE count.
• Track Engine Metrics Diligently: Assign responsibility for tracking the specific industry engine metrics. This may involve building reports or utilizing SAP tools to regularly track metrics such as the number of active contracts, total throughput, or other key measurements. Maintain internal records of these figures and the calculations used to derive them. This helps during an audit and allows you to anticipate when growth may require additional licenses. Tie this tracking into business planning – for instance, if a sales forecast indicates 20 new stores next year, budget the SAP license increase accordingly.
• Negotiate with Foresight: When contracting with SAP (or during your next renewal), negotiate terms that take into account your industry-specific needs. If possible, secure price protections or tiered pricing for expected growth (such as discounted rates for the next band of customers or stores). Clarify any ambiguous metric definitions in writing (e.g., what counts as a “user” or “customer” in that metric). Additionally, address future state plans: if you intend to migrate to S/4HANA or the cloud, ensure that there are clauses or conversion credits for the industry solutions. Don’t assume SAP will automatically carry over your rights – get it stipulated in the contract.
• Manage Indirect Usage: Evaluate how external systems and devices interact with your SAP system. If you have scenarios like e-commerce platforms, partner portals, IoT sensors, or mobile apps feeding data into SAP, quantify the documents or transactions generated. Then, decide whether to license these via SAP’s Digital Access (which may simplify compliance for large volumes) or through named users or other means. Address this proactively to prevent large audit findings related to industry processes (like an AMI system feeding millions of meter readings).
• Leverage Expertise and Tools: Utilize the available resources. SAP’s license measurement tools (USMM and LAW reports, and the SAP for Me portal dashboards) can help monitor usage – incorporate them into your IT operations. Consider engaging SAP licensing experts or third-party consultants, especially during significant changes (such as mergers or S/4HANA migrations), to validate that you’re appropriately licensed and to identify optimization opportunities. Staying informed through SAP user groups and industry forums can also alert you to common pitfalls and help you understand how others manage licenses.