SAP License Optimization Through Metrics

SAP License Optimization Through Metrics

• Track Usage Patterns: Identify frequently used features and tools.
• Analyze Transaction Data: Evaluate activities to match license types.
• Monitor User Login Frequency: Recognize inactive users for reallocation.
• Review Audit Logs: Identify overlaps or inconsistencies in licensing.
• Utilize Performance Metrics: Link roles to actual system usage.

SAP License Optimization Through Metrics: A Comprehensive Guide

In today’s rapidly evolving business environment, enterprise software is crucial in streamlining operations, driving productivity, and maintaining competitiveness.

SAP is a leading enterprise resource planning (ERP) software provider that offers comprehensive solutions for diverse business needs. 

However, navigating the complexities of SAP licensing is challenging for many organizations.

This article provides a comprehensive guide to optimizing SAP licenses using effective metrics. It empowers businesses to reduce unnecessary costs, ensure compliance, and maximize the value of their SAP investments.

Understanding SAP License Complexity

SAP licensing is one of the most intricate models in the enterprise software landscape. It encompasses over 3,000 products, 24 user license types, and over 100 engine metrics.

This level of complexity often leaves organizations struggling to align their license inventory with actual usage, resulting in over-licensing, wasted costs, or exposure to compliance risks.

SAP licensing has two core components: named user licenses and engine or package metrics. Understanding and optimizing each component is crucial for effectively managing costs and ensuring compliance.

Named User Licenses

Named user licensing is the foundation of SAP’s licensing structure. It involves several user types, each offering different system access and functionality levels.

• Professional License: The highest cost tier and the default assignment for users whose classification is not defined. This license provides comprehensive system access, including administrative capabilities.
• Limited Professional License: Previously available as a lower-cost option with a defined functional scope, but it has been discontinued for new clients since January 2016.
• Employee License: A cost-effective license option for occasional users who require basic system access with limited functionality.

Engine and Package Metrics

In addition to named user licenses, SAP employs various engine and package licensing metrics.

These metrics can be based on parameters such as:

• Number of employees
• Annual revenue
• Yearly spending volume
• Processing capacity
• Storage volume in gigabytes

Managing these metrics effectively is key to avoiding unexpected costs and optimizing license utilization.

Optimization Strategies for SAP Licensing

Organizations should optimize SAP licenses by combining usage-based classification, authorization-based assessment, compliance management, and continuous monitoring.

These strategies ensure that license assignments align with actual system usage, minimizing underutilization and unnecessary costs.

Usage-Based Classification

One of the most effective strategies for optimizing SAP licenses is classifying users based on their system activity.

Monitoring user activity levels, such as the number of dialog steps performed each month, can help determine the appropriate license type.

• High Activity Users: Users with over 1,000 dialog steps per month typically require a Professional License.
• Low-Activity Users: Users with minimal system usage can be reassigned to a lower-cost Employee License, thereby reducing costs.

Authorization-Based Assessment

With the introduction of USMM 2.0, SAP has shifted towards authorization-based licensing. This approach allows for better alignment between license assignments and actual user permissions.

However, excessive authorization assignments can lead to permanent over-licensing. Therefore, organizations must manage authorizations carefully, ensuring that each user’s role accurately reflects their business requirements.

Compliance Management

Compliance management is essential for minimizing the risks associated with SAP licensing. Effective compliance management involves regular audits, proactive monitoring, and ongoing adjustments to license assignments.

Regular Audits

SAP conducts two main types of audits:

• Annual System Measurements (SLAW): These audits measure all SAP systems to determine license compliance.
• Enhanced License Audits: These are conducted approximately every three years and offer a deeper analysis of license compliance and usage.

Proactive Monitoring

Organizations can implement continuous monitoring to:

• Identify inactive users and reassign or deactivate their licenses.
• Track Remote Function Calls (RFCs) to ensure compliance.
• Monitor engine and package consumption, identifying potential overuse.
• Evaluate indirect access scenarios, which can pose significant compliance risks.

Best Practices for SAP License Optimization

Organizations must follow best practices in user license management, engine optimization, and proactive monitoring to optimize SAP licensing effectively.

These best practices will help organizations achieve maximum value from their SAP investments while maintaining compliance.

User License Management

• Regular Review Cycles: Conduct periodic user roles and permissions reviews to ensure that each license assignment aligns with current job responsibilities. This helps avoid over-licensing and ensures users access only the functionalities they need.
• Usage Analysis: Use monitoring tools to analyze system usage patterns, allowing for informed decisions about potential license downgrades or reassignments.
• Deactivating Inactive Users: Identifying and deactivating users without access can prevent unnecessary license consumption. This is particularly important in organizations with a high rate of employee turnover or changing project roles.

Engine Optimization

• Peak Usage Monitoring: For licensed products, based on metrics like processing capacity or revenue, SAP evaluates usage based on peak values over 12 months. Organizations can optimize engine licenses and avoid unnecessary costs by understanding peak usage patterns.
• Consumption Tracking: Maintain detailed records of engine consumption metrics. This helps predict future requirements, identify opportunities for optimization, and prevent unexpected cost increases.
• Tracking by Metric Type: Since different engines are evaluated based on different metrics, tracking consumption on a metric-by-metric basis is important. For example, storage volume, CPU capacity, or revenue-based metrics may all require distinct strategies for keeping consumption within optimal limits.

Monitoring Indirect Access

Indirect access to SAP systems can be a significant source of compliance risk and unexpected costs.

Indirect access occurs when third-party applications communicate with SAP systems, sometimes requiring additional licenses.

• Identify Potential Indirect Access: Identify all third-party integrations that may access SAP systems indirectly.
• Audit Data Flows: Conduct a thorough review of data flows between SAP and non-SAP systems to determine potential indirect access use cases.
• License Appropriately: Ensure proper licensing for all indirect access points to mitigate compliance risks. This includes having clear documentation of how third-party systems interact with SAP.

Multi-Level Optimization Approach

Optimizing SAP licenses often requires an enterprise-wide strategy considering different business units, subsidiaries, and divisions. A multi-level optimization approach can help balance central oversight with local flexibility.

Enterprise-Wide Strategy

Implementing centralized license measurement standards is essential for large organizations with multiple subsidiaries.

This approach allows for enterprise-wide control while enabling local subsidiaries to make optimization decisions best suited to their specific needs.

• Centralized Policies with Local Adaptation: Create centralized policies that establish the framework for license measurement while allowing local units to adapt based on specific operational needs.
• Unified Reporting: Develop a unified reporting system that aggregates license usage data from all subsidiaries. This data can be used to assess the overall license portfolio and identify areas for potential optimization.

Technical Implementation

Organizations should leverage automation tools that support license management processes. Effective tools can help by:

• Centralizing License Administration: Maintain a single control point for all license management activities, ensuring consistency across the organization.
• Automating Usage Monitoring: Automated systems can more accurately track user activity and system usage, making it more efficient to identify optimization opportunities.
• Generating Compliance Reports: Automated tools can generate compliance reports, giving the organization a clear overview of licensing compliance and areas requiring attention.
• Providing Optimization Recommendations: Advanced tools can also analyze data to provide actionable recommendations for optimizing the license landscape, such as downgrading unused licenses or adjusting engine capacity.

Cost Reduction Opportunities

Reducing SAP licensing costs requires a strategic approach encompassing license portfolio analysis, indirect access management, and forward-looking planning.

License Portfolio Analysis

A thorough assessment of the current license portfolio is a key step towards reducing costs. Organizations should:

• Review License Distribution: Identify licenses that are either unused or underutilized.
• Evaluate License Type Changes: Consider changing users from higher-tier to lower-cost licenses if their access requirements change.
• Consolidate Licenses: Consolidate license requirements to minimize costs and reduce management overhead.
• Right-Sizing License Types: Perform a deep dive analysis to determine whether the licenses assigned to users still match their actual requirements.

Indirect Access Management

Indirect access occurs when third-party applications interact with SAP systems, potentially triggering additional licensing requirements. To manage indirect access:

• Assess Third-Party Integrations: Document all third-party applications that access SAP systems.
• Ensure Proper Coverage: Verify that indirect access is covered under the current licensing agreements.
• Implement Monitoring Solutions: Deploy tools to monitor indirect access scenarios, minimizing non-compliance risk.

Negotiating with SAP

Another cost-reduction strategy involves negotiating directly with SAP. Organizations should approach negotiations well-prepared, with a comprehensive understanding of their usage and requirements.

• Bundle Purchases: Bundling multiple license types or purchasing additional services can sometimes provide leverage for price reductions.
• Migration Discounts: Organizations transitioning to S/4HANA or cloud solutions may have opportunities to negotiate discounts or other favorable terms.
• Leverage Existing Relationships: Use established relationships and historical data to negotiate more favorable terms for ongoing licensing requirements.

Future-Proofing Your SAP License Strategy

Adapting their SAP license strategies becomes increasingly important as organizations move towards digital transformation.

Planning for future requirements, such as S/4HANA migrations and cloud transitions, can help ensure a smooth and cost-effective transition.

Digital Transformation Considerations

• S/4HANA Migration: Organizations migrating to S/4HANA should assess their current license inventory and determine future requirements. Taking advantage of conversion opportunities can help reduce costs and ensure compliance. Understanding the differences between ECC and S/4HANA licensing is crucial to avoid unexpected expenses.
• Cloud Transition Planning: As businesses shift towards cloud-based solutions, understanding their impact on existing license agreements is essential. Organizations should plan for hybrid scenarios and evaluate the implications of SAP’s RISE offerings. Migration to cloud-based SAP services may also introduce new licensing metrics, which require careful evaluation to prevent cost surprises.

Hybrid Scenarios and Licensing Implications

Many organizations are adopting a hybrid approach, utilizing a mix of on-premises and cloud solutions.

This presents unique challenges regarding SAP licensing.

• Evaluate Hybrid Usage Metrics: Determine how SAP measures cloud and on-premises usage metrics to optimize licensing for hybrid deployments.
• Align License Types Across Environments: To avoid duplication or inconsistency in user rights, ensure license types are aligned between cloud and on-premises systems.

Measuring Success in SAP License Optimization

Organizations should track key performance indicators (KPIs) that clearly show cost savings and compliance improvements to gauge the success of SAP license optimization efforts.

Key Performance Indicators

• Cost Reduction: Measure the percentage reduction in licensing costs following optimization efforts.
• Compliance Improvement: Track the reduction in compliance issues or audit findings over time.
• Usage Efficiency: Evaluate the efficiency of license usage, such as the number of users assigned to licenses compared to their actual activity levels.
• License Utilization: Monitor the utilization levels of engine and package licenses to identify any underused assets.
• User Reassignment Rate: Measure the rate at which users are reassigned to lower-cost licenses, reflecting improved optimization.
• Indirect Access Management: Monitor the management of indirect access to identify improvements in mitigating compliance risks.

FAQ: SAP License Optimization Through Metrics

What is the purpose of SAP license metrics?
SAP license metrics help monitor and analyze user activities, ensuring licenses align with system usage and avoiding over-licensing or misallocation.

How do transaction metrics assist in SAP licensing?
Transaction metrics identify user-specific activities, helping assign appropriate license types based on the tasks performed.

Can monitoring inactive users reduce costs?
Identifying inactive users allows reallocation or removal of unnecessary licenses, optimizing resource utilization.

How do audit logs aid in license optimization?
Audit logs provide detailed records of user activities and access patterns, revealing areas for improvement in license assignment.

What tools are available for license optimization?
Several SAP tools, such as License Audit Workbench and third-party solutions, provide user activity and metrics insights.

How often should license metrics be reviewed?
Reviewing metrics quarterly or during major organizational changes is recommended to keep licenses aligned with actual usage.

What data is essential for license optimization?
Key data includes transaction logs, login frequency, role assignments, and audit trail insights to evaluate and adjust licenses effectively.

Can role consolidation help optimize licensing?
Combining similar roles can reduce redundancy, ensuring users have appropriate access without excessive licensing.

What’s the role of system usage patterns in optimization?
Usage patterns reveal which features or modules are frequently accessed, helping allocate cost-effective licenses.

How does automation help in license management?
Automation tools streamline role assignments, adapting license needs as users switch jobs or responsibilities.

Can metrics prevent license compliance issues?
Using metrics ensures adherence to licensing agreements by accurately tracking and managing usage.

How do indirect usage metrics impact licensing?
Indirect usage metrics track third-party or automated interactions with SAP, which is crucial for understanding hidden licensing requirements.

Are there risks in over-licensing?
Over-licensing unnecessarily increases costs; metrics can help avoid this by ensuring licenses match user needs.

Can we identify training needs through metrics?
Metrics may highlight users struggling with specific features, indicating areas where additional training might reduce inefficiencies.

What’s the importance of metrics in growth planning?
Metrics help forecast license needs as the business grows, ensuring scalability without overspending.