SAP Licensing Terminology
- User-based licensing: Charges per user type (Professional, Limited, Developer).
- Modular licensing: Pay for specific SAP modules.
- Indirect access: Charges for third-party systems interacting with SAP.
- Digital access: Fees for document creation or data use in non-SAP apps.
- Perpetual licensing: One-time purchase.
- Subscription licensing: Ongoing payments.
1. Introduction To SAP Licensing Terminology
SAP, one of the world’s leading enterprise software providers, uses a complex licensing framework to distribute access to its suite of powerful tools.
Understanding the key terms related to SAP licensing is critical for businesses to ensure compliance, cost efficiency, and maximize the benefits of SAP solutions.
Managing licenses can be overwhelming and costly without a good grasp of these terms.
This article provides a comprehensive guide to SAP licensing terminology, covering various frequently used terms and concepts.
We will break down the jargon and provide examples to help you understand the nuances of SAP licensing. By the end of this guide, you will be well-equipped to navigate SAP’s licensing landscape effectively.
2. Named User License
A Named User License is one of the most fundamental terms in SAP licensing. It refers to a license assigned to a specific individual authorized to access SAP systems.
- Definition: A Named User License is linked to an individual user, meaning the license cannot be shared among multiple users. Users must have their license, even if they access the system infrequently.
- Example: In a sales department, each sales representative accessing the SAP CRM system must have their Named User License. Even if they only use the system a few times a month, they must have a unique license assigned to them.
- Key Considerations: Named User Licenses are ideal for companies with a stable workforce where each employee consistently requires access to SAP. It ensures that everyone has the proper authorization and role-specific access they need.
Benefits:
- Accountability: Since each license is tied to an individual, there is greater accountability for usage and system access.
- Compliance: Named User Licensing helps ensure compliance with SAP’s policies, as only authorized users access the software.
Challenges:
- Cost Efficiency: Managing costs can become challenging, especially if the organization has a high turnover or many part-time employees who only need intermittent access.
3. Concurrent User License
Concurrent User Licensing refers to a type of licensing where a pool of licenses can be shared by multiple users as long as only a limited number of users access the system simultaneously.
- Definition: Unlike Named User Licenses, concurrent licenses are not tied to specific individuals. Instead, they are shared among users, and only the number of active users matters.
- Example: Imagine a customer support center with 100 employees, but only 40 support agents access the SAP system simultaneously during peak hours. With Concurrent User Licensing, the company would only need 40 licenses.
- Use Cases: This licensing model is particularly useful for environments like call centers, manufacturing facilities, or departments with shift employees.
Benefits:
- Cost Savings: This model can reduce costs for companies that have many employees who do not need constant, individual access to SAP systems.
- Flexible Usage: It offers flexibility as individuals can use the same license at different times.
Challenges:
- Monitoring: The company needs to monitor peak usage to ensure they do not exceed the number of available licenses, which could lead to non-compliance.
4. Engine or Package Licensing
Engine Licensing, or Package Licensing, involves licensing specific SAP software modules based on metrics like data volume, transactions, or system usage.
- Definition: Engine Licensing involves using specific engines or functionalities, such as SAP Business Warehouse (BW), SAP HANA, or SAP CRM. The license cost depends on various factors, such as the number of transactions or the database size.
- Example: A logistics company using SAP Extended Warehouse Management (EWM) might pay based on the number of orders processed through the system. The more orders they process, the more they pay for the engine license.
- Usage Metrics: These licenses can be measured based on metrics like CPU cores, GB of memory used, number of users, or document creation.
Benefits:
- Customizable: Companies pay only for the specific functionalities they need, which can result in significant savings for specialized use cases.
- Scalability: Engine Licensing offers scalability as companies can increase the metric size (e.g., more data or transactions) as their business grows.
Challenges:
- Complexity: Tracking engine metrics and staying within agreed-upon limits can be complex, requiring precise monitoring of system usage.
- Unexpected Costs: As business activity fluctuates, costs may rise unexpectedly if system usage metrics exceed initial estimates.
5. Indirect Access
Indirect Access is among the most debated and often misunderstood concepts in SAP licensing. It occurs when third-party applications interact with SAP software, potentially triggering additional licensing requirements.
- Definition: Indirect access refers to scenarios where a non-SAP application accesses the SAP system or its data. This type of access may require a separate license for each user or system that interacts indirectly with SAP.
- Example: A company using a third-party e-commerce platform might have order information flow from the e-commerce software into the SAP ERP system to update inventory and create sales orders. Although the users are not directly logging into SAP, they are still indirectly interacting with it, thus requiring appropriate licensing.
- Digital Access: SAP introduced the Digital Access model to simplify indirect access. Instead of licensing users, it licenses based on the number of documents processed, such as sales orders or invoices.
Benefits of Digital Access:
- Simplified Pricing: Businesses pay for document usage rather than trying to calculate indirect user access, providing a more predictable cost structure.
- Clarity: This approach reduces ambiguity around what constitutes indirect access and how it should be licensed.
Challenges:
- Complex Audit Process: Indirect access licensing can be challenging to monitor, making audits time-consuming and potentially costly.
- Integration Costs: Businesses with many third-party integrations may find indirect access licensing a significant expense.
6. Digital Access
The Digital Access Licensing Model was introduced to simplify SAP’s licensing for scenarios where third-party systems create, read, or modify documents in SAP systems.
- Definition: Digital Access licenses are calculated based on the number of specific documents generated in the SAP system. Common document types include Sales Orders, Invoices, and Purchase Orders.
- Example: If an external e-commerce system creates 10,000 sales orders in SAP, the company must license 10,000 sales order documents under Digital Access.
- Document Types: Some of the main document types include:
- Sales Orders
- Purchase Orders
- Invoices
- Service Orders
Benefits:
- Transparent Pricing: Unlike indirect access, Digital Access provides transparency by basing costs on document volumes.
- Scalability: Costs are more predictable, allowing companies to scale their integrations without the risk of indirect user charges.
Challenges:
- Complexity in Counting Documents: Companies need systems to accurately track the number of documents created, which can sometimes lead to administrative overhead.
7. License Metrics
License Metrics determine the cost and structure of SAP licenses based on specific, measurable factors. These metrics can vary significantly based on the type of license being utilized.
- User-Based Metrics: Metrics that count the number of users accessing the system. This is most commonly used for Named User Licenses.
- Example: A company with 500 SAP users would be billed based on the number of users assigned licenses and the type of licenses they use.
- Engine Metrics: These metrics are used for specific SAP modules or functionalities. Metrics might include the number of CPU cores used or the volume of data processed.
- Example: A company running SAP BW might have its licensing costs determined by the number of reports generated and the processing resources consumed.
- Transaction Metrics: These are based on the number of transactions processed by the SAP system, such as sales or purchase orders.
- Example: A manufacturing company might be billed based on the number of production orders processed each month, linking license costs directly to operational activities.
Benefits:
- Aligning Costs with Usage: Licensing metrics ensure that costs scale with system usage, making managing budgets for SAP licenses easier.
- Flexibility: Different metrics allow companies to choose a licensing structure that best suits their operational requirements.
Challenges:
- Tracking Usage: Companies need to have tools and processes in place to track system usage accurately. Failing to do so can lead to non-compliance or unexpected costs.
8. SAP License Types
SAP offers various license types, each catering to different business needs and usage levels. Understanding these license types is crucial for optimizing cost and ensuring appropriate user access.
- Developer License: This license is intended for users developing and customizing SAP software. Developers need full access to the system to create custom reports, forms, and applications.
- Professional License: This is the most comprehensive user license, offering full access to the system. It suits managers, analysts, and those working across multiple SAP modules.
- Limited Professional License: This license is restricted to users who only need access to specific SAP system parts. It offers more limited capabilities than a Professional License but is less expensive.
- Employee License: This license type is ideal for casual users who only need to perform specific, limited tasks, such as data entry or viewing reports. It is more affordable and suitable for a broader group of employees.
Benefits of Understanding License Types:
- Optimizing Costs: Assigning the correct license type to each user helps in reducing unnecessary costs. Over-licensing can lead to overspending, while under-licensing can lead to non-compliance.
- Ensuring Compliance: Properly matching license types with user needs ensures compliance with SAP licensing agreements, avoiding potential legal and financial consequences.
9. License Management Tools
Effective management of SAP licenses is key to cost control and compliance. License management tools help organizations track usage, optimize license allocation, and ensure they are prepared for SAP audits.
- Software Asset Management (SAM) Tools: These tools help companies manage their SAP licenses by tracking how each license is used, monitoring user activity, and providing insights into opportunities to reduce costs.
- Example: Snow Software or Flexera are popular SAM tools that allow companies to track SAP license usage and identify underutilized licenses.
Benefits:
- Cost Optimization: SAM tools can identify licenses underutilized or assigned to inactive users, enabling reallocation and cost savings.
- Audit Preparedness: Maintaining up-to-date records of license usage helps companies stay compliant and avoid penalties during SAP audits.
- Efficient Allocation: License management tools make it easier to ensure each user has the correct license type assigned based on their role and system usage.
Challenges:
- Initial Setup: Implementing license management tools requires initial setup and ongoing maintenance, which can be resource-intensive.
- Complex Environments: Organizations with multiple SAP products and a mix of on-premise and cloud solutions may find tracking licenses accurately across all environments challenging.
SAP Licensing Terminology FAQ
What is user-based SAP licensing?
User-based licensing charges are based on the number of users accessing the system, with different user roles like Professional, Limited, and Developer.
What does modular licensing mean?
Modular licensing allows businesses to pay only for the specific SAP modules they need, such as finance, human resources, or CRM.
What is indirect access in SAP licensing?
Indirect access fees are incurred when non-SAP systems or applications access SAP data, even if they don’t use the SAP interface directly.
What is digital access in SAP licensing?
Digital access refers to licensing that charges based on the creation of documents or use of data through non-SAP systems, separate from user-based licensing.
How do perpetual and subscription licenses differ?
Perpetual licenses are a one-time purchase, while subscription licenses require ongoing payments, typically for cloud or SaaS solutions.
What is SAP’s policy on indirect access?
SAP’s indirect access policy requires licenses for third-party applications that read, write, or modify data within SAP systems.
What is the significance of digital access fees?
Digital access fees reflect how SAP data is used externally, charging for document creation or manipulation through non-SAP interfaces.
Can I combine perpetual and subscription licenses?
Yes, many businesses combine perpetual licenses for on-premise solutions with subscription licenses for cloud-based services.
What are the different types of user licenses?
Common user types include Professional, Limited, and Developer licenses, each allowing different access levels to the SAP system.
How are indirect access fees calculated?
Indirect access fees are calculated based on the number of external systems interacting with SAP data and the frequency of use.
Why are compliance audits important in SAP licensing?
Compliance audits ensure companies use the correct licenses for their system usage, avoiding penalties or additional fees.
How often should companies review their SAP licenses?
Reviewing SAP licenses annually or during major system changes is recommended to ensure compliance and cost efficiency.
What are the risks of not accounting for indirect access?
Failing to account for indirect access can result in unexpected fees during an audit, potentially increasing licensing costs.
What is the difference between user and engine licensing?
User licensing is based on the number of users, while engine licensing charges are based on the capacity or usage of specific functionalities, like databases.
How does SAP handle non-compliance with licensing?
Depending on the severity of the breach, non-compliance can result in additional fees, forced contract adjustments, or even legal consequences.
