SAP Named User Licensing
SAP Named User Licensing is a core component of SAP software contracts, often representing the largest share of SAP costs for enterprises.
Every individual accessing SAP requires a named user license, and optimizing these licenses can yield significant cost savings and reduce compliance risks.
This advisory outlines the various SAP named user license types, typical costs, common pitfalls, and best practices for CIOs and CTOs to effectively manage and negotiate SAP user licenses within their organizations.
SAP Named User Licensing
What it is: In SAP’s licensing model, each person who uses the SAP system must be assigned a specific “named user” license.
Unlike concurrent user models, a named user license is tied to an individual (non-transferable between individuals) and grants that person specific permissions within the SAP environment.
This means even occasional users and external contractors need their license if they log into SAP. Named user licenses apply across SAP ERP modules and even other SAP products (CRM, BW, etc.), making them a foundational element of any SAP contract.
Why it matters:
For most enterprises, named user licenses make up a substantial portion of total SAP spend (often 40–70% of the software contract value). These licenses are the gateway to SAP’s functionality, so every SAP user adds to both licensing costs and annual maintenance fees.
For CIOs and CTOs, this is a major budget line item – and also a potential area of waste if licenses are mis-assigned or underutilized.
Moreover, SAP strictly enforces named user compliance through periodic audits, meaning any user accessing SAP beyond their license type or without a license can trigger compliance penalties.
In summary, managing named user licenses effectively is crucial for controlling costs and avoiding surprises during SAP audits.
Named vs. Package Licenses: It’s essential to note that SAP licensing comprises two layers: named user licenses (covering “who” is using the system) and engine or package licenses (covering “what” functionality is utilized).
For example, if you license an SAP payroll module (an engine license based on the number of employees or payroll results), you still need each HR clerk or payroll specialist to have a named user license to log in.
The named user license grants a person general access to SAP, while the package license entitles the company to utilize specific SAP modules or features.
Both aspects must be licensed correctly – having one doesn’t negate the need for the other. This two-layer model means CIOs must manage user licensing in tandem with module licensing to fully comply with SAP agreements.
SAP Named User License Types and Costs
SAP offers a range of named user license categories, each with different levels of access and price points.
Aligning each user with the appropriate license type (not too powerful, not too limited) is the cornerstone of cost optimization.
Below are the most common license types and their typical usage scopes and costs:
| License Type | Scope & Example Roles | Approx. On-Premise Cost (one-time per user) | Approx. Cloud Cost (subscription per user) |
|---|---|---|---|
| Professional User | Full unrestricted access across SAP modules. Suited for power users: e.g. system administrators, senior finance managers, IT config analysts who perform wide-ranging transactions. | ~$3,000 list price (+~22% yearly support) | ~$150 per user/month |
| Limited/Functional User | Limited operational access within specific modules or departments. For example, an accounts payable clerk in Finance, or a sales order processor in Sales. Can do substantial work in one area but not full enterprise access. | ~$1,200–$1,500 per user (about half the cost of Professional) | ~$50–$100 per user/month |
| Employee/ESS User | Self-service and casual use. For employees who only view their data, enter timesheets, request leave, or run basic reports. No operational transactions beyond their own profile. Often called Employee Self-Service (ESS) or Productivity user. | ~$100–$300 per user (low cost) | ~$10–$20 per user/month |
| Developer User | Technical developer access for building and customizing SAP (ABAP development, configuration tasks). Typically assigned to IT developers and technical consultants. | ~$2,500–$3,000 per user (similar to Professional) | ~$120–$200 per user/month (if applicable) |
Indicative pricing only – actual costs vary by region and discounts. On-premise costs are perpetual license fees; cloud costs are subscription-based.
License scope vs. cost: Generally, the broader a license’s capabilities, the higher the price. The Professional is the most powerful (and expensive) user type, granting full create, read, update, and delete rights in all standard SAP modules.
Limited Professional (also referred to as a Functional user in newer S/4HANA contracts) offers a mid-tier access level, providing significant but confined access to certain functions or business areas.
Employee or ESS users are the least expensive, limited to self-service or very basic tasks (they cannot execute core transactions like creating sales orders or approving large transactions).
Developer licenses are specialized, often priced similarly to Professional licenses, as they grant deep technical access. However, many contracts include a small number of developer licenses by default for the implementation team.
Real-world example: One global manufacturer discovered that it had assigned nearly all 800 of its SAP users with Professional licenses by default. Following a usage review, approximately 300 users were identified as performing only simple tasks (e.g., time entry, expense lookup).
By reclassifying those 300 users to a lower license tier (ESS or Limited), the company avoided purchasing 300 high-cost Professional licenses, saving roughly $500,000 in one-time fees and $110,000 per year in maintenance costs.
This example illustrates how right-sizing licenses to actual roles can yield significant savings without compromising productivity.
Challenges and Compliance Risks
Managing SAP named user licensing is challenging due to both cost pressures and compliance requirements.
Here are common pitfalls and risks enterprises face:
- Over-licensing (Oversized Assignments): A prevalent issue is assigning a more powerful (expensive) license than necessary. For instance, companies often give every new SAP user a Professional license “just in case.” This one-size-fits-all approach leads to many users having capabilities they never use, while the organization overpays for those unused rights. Over-licensing not only wastes license fees but also incurs higher annual support costs on those licenses. The safer strategy is to start users with the lowest appropriate access and only upgrade if their role truly demands it.
- Under-licensing (Misclassified Users): The flip side is when a user’s activities exceed what their current license permits. For example, an employee assigned as an ESS (self-service) user who gains unauthorized access to create purchase orders or run advanced reports, tasks typically reserved for higher license types. In an audit, SAP will flag this as a compliance violation: the company would be required to purchase the proper higher-level licenses (often at backdated maintenance fees or list price). Misclassification often happens when roles change or expand over time, but the license assignment isn’t updated. It’s a hidden risk that can accumulate and then surface during an official audit.
- Dormant and Duplicate Users: Over time, some named user accounts become inactive (e.g., former employees or users who haven’t logged in for months) but remain counted in the license totals. Companies may be paying maintenance on these unused licenses or purchasing new ones while older ones remain idle (so-called “shelfware”). Additionally, suppose one person has multiple SAP accounts (for example, one in the ERP system and another in the BI system). In that case, SAP’s measurement tools may count them twice if not consolidated – artificially inflating the license count. Without cleanup, dormant and duplicate accounts lead to unnecessary license purchases and can complicate compliance reporting.
- Indirect Access & Digital Use: A challenging aspect of SAP licensing is “indirect use,” where non-SAP systems or automated processes access SAP data. In the past, SAP would charge for this via named user licenses or special fees, and many customers were caught off guard with large claims for indirect usage. SAP has since introduced a Digital Access model (document-based licensing) to handle certain indirect scenarios, but it remains a complex solution. If you remove named users and instead funnel data through an external app, you must ensure you’re covered under SAP’s digital access licenses. Otherwise, you risk simply shifting compliance exposure elsewhere. CIOs need to account for all usage of SAP, even if a person isn’t directly logging in, when optimizing licenses.
- Audit Surprise: SAP license audits are contractually mandated reviews where SAP requires customers to run user measurement programs (such as USMM and LAW) and provide the results. Audits typically occur every 1-2 years or before contract renewals. Without proactive management, an audit can reveal that the company has more users or higher usage than licensed, leading to an unexpected “true-up” bill that can be in the millions. Auditors will count every user in the system and default any undefined users to Professional licenses. They will also check for indirect usage. Non-compliance identified in an audit usually means the company must purchase additional licenses at list price (often with backdated support). This is a financial and negotiation setback that CIOs want to avoid. The best defense is to treat compliance as an ongoing discipline rather than a one-time event.
Optimizing License Usage and Compliance
To address these challenges, organizations should adopt a proactive and systematic approach to SAP user license management.
Key strategies include:
- Regular Internal Audits: Don’t wait for SAP’s auditors – conduct your license reviews at least annually. Use SAP’s built-in license measurement tools (USMM for user count and LAW for cross-system consolidation) to get a baseline of how many users of each type you’re consuming. Complement this with usage data (e.g., last login dates, transaction usage logs) to spot anomalies. Identify users who haven’t logged in for 90+ days – consider deactivating them and re-harvesting their licenses. Similarly, check if any current ESS or Limited users are executing transactions outside their allowance, which may indicate a needed license upgrade. By catching these internally, you can true-up on your terms (or reallocate licenses) before an official audit forces your hand.
- License Assignment Policy: Implement a clear policy that defines which job roles are associated with specific license types. For example: “Finance clerks = Functional User, Sales reps = Productivity User, Managers = Professional only if they oversee multiple functions,” etc. Then, enforce this in the user provisioning process. When a new SAP account is created or a role changes, have the SAP security or ITAM team assign the appropriate license type per policy (instead of defaulting to Professional). This policy-driven approach ensures consistency and prevents ad-hoc upgrades. Some organizations even build checks into their SAP role assignment workflow: if someone assigns a high-level security role to a user, it triggers a review of that user’s license category. By aligning license types with actual job needs, you can avoid overspending due to misassignments.
- Continuous Cleanup (Remove Shelfware): Make license “recycling” part of your offboarding and periodic cleanup. If an employee leaves the company or no longer needs SAP access, promptly remove or deactivate their user account and reclaim that license allocation for future use. SAP named user licenses are generally transferable internally – you own the entitlement for X users of a type, not the individuals’ names. So, for example, if you have 500 Professional licenses purchased and only 450 active Professional users, you have 50 spare licenses that can be allocated to new users without buying more. Keeping track of these entitlements is critical. Also, periodically purge or archive dormant accounts. This not only frees up licenses but also improves security. A joint effort between HR (for timely notice of departures) and IT (for account removal) will ensure you’re not paying for users who aren’t there.
- Rightsize Before You Buy: Before purchasing additional SAP licenses, look inward. If your SAP user count is growing (say, a new project onboarding 100 users) and you think you need more licenses, first check if you can downgrade or reassign some existing users. For example, if you’re nearing the limit of Professional licenses, see if a subset of current Professional users could function on a Functional user license instead – downgrade them where appropriate (within contract allowances) to free up some Professional slots for the new users. This way, you can delay or avoid making new purchases. Be mindful of your contract, though: some older SAP agreements fixed the number of each license type, meaning you may need to negotiate to formally convert a license from one type to another. However, in practice, if you own a higher-level license, SAP allows you to assign a user a lower-level license without issue (you just can’t exceed the total entitlements). Use this flexibility to optimize the usage of what you already have.
- Tools and Analytics: Consider using dedicated license management tools or services to analyze SAP user activity. SAP provides the License Administration Workbench (LAW) and some basic reports; however, third-party SAP license optimization software can offer deeper insights. These tools can automatically suggest the optimal license type for each user based on their actual transaction usage patterns. For instance, they might reveal that 40 of your “Professional” users never use functionality beyond what a Functional user requires, highlighting immediate downgrade opportunities. They can also help simulate an audit: “If SAP audited us today, how many of each license type would they count?” This helps you fix issues proactively. While these tools come at a cost, large enterprises often find the investment pays off quickly through identified savings and smoother audits.
- Governance and Ownership: Assign clear ownership for ongoing SAP license management. This could be a Software Asset Manager or a small IT asset management (ITAM) team responsible for SAP. They should have the mandate to regularly review license usage, keep records of changes, and stay up-to-date on SAP’s licensing policies. A governance structure ensures that optimization isn’t a one-time project but a continuous process. For example, this team would periodically report to the CIO on license utilization rates and highlight any areas that require contract adjustments. They also prepare the organization for any upcoming audits by ensuring data is clean and justifiable.
- Stay Compliance-Ready: Always operate as if an SAP audit could happen next quarter. This mindset fosters good habits, such as maintaining documentation of license assignments and changes. If you downgrade 50 users from Professional to Functional, document the rationale (e.g., list their names, old license, new license, date, reason “changed role or minimal usage”). If auditors come, being able to demonstrate a well-governed process and maintain historical records can make the audit smoother and show your good-faith efforts. It also helps internally when new personnel take over license management – they can understand past decisions.
By applying these practices, CIOs can significantly reduce excess licensing costs (often cutting 10–30% of named user spend) and mitigate compliance risks before they escalate.
Optimizing SAP named user licenses is an ongoing discipline that pays dividends in cost savings, audit readiness, and better alignment of IT resources with business needs.
Read SAP Professional Licensing.
Negotiating SAP User License Agreements
Effective negotiation with SAP is essential to maximize value and flexibility in your user licensing.
CIOs and CTOs preparing for a new SAP contract, renewal, or a shift (such as a migration to S/4HANA or the cloud) should keep these points in mind:
- Leverage Volume and Timing: SAP’s pricing for named users has list prices, but in practice, substantial discounts (20–50%) are achievable, especially for large purchases or strategic deals. Volume is your friend – bundling a higher quantity of user licenses in one negotiation can qualify you for volume-based discounts. Additionally, aligning your purchase or renewal with SAP’s quarter or year-end can improve your bargaining position, as SAP sales teams may offer better discounts to close the deal. Enter negotiations with clear knowledge of how many users you truly need (after optimization) and push for pricing that reflects the scale.
- Contractual Flexibility Clauses: When structuring the agreement, seek clauses that give you flexibility in managing user licenses over time. “Renaming rights” are standard (this means you can reassign a license from one user to another when people leave or change roles – SAP generally permits this as long as you don’t exceed purchased quantities). Beyond that, try to negotiate the ability to swap or convert license types as your needs evolve. For instance, you might ask for the right to convert, say, 100 Professional licenses to 200 Functional licenses at a later date if usage shifts, or vice versa. SAP is traditionally resistant to reducing license counts. Still, if you’re making a big new investment (e.g., buying additional products or moving to S/4HANA), you can use that as leverage: “We will purchase X, if SAP allows us to re-balance or retire Y unused licenses.” Aim to include terms for periodic review or reclassification of users without financial penalty.
- Shelfware Trade-Ins: Over the years of SAP use, companies often accumulate shelfware (unused licenses). One negotiation tactic is to trade these in when adopting new SAP solutions. For example, if you plan to migrate to RISE with SAP (S/4HANA Cloud), you may have legacy user licenses that become obsolete. SAP has offered conversion programs that allow the value of existing on-premise licenses to be credited toward cloud subscriptions. Ensure you understand SAP’s conversion offers – often called License Transfer or Conversion Credits – so you don’t pay twice for the same users. When negotiating a move to S/4HANA, clarify how your current named user licenses will map to the new model. S/4HANA on-premise uses similar user categories (Professional, Functional, etc.), so carryover is usually possible under conversion rules. However, if you adopt a subscription model (like RISE), SAP may instead use Full Usage Equivalents (FUE) – a metric that aggregates users into a single consumption unit. In that case, negotiate the valuation of your existing investment and ensure you’re not losing any entitlement value.
- Indirect Usage and Digital Access: Address the topic of indirect use upfront in negotiations. The last thing you want is an unclear clause, leaving you exposed to a significant bill later. SAP now allows licensing indirect access via the Digital Access Document model, where you purchase a certain number of documents (such as sales orders, invoices, etc.) created by external systems, rather than named users. If your architecture involves non-SAP front-ends or integrations, consider including a known quantity for digital access or specifying document licenses in your agreement. Some customers have negotiated one-time conversions of unused named users into digital access credits. The key is to explicitly settle this area in the contract to avoid gray areas that auditors might exploit.
- Plan for Growth and Contraction: Incorporate future flexibility. If you anticipate organizational changes (such as mergers, divestitures, or layoffs that impact user count), negotiate provisions that allow for true-down (reducing the license count) or a floating pool of licenses. SAP historically does not refund licenses; however, you can secure terms that include the option to add licenses at a consistent discount rate or the ability to drop maintenance on unused licenses without losing reinstatement rights. At a minimum, ensure the contract doesn’t lock you into annual growth assumptions for users if you’re unsure. A balanced agreement accounts for both expansion and efficiency improvements over the term.
- Benchmark and Seek Expert Input: Finally, enter any SAP negotiation armed with market knowledge and insights. Benchmark prices for similar SAP customers (industry peers, similar size), if possible, or consult SAP licensing experts who know typical discount levels. SAP’s pricing and terms can be opaque, so having an expert perspective or even a third-party negotiator can help identify areas that are negotiable. Being informed about SAP’s latest licensing programs (for example, promotions on S/4HANA or cloud bundles) can give you additional leverage or creative solutions that SAP might not volunteer. The result of a well-negotiated user licensing deal is not just a lower price, but also contractual terms that allow you to optimize and adjust your SAP usage with minimal friction over the coming years.
Read Essentials of SAP Developer Licensing You Should Know.
Recommendations
- Audit Your Users Now: Review your current SAP user list immediately. Remove or deactivate any accounts no longer needed and reclaim those licenses. This quick cleanup can reduce costs and is a good first step toward compliance.
- Match License to Role: Establish a clear mapping of job roles to the appropriate SAP license types (E.g., Professional, Functional) and enforce it. This prevents over-provisioning high-level licenses to users who don’t need them.
- Monitor Usage Regularly: Implement a quarterly or biannual process to check SAP user activity. Identify users with very low usage or long periods of inactivity and evaluate the option of downgrading or removing their licenses.
- Use SAP’s Tools Wisely: Run SAP’s License Administration Workbench (LAW) to consolidate duplicate user accounts across systems. Make sure one person = one license in your reporting by maintaining consistent user IDs or linking accounts, so you don’t double-count and overpay.
- Control High-Cost Licenses: Treat Professional (and other expensive licenses) as a limited resource. Require management approval before assigning a Professional User license to anyone. This adds oversight and ensures that only truly necessary users receive top-tier access.
- Educate Admins and Teams: Train your SAP security, basis, and IT asset management teams on licensing implications. They should be aware that granting certain roles or transactions to a user may require a higher license. Awareness at this level will prevent accidental non-compliance.
- Optimize Before Buying More: When new projects or hires arise, first attempt to reallocate or downgrade existing licenses to cover them. Purchasing additional SAP licenses should be a last resort after you’ve maximized the use of those you already own.
- Review Your SAP Contract: Understand the fine print of your current SAP agreement regarding license types and conversions. If unclear, seek clarification from SAP in writing. Knowing your contractual rights (e.g., ability to substitute license types) will guide your optimization efforts and negotiation strategy.
- Prepare for Audits: Have a response plan for SAP audits. Keep documentation of all license assignments, changes, and cleanup actions. Being able to show auditors a well-managed, up-to-date user license inventory (with evidence of proactive compliance) can mitigate issues and perhaps even deter aggressive findings.
- Stay Informed on Licensing Changes: SAP’s licensing models are continually evolving (for example, the introduction of digital access and the shift to cloud subscriptions). Assign someone to monitor SAP announcements and industry news related to licensing. If a new model could benefit your company (or pose a risk), you want to be ahead of the curve, possibly leveraging it in your next true-up or negotiation.
FAQ
Q1: We purchased 500 Professional and 300 Limited user licenses in our SAP contract, but we’re currently only using 400 Professional users. Can we use the “extra” 100 Professional licenses for new hires?
A1: Yes – if you own 500 and are using 400, you have 100 available Professional user entitlements to allocate to new people as needed. Your SAP license agreement sets the maximum authorized users by type, but you don’t have to use them all at once. You can hold some in reserve. Just track it carefully: if you exceed 500 actual Professional users at any point, you’ll need to purchase additional licenses. It’s wise to maintain an internal license count dashboard so you always know your headroom before SAP does.
Q2: Can we reassign a named user license from one employee to another (for example, when someone leaves the company)?
A2: Absolutely. SAP named user licenses are not tied to a specific person forever – they’re tied to your organization. If John leaves and Jane is his replacement, you can give Jane John’s old SAP user ID (or a new ID) and count her under the same license entitlement. There’s no extra fee for reassigning in this way; you’ve already paid for the user slot. Just be sure to remove or lock John’s account so you’re not accidentally counting two users. License “renaming” (reassignment) is permitted in SAP contracts as long as you don’t go over the total purchased quantity.
Q3: One person in our company has two SAP login accounts (e.g., one for ERP, one for the BW system). Do we need two licenses for that one person?
A3: In principle, one person should only require one named user license to cover them across all SAP systems, but it’s up to you to ensure they are identified as the same individual. SAP’s audit tools will see two accounts and assume two users unless you consolidate them. Using the LAW tool, you can merge accounts by matching criteria (like username or personnel ID). It’s important to maintain consistent user identifiers or document a mapping so that during an audit, you can demonstrate that these two accounts belong to the same person. In short, you pay for the person, not the login, but you have to prove it to SAP.
Q4: How can we detect if a user is “misclassified” – using more functionality than their license type allows?
A4: The best approach is to analyze user activity against the definition of their license. Each license type (Professional, Functional, etc.) has an official scope of allowed activities (usually detailed in SAP’s contract documents or product usage descriptions). You can extract logs of what transactions each user executes (for example, using SAP’s ST03N transaction for usage statistics or other monitoring tools). Suppose an ESS user is found executing a transaction like VA01 (Create Sales Order). In that case, that’s a red flag – they are performing a task reserved for a higher license level. Regularly run reports or use third-party license management software that flags such anomalies. Additionally, proactively design your role provisioning: if a user requires roles that allow advanced transactions, that should trigger a review to elevate their license type beforehand.
Q5: Many of our SAP users only log in occasionally (say, once a month). Do they each still need a named user license?
A5: Yes. SAP’s model is named-user based, not concurrent usage. Even if a user logs in once a month or once a year, if they have an account and use it, they must be licensed. This can feel inefficient for very light users, but it’s the rule. You are not allowed to have “shared” logins or a pool of concurrent user licenses – each person must have their credentials and license. Some strategies to mitigate this include seeing if those occasional tasks can be handled by a smaller group of licensed power users or through automated reports, thereby reducing the number of people who need access. But beware of violating policy: sharing one user account among multiple people is against SAP’s terms and is easily spotted in audits (and heavily penalized). If those individuals genuinely need to use SAP directly, even occasionally, assign them the most appropriate and affordable license (e.g., an ESS or Productivity user license rather than a Professional license).
Q6: Does a named user license allow a person to use multiple SAP systems (ERP, CRM, BW,) or do we need separate user licenses for each system?
A6: A single named user license usually covers that user’s access across the SAP software environments your company has licensed, provided those systems are under the same corporate agreement. For example, if you have SAP ERP and SAP BW implemented and both are included in your license scope, a licensed Professional user can use both systems. You don’t pay twice for the same person. However, ensure your contract is structured properly: some older contracts listed user licenses per product (e.g., 100 ERP users and 50 CRM users separately). Modern agreements often include enterprise user licenses that cover multiple systems; however, you should confirm this in the contract wording. The key action is to avoid double-counting the same person in your license audit – use LAW to reconcile cross-system duplicates. In summary, one person = one license entitlement, even if they have access to several SAP modules.
Q7: What is an “SAP Audit User” licens,e and do we need to pay for it?
A7: An “Audit User” (sometimes referred to as an External Auditor User) is a special classification that SAP provides, typically to allow external auditors (such as your finance auditors or compliance inspectors) read-only access to the system. SAP generally permits a limited number of audit-only users without requiring a full paid license, as long as they’re truly used for audit purposes (viewing reports, checking configurations, etc.) and not performing operational work. Check your contract; many have a clause allowing a certain number of audit users at no charge. The important thing is not to abuse these accounts – they should not be used by internal staff or for regular activities. If used properly (only for audits, and often temporarily), they do not incur licensing fees. It’s a good practice to document the creation of audit user accounts and ensure they are secured and removed after the audit.
Q8: We are planning to move from SAP ECC to SAP S/4HANA. Will our existing named user licenses be carried over, or will we need to purchase new ones?
A8: If you move to S/4HANA on-premise, you can typically carry over your existing named user licenses through a conversion process. SAP has mappings for the old user types to new S/4HANA user types (for example, older “Limited Professional” might map to “Functional” user). You won’t typically need to repurchase users you already own, but you may need to update the license definitions in your contract to reflect the new terminology. Work with SAP to ensure a smooth conversion and that you have the right mix of S/4 license types. However, if you move to S/4HANA Cloud or RISE with SAP (subscription model), the licensing metric shifts. In RISE (as of recent models), SAP often uses Full Usage Equivalents (FUE) instead of individual named users. FUEs aggregate different user types into a single consumption metric. In that scenario, your traditional named user licenses would be replaced with a subscription that covers a specified number of FUEs. SAP typically offers credit for the value of your existing licenses when you transition to RISE. Essentially, you negotiate a conversion that factors the money spent on licenses into the new subscription pricing. So, the short answer is: on-prem S/4HANA – your named users remain (just updated); moving to the cloud – named user licensing is replaced by a new scheme, and you should negotiate credit so you’re not losing your prior investment.
Q9: How do our named user licenses interact with SAP’s module/engine licenses? If we have a license for a specific module (such as SAP Payroll by employee count), do users of that module also require named user licenses?
A9: Yes, you need both types of licenses in tandem. A module or engine license (such as Payroll Engine, CRM, etc.) entitles your company to use that functionality up to a certain capacity (e.g., processing payroll for X employees or handling Y records). Named user licenses cover the individuals who use the software. For example, if you have an engine license for SAP Payroll, it covers the necessary functionality. However, each HR or Payroll clerk who logs into SAP to run payroll or view results still requires their user license (likely a Professional or Functional user, depending on their role). Think of it this way: engine licenses cover “what is being used,” and named user licenses cover “who is using it.” Both aspects must be licensed. Many compliance issues arise when companies have sufficient engine metrics but forget the user side (or vice versa). Always ensure that for every SAP module in use, the individuals accessing it are also properly licensed.
Q10: If we succeed in reducing our total named user count (say by eliminating unused accounts), how does that impact our annual maintenance costs?
A10: Reducing your licensed user count can yield ongoing savings in maintenance fees, but it depends on whether you remove those licenses from your support contract. SAP’s standard maintenance (typically ~20–22% of the net license value per year) is charged on all active licenses you own. Suppose you identify 100 licenses that are truly not needed. In that case, you have a couple of options: (a) You can try to terminate those licenses from your contract which would stop the maintenance charges on them – SAP might allow this if it’s at contract renewal time or if you’re making other purchases (they often resist outright cancellations mid-term). (b) More commonly, you might keep the licenses but remove them from active use; however, you’ll still pay maintenance unless you negotiate a reduction. Some companies choose to shelf licenses for maintenance to save cost, meaning you tell SAP you won’t pay support on those 100 users anymore. You retain the perpetual right to use the older version (you have already paid for it), but you lose support and upgrade rights for it. This can save ~20% per year on the original cost. For example, if those 100 licenses had a combined net value of $100,000, you’d save about $22,000 each year in maintenance by dropping them. Over a few years, that’s significant. Just be sure that if you drop maintenance on licenses, you truly don’t need them, because reinstating them later can be costly. In summary, optimizing user licenses not only saves on upfront license fees but also shrinks the recurring support bill – an important factor to include in your cost-benefit analysis.
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