SAP Package Licensing
- Definition: Specific method for SAP software solutions in predefined bundles.
- Types: Includes perpetual, subscription, cloud-based, and indirect access licenses.
- Key Metrics: User licensing, transaction-based licensing, engine-based licensing.
- Considerations: Business size, long-term goals, deployment model, and integration with other systems.
- Optimization: Audit licenses, leverage discounts, monitor indirect access, and engage with partners.
SAP Package Licensing for Your Business
Managing software licenses can be challenging in today’s complex enterprise environment.
SAP (Systems, Applications, and Products in Data Processing), one of the largest enterprise software providers, offers a wide array of licensing options to meet various business needs.
SAP package licensing plays a significant role in helping organizations structure their software investment scalable and cost-effectively.
What is SAP Package Licensing?
SAP package licensing refers to the specific method by which SAP offers its software solutions in predefined bundles or packages.
Unlike traditional user-based licensing models, where organizations pay based on the number of users accessing the software, package licensing is determined by the specific functionalities or modules an organization needs.
SAP packages are typically tailored to meet the unique requirements of different industries or business processes. This modular approach allows companies to purchase only the required software components, leading to a more flexible and potentially cost-effective licensing arrangement.
Example:
Suppose a manufacturing company needs software to manage its supply chain and production processes. In that case, it can opt for a package containing modules like SAP Supply Chain Management (SCM) or SAP Manufacturing Execution (ME), without buying other modules irrelevant to their needs, such as HR management tools.
Key Types of SAP Package Licenses
SAP offers several licensing models, depending on how an organization plans to use its software. These licensing models are usually structured around specific metrics, such as user roles, data volume, or the software’s complexity.
Below are the primary types of SAP package licenses:
1. Perpetual License
A perpetual license allows an organization to use the software indefinitely after paying an upfront cost. This model is typically ideal for companies that expect long-term use of the software and want full control over their SAP environment.
- Upfront cost: A large, one-time payment.
- Ongoing costs: Maintenance fees (often 20-22% of the license cost) for support and updates.
2. Subscription License
In the subscription-based model, organizations pay a recurring fee to use the software over a defined period (monthly, quarterly, or annually). This model offers flexibility and can be scaled up or down based on the company’s needs.
- Cost: Smaller, regular payments.
- Benefits: Includes software updates and support during the subscription term.
3. Cloud-Based Licensing
SAP also provides cloud-based licenses for its cloud solutions, such as SAP S/4HANA Cloud or SAP SuccessFactors. These licenses are typically subscription-based but offer greater flexibility and scalability since cloud environments can adjust more easily to business demands.
- Cost: Ongoing subscription fees.
- Scalability: Cloud infrastructure adjusts based on your company’s requirements.
- Examples: SAP SuccessFactors (HR), SAP S/4HANA Cloud (ERP), and SAP Ariba (Procurement).
4. Indirect Access Licensing
SAP’s indirect access license model covers scenarios where non-SAP systems or third-party applications interact with the SAP system. This could be through APIs or third-party apps that pull or push data into the SAP system.
- Example: A CRM system that pulls customer data from SAP S/4HANA would require an indirect access license.
- Cost: Based on the number of records, data volume, or processes involved.
Key Metrics in SAP Package Licensing
SAP calculates the cost of package licenses using different metrics. These are crucial for determining how much an organization will pay based on its specific needs.
Let’s break down the main metrics SAP uses:
1. User Licensing
SAP licenses can be categorized based on the types of users accessing the system. Typically, these user categories are divided into roles such as Professional Users, Developer Users, Employee Users, and Limited Users. The price varies depending on how much access each user requires.
- Professional User: Full access to the SAP system, able to create and modify documents, configure settings, and use all functionalities.
- Employee User: Limited to using the system for predefined tasks, such as submitting time entries or accessing self-service portals.
2. Transaction-Based Licensing
Some licenses are based on the number of transactions processed in the system rather than the number of users. This is particularly relevant in industries with high transaction volumes, such as retail or financial services.
- Example: A retail company might be charged based on the number of sales transactions processed in SAP Commerce Cloud.
3. Engine-Based Licensing
In engine-based licensing, pricing is based on the system’s processing power or data volume. This metric is often used for more specialized SAP modules, such as SAP BusinessObjects or SAP BW/4HANA, where the data processed directly influences the cost.
- Example: A business running advanced analytics on large data sets with SAP Business Warehouse (BW) will likely be charged based on the size of its data footprint and system performance requirements.
Factors to Consider When Choosing an SAP Package License
Selecting the right SAP package license requires careful analysis of your business needs, growth projections, and budget. Below are key factors to consider:
1. Business Size and Complexity
Larger organizations or those with more complex operations may need broader licensing packages covering multiple modules and user types. Smaller companies may benefit from a more streamlined license focusing on core needs like accounting or HR management.
- Example: A global manufacturing firm will likely need licenses covering multiple regions, user types, and business processes, while a small firm may only need SAP Business One with basic functionalities.
2. Long-Term Business Goals
Consider whether your business is in a growth phase or planning for mergers and acquisitions. Opting for a scalable SAP package license ensures you’re not overpaying upfront while allowing for smooth expansions.
- Example: A company planning to expand into new markets might choose a cloud-based subscription model that can scale with its operational needs.
3. Deployment Model
Decide whether to deploy SAP on-premises, in the cloud, or a hybrid model. Cloud deployments offer more flexibility, especially if you anticipate fluctuating demands, while on-premises solutions may offer more control and customization.
4. Integration with Other Systems
Evaluate the software packages you’re licensing and how they’ll interact with other systems in your business. Indirect access costs can add up if third-party systems need frequent interaction with SAP.
- Example: A company using a third-party CRM that frequently pulls data from SAP might need to account for indirect access licensing.
Optimizing SAP Package Licensing Costs
SAP licensing can become costly if not properly managed. Below are strategies to optimize your SAP package licensing and avoid overspending.
1. Audit Your Current Licenses
Perform regular audits to ensure that your current licenses reflect your actual usage. Over-licensing can result in paying for functionalities or user types not being utilized.
- Example: You might discover that employees categorized as professional users could instead be classified as limited users, reducing costs.
2. Leverage Volume Discounts
Anticipate needing additional licenses in the future. You may be able to negotiate volume discounts with SAP, especially if you’re a large enterprise or planning a significant system rollout.
3. Monitor Indirect Access
Keep a close eye on how non-SAP systems interact with SAP to avoid surprises with indirect access fees. Where possible, consider integrating third-party systems more efficiently to reduce the number of touchpoints.
4. Engage with an SAP Partner
Working with an SAP-certified partner can help you select the right licensing model for your needs. Partners can also provide guidance on negotiating with SAP and ensuring your licenses are optimized for your specific industry.
SAP Package License FAQs
What is SAP package licensing, and how does it differ from traditional user-based models?
SAP package licensing refers to acquiring software based on specific functionalities or modules that a business requires rather than paying for the number of users. Unlike user-based models, where fees are determined by how many individuals access the system, package licensing focuses on the software’s capabilities needed for different business processes.
What are the main types of SAP package licenses available?
The main types of SAP package licenses include perpetual, subscription, cloud-based, and indirect access. Each offers distinct advantages depending on your business’s operation and long-term goals.
How does perpetual licensing work in SAP package licensing?
With perpetual licensing, businesses pay a one-time upfront cost to use SAP software indefinitely. While this model provides long-term access to the software, it also requires ongoing maintenance fees for support and updates, typically 20-22% of the initial license cost.
What is the benefit of subscription-based licensing for businesses?
Subscription-based licensing allows businesses to pay regular, recurring fees (monthly, quarterly, or annually) for access to SAP software. This model is more flexible than perpetual licensing and often includes software updates and support within the subscription period. It’s ideal for companies that prefer to scale their software needs over time.
How does cloud-based licensing differ from on-premises options?
Cloud-based licensing provides access to SAP solutions through a subscription model, offering greater flexibility and scalability than traditional on-premises deployments. The cloud allows businesses to adjust their software environment based on evolving needs without investing heavily in infrastructure.
What is indirect access licensing in SAP, and when do businesses need it?
Indirect access licensing applies when non-SAP systems or third-party applications interact with SAP systems, such as pulling or pushing data through APIs. Businesses need this type of licensing when external systems need to access SAP data regularly. Costs are often determined by the volume of data or records accessed.
How does SAP determine the cost of package licenses?
SAP uses different metrics to determine licensing costs, including user licensing (based on user roles and permissions), transaction-based licensing (based on the number of transactions processed), and engine-based licensing (based on data volume or processing power). These metrics help businesses pay for what they specifically need.
What is the difference between professional and employee users in SAP licensing?
Professional users have full access to the SAP system, allowing them to create, modify, and configure various components. On the other hand, employee users have limited access, often restricted to tasks like entering time or accessing self-service tools. Due to their broader access, professional users generally come at a higher cost than employees.
Why should businesses consider transaction-based licensing?
Transaction-based licensing benefits industries with high transaction volumes, such as retail or financial services. In this model, businesses are charged based on the number of transactions processed rather than the number of users, making it more cost-effective for companies that process large amounts of data.
What is engine-based licensing, and when is it used?
Engine-based licensing is based on the processing power or data volume the SAP system requires. This model is often applied to specialized SAP modules, such as analytics or business intelligence tools, where the size of the data being processed influences the cost.
How can a business decide which SAP package license is right for them?
Choosing the right SAP package license involves analyzing your business’s size and complexity, long-term goals, deployment preferences (cloud vs. on-premises), and integration needs with other systems. A smaller company may only need a basic package, while a larger, more complex organization might require multiple modules across regions and departments.
What factors should a company consider when evaluating cloud versus on-premises SAP deployment?
When deciding between cloud and on-premises SAP deployment, businesses should consider the flexibility of cloud solutions in handling fluctuating demands, the control offered by on-premises systems, and long-term cost implications. Cloud solutions often provide better scalability, while on-premises deployment allows for more customization and control.
How can businesses avoid overpaying for SAP package licenses?
To avoid overpaying, businesses should regularly audit their SAP licenses to ensure they only pay for what they use. Reassessing user roles and downgrading unnecessary professional licenses to limited access roles can help reduce costs. Additionally, monitoring indirect access and optimizing system integrations can prevent unexpected fees.
What are some ways to optimize SAP package licensing costs?
Businesses can optimize their SAP package licensing costs by auditing current usage to identify over-licensing, negotiating volume discounts for future licenses, carefully managing indirect access between SAP and third-party systems, and working closely with SAP-certified partners to ensure the right license models are chosen for their specific needs.
How can an SAP-certified partner help you select the right licensing model?
SAP-certified partners can provide valuable insights into selecting the right licensing model based on a company’s size, industry, and long-term goals. They also assist in negotiating licenses, ensuring cost efficiency, and optimizing license usage to align with industry standards and business demands.
