SAP Partner Licensing Models

SAP Partner Licensing Models

• Reseller agreements allow partners to sell SAP licenses.
• Managed service providers (MSPs) offer SAP solutions.
• OEM agreements embed SAP software in partner products.
• Cloud service providers offer SAP licenses via cloud platforms.
• Partners provide tailored licensing solutions for clients.
• Licensing models depend on partner roles and customer needs.

SAP Partner Licensing Models

SAP is a global leader in enterprise resource planning (ERP) software, helping businesses streamline processes, manage operations, and drive growth. One key driver behind SAP’s widespread adoption is its robust partner ecosystem.

SAP partners play a critical role in extending the functionality of SAP solutions and providing implementation, integration, and support services to businesses of all sizes.

To accommodate the diverse range of services these partners provide, SAP offers a variety of licensing models that cater to different partner roles and customer needs.

This article explores the different SAP partner licensing models, their key features, challenges, and how they can benefit businesses within the SAP ecosystem.

The SAP Partner Ecosystem

SAP’s partner ecosystem is a vast network of organizations that work with SAP to sell, build, and deliver SAP solutions.

These partners include value-added resellers (VARs), system integrators (SIs), independent software vendors (ISVs), managed service providers (MSPs), and consulting partners.

Each type of partner plays a distinct role within the ecosystem, and their licensing requirements vary based on the services they provide and the solutions they offer.

SAP partner licensing models are designed to enable these partners to deliver SAP software and services effectively while ensuring compliance and transparency.

The licensing models vary depending on the partner’s role, customer engagement type, and the specific SAP products and services involved.

This diversity allows SAP to create a flexible framework that can accommodate various business models, thereby supporting the growth and sustainability of the partner ecosystem and SAP itself.

Key SAP Partner Licensing Models

1. SAP PartnerEdge Program

The SAP PartnerEdge program is the cornerstone of SAP’s partner ecosystem. It provides a structured framework for partners to engage with SAP and its customers. The PartnerEdge program is divided into different categories to accommodate the unique needs of various partner types:

• Sell: Partners in the Sell category focus on reselling SAP solutions. These partners are typically value-added resellers (VARs) that work closely with customers to understand their needs and provide the appropriate SAP software licenses. The licensing model for Sell partners is based on reselling SAP licenses to end customers, often with added services such as consulting and support. By bundling software and services, Sell partners can offer a more comprehensive solution to customers, enhancing customer satisfaction and retention.
• Build: Partners in the Build category are independent software vendors (ISVs) who develop complementary solutions that extend the capabilities of SAP products. These partners need licensing arrangements that allow them to build, test, and deploy their applications on SAP platforms. Build partners often use the SAP Business Technology Platform (BTP) to create and integrate solutions, and licensing is typically based on platform usage and development rights. Build partners are integral to SAP’s innovation strategy, as they create niche applications that address specific industry needs, making the SAP ecosystem more versatile.
• Service: Service partners, such as system integrators and consulting firms, provide implementation, integration, and support services. These partners do not resell SAP licenses directly but need access to SAP systems to deliver their services. Licensing for Service partners is often structured around accessing SAP environments for development, testing, and implementation. Service partners are crucial in ensuring that SAP solutions are deployed effectively and optimized to meet customers’ business requirements.
• Run: Run partners, such as managed service providers (MSPs), offer cloud hosting and managed services for SAP applications. Licensing for Run partners is focused on providing the right to host SAP software in their own data centers or through third-party cloud providers. These partners require specific licenses to deliver hosting services and manage SAP systems on behalf of customers. Run partners are critical in helping businesses transition to cloud-based environments, providing scalability and reducing the need for on-premise infrastructure.

2. Value-Added Reseller (VAR) Licensing

Value-Added Resellers (VARs) are a key component of SAP’s partner network. VARs purchase SAP licenses at a discounted rate and resell them to end customers, often bundling the software with additional services such as consulting, customization, and ongoing support.

• Discounted Licensing: VARs benefit from purchasing SAP licenses at a discounted rate, which allows them to add value through additional services while maintaining competitive pricing. This discount is usually negotiated based on the volume of licenses the VAR commits to purchasing from SAP. VARs must manage their sales pipelines effectively to meet these commitments and maximize profitability.
• Bundled Services: VARs often provide a full package that includes software, implementation, customization, and support. Their licensing model allows them to act as a one-stop shop for customers, simplifying the purchasing process and ensuring that customers receive end-to-end support. This bundling approach enhances customer satisfaction by offering a seamless experience from procurement to implementation and beyond.
• Revenue Sharing: In some cases, VARs and SAP use a revenue-sharing model, where the VAR receives a portion of the revenue generated from selling SAP licenses and related services. This model incentivizes VARs to actively promote and sell SAP solutions while providing value-added services to customers. Revenue sharing also aligns the interests of SAP and VARs, fostering a collaborative relationship that benefits both parties.

3. OEM Licensing Model

The OEM (Original Equipment Manufacturer) licensing model allows partners to embed SAP software into their solutions and sell it as a bundled offering. This model is particularly popular with independent software vendors (ISVs) who want to enhance their software products by leveraging SAP’s powerful ERP capabilities.

• Bundled Solutions: OEM partners can integrate SAP software into their applications and offer customers a complete, packaged solution. This provides customers a seamless experience, as they receive the combined capabilities of SAP and the partner’s solution without purchasing separate licenses. Bundled solutions help customers reduce complexity and ensure compatibility between different software components.
• Flexible Licensing: The OEM licensing model offers flexibility in how partners price their solutions. Partners can choose to bundle SAP software with their pricing structure, which allows them to create tailored offerings for specific customer segments or industries. This flexibility enables OEM partners to target niche markets and create value-added products that meet unique customer needs.
• Brand Leverage: By embedding SAP software into their products, OEM partners can leverage SAP’s brand and reputation to enhance the marketability of their solutions. This helps build credibility and customer trust, particularly in industries where SAP is a recognized leader. OEM partners benefit from SAP’s established reputation, which can help them differentiate their offerings in a competitive market.

4. Managed Service Provider (MSP) Licensing

Managed Service Providers (MSPs) are responsible for hosting, managing, and maintaining SAP solutions for customers. MSPs offer cloud hosting, system monitoring, and ongoing maintenance, allowing customers to focus on their core business activities without worrying about IT infrastructure.

• Hosting Rights: MSPs require specific licenses to host SAP software in their data centers or third-party cloud platforms. These licenses are typically based on the number of instances or the capacity required to host SAP solutions for multiple customers. Hosting rights are a key component of MSP licensing, as they determine how MSPs can offer cloud services to their clients.
• Subscription-Based Licensing: The MSP licensing model often follows a subscription-based approach, where customers pay a recurring fee for access to SAP software and related services. This model provides predictable revenue for MSPs and allows customers to avoid the large upfront costs associated with traditional licensing. Subscription-based licensing also supports flexibility, as customers can scale their usage up or down based on changing business needs.
• Scalability: MSPs can scale their services to accommodate customers’ changing needs. Their licensing models are designed to support scalability, allowing MSPs to add new customers or expand existing services without renegotiating their entire licensing structure. Scalability is particularly important for MSPs that serve growing businesses, as it enables them to adjust resources and services per customer requirements.

5. Cloud Service Provider Licensing

With the growing adoption of cloud-based solutions, SAP has introduced licensing models specifically for Cloud Service Providers (CSPs). These partners offer cloud-based versions of SAP applications, providing customers with scalability, flexibility, and reduced infrastructure costs.

• Pay-As-You-Go Licensing: CSPs often provide pay-as-you-go licensing models, where customers pay for the SAP resources they use monthly or annually. This model is particularly attractive to businesses looking for cost flexibility and scalability, allowing them to adjust their SAP usage based on current needs. Pay-as-you-go licensing is ideal for businesses with fluctuating demand, enabling them to control costs more effectively.
• Cloud Hosting and Management: CSPs are responsible for hosting SAP solutions on their cloud infrastructure, managing system updates, and ensuring high availability. The licensing model for CSPs includes provisions for hosting rights, platform management, and customer support. CSPs must maintain a robust infrastructure and provide reliable service to ensure customer satisfaction and compliance with SAP’s standards.
• Multi-Tenancy: Many CSPs offer multi-tenant SAP environments where multiple customers share the same infrastructure. Licensing for multi-tenant environments requires careful management to ensure compliance with SAP’s terms and conditions while providing customers with a secure and isolated experience. Multi-tenancy helps CSPs optimize resource utilization, leading to cost savings passed on to customers.

Challenges of SAP Partner Licensing Models

While SAP partner licensing models offer numerous opportunities, they also present several challenges that partners must navigate to ensure compliance and profitability:

• Complexity of Licensing Terms: SAP’s licensing terms can be complex, with different requirements for each partner type. Partners must fully understand the licensing agreements to avoid compliance issues and ensure they provide accurate information to customers. The complexity of licensing terms can lead to misunderstandings, resulting in unexpected costs or compliance risks.
• Balancing Profitability and Compliance: Partners must balance the need to remain profitable with the requirement to comply with SAP’s licensing terms. Misunderstanding the licensing model or incorrectly licensing customers can lead to financial penalties and damage the partner’s reputation. Ensuring compliance requires ongoing training and investment in licensing expertise.
• Evolving Licensing Models: SAP’s licensing models continue to evolve as the company shifts its focus towards cloud solutions and subscription-based offerings. Partners must stay updated on changes to SAP’s licensing policies and adjust their business models accordingly to remain competitive. Adapting to these changes can be resource-intensive, particularly for smaller partners that may lack the capacity for frequent restructuring.
• Customer Education: Educating customers on the different SAP licensing models can be challenging, particularly when customers are unfamiliar with SAP’s products and services. Partners must be able to clearly explain the benefits, costs, and requirements of each licensing model to help customers make informed decisions. Effective customer education is crucial for building trust and ensuring that customers fully understand the value of their purchasing solutions.

Benefits of SAP Partner Licensing Models

Despite the challenges, SAP partner licensing models offer significant benefits to both partners and customers:

• Flexibility for Partners: SAP’s partner licensing models allow partners to choose the model that best fits their business and customer needs. Whether a partner wants to resell SAP software, develop complementary solutions, or provide managed services, there is a licensing model that supports their business strategy. This flexibility helps partners create unique value propositions that differentiate them in the market.
• Access to SAP’s Technology: Partners gain access to SAP’s powerful technology stack, enabling them to develop innovative solutions and provide high-quality services to customers. This access helps partners differentiate themselves and offer unique value propositions. By leveraging SAP’s technology, partners can create customized solutions that address their customers’ business challenges.
• Customer Value: Working with an SAP partner means customers receive the expertise and support needed to successfully implement and use SAP solutions. Partner licensing models allow customers to choose the engagement type that best suits their needs—purchasing software, outsourcing system management, or integrating custom-built applications. This variety of options ensures that customers can find a solution that fits their budget and business requirements.
• Scalable Solutions: Many SAP partner licensing models, particularly those for MSPs and CSPs, are designed to support scalability. This allows customers to start small and scale their SAP usage as their business grows without making significant upfront investments in IT infrastructure. Scalable solutions are particularly beneficial for startups and growing businesses that must manage costs while expanding their operations.

Best Practices for SAP Partners

To succeed within the SAP ecosystem and make the most of SAP partner licensing models, partners should follow these best practices:

• Stay Informed: SAP’s licensing models and policies are continuously evolving. Partners should stay informed about changes by attending SAP training sessions, participating in webinars, and maintaining close communication with SAP account managers. Keeping up with the latest developments ensures that partners adapt quickly and remain compliant.
• Invest in Licensing Expertise: Understanding SAP’s licensing terms is crucial for compliance and profitability. Partners should invest in licensing expertise by hiring specialists or training their existing teams to understand the intricacies of SAP licensing. Licensing experts can help partners navigate complex agreements and avoid costly mistakes.
• Focus on Customer Education: Educate customers about the different licensing options available and help them choose the one that best fits their business needs. Transparent communication about costs, benefits, and requirements will help build trust and ensure long-term relationships. Providing clear, concise information can also help reduce the likelihood of misunderstandings and enhance customer satisfaction.
• Optimize License Usage: Use licensing management tools to optimize license usage and ensure compliance. Tools like SAP License Administration Workbench (LAW) or third-party solutions like Snow Optimizer for SAP can help partners manage their licenses effectively and avoid compliance issues. License optimization helps partners reduce costs and maximize the value they provide to customers.
• Leverage SAP Branding: Partners can enhance their credibility by leveraging SAP’s brand and reputation. Including SAP’s branding in marketing materials and positioning themselves as trusted SAP partners can help attract customers and differentiate the partner’s offerings. Leveraging SAP’s reputation can be advantageous when entering new markets or competing against larger players.

SAP Partner Licensing Models FAQ

What are the main types of SAP partner licensing models?
SAP offers several partner models, including reseller agreements, managed service providers (MSPs), OEM partnerships, and cloud service providers.

What is an SAP reseller agreement?
Reseller agreements allow partners to sell SAP licenses directly to customers, often with additional value-added services like support or training.

How do managed service providers (MSPs) work in SAP licensing?
MSPs offer SAP licenses as part of their broader service offerings, often bundling software with managed IT services and ongoing support.

What is an OEM partnership in SAP licensing?
OEM partners embed SAP software into their products, allowing customers to use SAP solutions within the partner’s offering without purchasing separate SAP licenses.

How do cloud service providers fit into SAP licensing models?
Cloud providers offer SAP licenses via their cloud platforms, allowing customers to run SAP software in a cloud environment with subscription-based pricing.

What flexibility do SAP partner licenses offer?
SAP partner licenses allow customization and tailoring of licensing solutions to fit customer needs, providing more flexibility than direct licensing from SAP.

What are the benefits of using SAP partner licensing?
Partner licensing can offer cost savings, specialized services, and more flexibility in deployment and support compared to purchasing directly from SAP.

How do partners manage SAP license compliance?
Partners are responsible for ensuring their clients are properly licensed and comply with SAP’s terms, often providing tools and services to help with compliance.

Can partners offer both on-premise and cloud licensing?
Yes, depending on the customer’s requirements, SAP partners can offer various licensing options, including on-premise and cloud-based solutions.

What is the difference between direct SAP licensing and partner licensing?
Direct licensing involves purchasing licenses directly from SAP, while partner licensing involves acquiring licenses through an SAP-approved partner who may offer additional services.

What are the advantages of OEM partnerships for customers?
OEM partnerships seamlessly integrate SAP software into a partner’s solution, offering customers a simplified experience with fewer vendors to manage.

How do cloud service providers impact SAP licensing costs?
Cloud service providers offer subscription-based pricing, which can reduce upfront costs and provide more flexibility than traditional licensing models.

What role do partners play in SAP digital transformation?
Partners help businesses implement SAP solutions, manage licenses, and drive digital transformation by offering tailored solutions that fit specific business needs.

How do SAP partners handle customer support?
Many SAP partners provide comprehensive support services, including implementation, maintenance, and compliance management, ensuring customers get the most from their licenses.

Can partners customize SAP licensing models for specific industries?
Yes, SAP partners often specialize in specific industries, offering tailored licensing models that align with the unique needs of businesses in those sectors.