SAP S/4HANA Digital Core Licensing
- User-Based Licensing: Charges based on named users.
- Engine Licensing: Based on resource or functionality usage.
- Indirect Access Licensing: Covers third-party systems accessing SAP data.
- Cloud vs On-Premises: Pricing varies by deployment option.
- Runtime Database License: Optional for HANA database usage.
SAP S/4HANA Digital Core Licensing
SAP S/4HANA, the latest ERP suite from SAP, has rapidly become the go-to solution for companies looking to streamline their operations, drive innovation, and enhance their business agility.
However, understanding how to license SAP S/4HANA can be daunting for many businesses, especially given the various intricacies of its “Digital Core” licensing model.
This article breaks down the essentials of SAP S/4HANA Digital Core Licensing in an easy-to-understand way, covering key concepts, the structure of licenses, different user types, common challenges, and practical examples.
1. What is SAP S/4HANA Digital Core?
SAP S/4HANA Digital Core represents the heart of an organization’s ERP landscape, providing critical functionalities to manage finance, supply chain, manufacturing, procurement, and other enterprise operations.
It is built on SAP’s in-memory HANA database, which allows for real-time data processing and significantly enhances performance and decision-making capabilities.
The term “Digital Core” signifies the foundational capabilities necessary for digital transformation—in other words, all the key elements that help a business operate efficiently and with the agility required to compete in today’s fast-paced world.
2. Key Concepts in SAP S/4HANA Licensing
Licensing SAP S/4HANA can be complex due to the range of options and flexibility. Let’s go over the major aspects of S/4HANA licensing:
- Perpetual vs. Subscription Licenses:
- Perpetual License: This model allows customers to pay a one-time fee for a license that they own indefinitely. However, annual maintenance costs apply for support and updates.
- Subscription License: Under this model, customers pay recurring fees (usually annually) to use the software, similar to a Software-as-a-Service (SaaS) model.
- User Types: SAP S/4HANA licensing is also based on the different types of users accessing the system. User types include:
- Professional Users: These users have full access to all modules and functionalities in SAP S/4HANA. Typically, this includes key roles like business analysts or finance managers.
- Functional Users: These users require access to specific functions within the system, such as warehouse clerks or procurement officers, with limited capabilities compared to professional users.
- Productivity Users: These users have read-only access or require minimal data entry capabilities.
- Modular Licensing: SAP S/4HANA offers modular licensing, allowing organizations to license only the necessary modules. For example, a business might license finance and sales but opt out of modules like production planning or human resources.
3. The Transition to S/4HANA: Converting Existing Licenses
Many existing SAP customers are transitioning from older versions, like ECC 6.0, to SAP S/4HANA. SAP provides a license conversion path to facilitate this migration.
There are three primary options:
- System Conversion: Moving from an existing on-premise ERP (like ECC) to S/4HANA. The existing licenses are transitioned into S/4HANA licenses based on specific rules and calculations.
- New Implementation: Starting fresh with SAP S/4HANA includes purchasing new licenses.
- Selective Data Transition: A hybrid approach where businesses move selected portions of their processes or data while maintaining certain existing systems.
For instance, a manufacturing company using SAP ECC could convert its finance and production licenses to equivalent S/4HANA licenses, ensuring continuity while upgrading to a more robust system.
4. Types of Deployment and Licensing Models
SAP S/4HANA offers several deployment options, each with its licensing considerations:
- On-Premise:
- In this model, the company owns the software, and the data resides on the company’s servers.
- Licensing: Businesses can opt for perpetual or subscription-based licenses. This model offers flexibility that is advantageous for companies with stringent data security or customization requirements.
- Cloud (Public and Private):
- Public Cloud: A multi-tenant environment hosted by SAP, where different customers share resources. Public cloud deployments use a subscription-based licensing model.
- Private Cloud: Single-tenant hosting that allows greater customization while offering the cloud’s scalability benefits.
- Licensing: Both public and private cloud deployments are typically licensed through a subscription model, with charges based on factors like a number of users and data volume.
5. Digital Access (Indirect Access Licensing)
Digital Access, also known as indirect access licensing, is a significant component of SAP S/4HANA’s licensing model. It refers to how non-SAP systems or applications access SAP data.
Consider a scenario where an e-commerce website accesses inventory data from the SAP system to update stock levels. This access, which doesn’t involve a direct user logging into SAP but still utilizes SAP data, requires Digital Access licensing.
- Digital Access Document Types: SAP has defined several document types for digital access licensing, including sales orders, purchase orders, and invoices.
- Counting Documents: Instead of counting users, Digital Access licensing focuses on counting documents created by non-SAP systems, offering greater transparency for businesses.
6. Key Challenges in SAP S/4HANA Licensing
The following are some challenges that companies face when licensing SAP S/4HANA:
- Complexity: With so many options, determining the most cost-effective licensing model for a particular business can be challenging.
- Indirect Access Concerns: Businesses often struggle to determine how much indirect access occurs within their operations. Failing to account for digital access can lead to unexpected costs.
- Over- or Under-licensing: Companies often purchase more licenses than they need or find themselves short when new requirements emerge.
Example: A company that overestimates the number of professional users might pay more for licenses than they truly need. Alternatively, underestimating users leads to a lack of key personnel access, disrupting operations.
7. Practical Strategies for Optimizing Licensing Costs
Here are some practical strategies to ensure cost-effective licensing:
- Conduct a Licensing Audit: Perform a detailed assessment of current and future requirements to identify the optimal number of licenses required.
- Rightsizing Users: Classify users appropriately. For instance, categorize employees who only need basic access as productivity rather than professional users.
- Negotiation and Bundling: Businesses with large SAP environments should negotiate bundle licenses or enterprise agreements to lower per-user costs.
- Monitor Digital Access: Utilize SAP’s tools to monitor document usage and estimate digital access requirements accurately.
Example: A medium-sized retail business can save costs by differentiating its head-office users (professionals) from its store clerks (productivity users) who only need limited system access to look up inventory.
8. Understanding License Measurement and Compliance
SAP requires customers to comply with their licensing agreements by reporting their usage. This is done through SAP’s License Administration Workbench (LAW), which measures user counts, digital access, and overall license compliance.
- User Classification: Ensure each user is classified correctly according to their roles. Incorrect classification could lead to higher license costs.
- Digital Document Compliance: Track documents accessed by third-party systems to ensure Digital Access is licensed correctly.
SAP also offers the SAP Licensing Audit service, which reviews a customer’s system usage to determine if they comply with the agreed licensing terms. Non-compliance could lead to penalties or retroactive costs.
9. Key Insights for Businesses Considering SAP S/4HANA Licensing
- Flexibility and Scalability: SAP S/4HANA licensing is designed to be flexible and scalable, ensuring that businesses only pay for what they use.
- Consider Long-Term Growth: If your business is expected to grow, ensure your chosen licensing model will support scalability without dramatic cost increases.
- Partner Support: Engaging with SAP partners or consulting with SAP licensing experts can be invaluable. These experts can provide customized advice on the right licensing mix for your business.
10. Examples of Licensing Scenarios
To better understand the SAP S/4HANA licensing structure, let’s consider a few scenarios:
- Scenario 1: A Small Manufacturing Company
- Requirement: Needs access to finance, production, and supply chain management.
- License Model: Perpetual licenses with on-premise deployment.
- Users: 10 professional users (accounting and production managers) and 30 functional users (warehouse clerks and machine operators).
- Scenario 2: A Retail Chain
- Requirement: Requires real-time inventory updates across its e-commerce and in-store systems.
- License Model: Subscription model with private cloud deployment.
- Users: 50 productivity users (store associates) and Digital Access licensing for integration with their e-commerce platform.
- Scenario 3: A Growing E-Commerce Startup
- Requirement: Only finance and sales modules are used, with a strong need for scalability.
- License Model: Subscription-based license in a public cloud environment.
- Users: 5 professional users (finance and management) with Digital Access to the website’s customer orders.
FAQ: SAP S/4HANA Digital Core Licensing
What is included in SAP S/4HANA Digital Core Licensing?
The licensing covers core ERP functionalities such as finance, supply chain, procurement, and manufacturing, with flexible module options.
How is SAP S/4HANA licensing structured?
Licensing is based on user types, organizational needs, and deployment preferences, including subscription and perpetual models.
Is the licensing suitable for cloud or on-premise deployment?
Yes, it supports cloud and on-premise models, providing adaptability for business requirements.
What industries can benefit from SAP S/4HANA?
It is tailored for retail, manufacturing, healthcare, and utilities with specific extensions.
How are user types defined in licensing?
Users are classified as professional, functional, or employee, impacting the license type and cost.
Can licensing be scaled as the business grows?
It is designed to scale with the organization’s size, transaction volume, and functionality needs.
Does SAP S/4HANA licensing include analytics tools?
Basic analytics and reporting are part of the core license, with options to add advanced analytics solutions.
What is the difference between subscription and perpetual licenses?
Subscription licenses are recurring with cloud flexibility, while perpetual licenses are a one-time purchase for on-premise setups.
Are third-party integrations covered under licensing?
Basic integrations are supported; additional licensing may be required for specific external tools or platforms.
Does the licensing model support global operations?
Yes, it accommodates global organizations’ multi-currency, multilingual, and multi-entity scenarios.
What costs are associated with indirect access?
Indirect access involves licensing for third-party systems interacting with SAP data, charged per integration.
How does licensing manage user role changes?
Flexible licensing adjusts user types and access as roles evolve, ensuring compliance.
Is training or support included in the license?
Core licensing often includes basic support; advanced training or dedicated support requires additional packages.
How does SAP ensure compliance with licensing terms?
SAP conducts audits and offers tools to track usage and adherence to licensing agreements.
Are upgrades or updates covered in the license?
Cloud licensing includes automatic updates; on-premise users may need separate agreements for upgrades.
