SAP S/4HANA Licensing

SAP S/4HANA Licensing Overview

• User-Based Pricing: Costs depend on user types and roles.
• Deployment Type: Different costs for cloud vs on-premise.
• Digital Access: Charges for third-party integrations and digital documents.
• Subscription or Perpetual: Choose between subscription or one-time licensing.

Introduction to SAP S/4HANA Licensing

Overview

SAP S/4HANA is SAP’s next-generation enterprise resource planning (ERP) suite, designed to help businesses in their digital transformation journey.

Understanding the licensing concepts for SAP S/4HANA is crucial for organizations, as it ensures they invest appropriately and use the software within compliance. Proper licensing knowledge can avoid costly mistakes and ensure businesses fully use their entitlements.

With SAP S/4HANA, SAP has reimagined its approach to licensing. The transition from traditional SAP ERP to S/4HANA represents a significant shift in how businesses are expected to acquire and manage software licenses.

For companies moving to this advanced platform, a clear understanding of licensing helps optimize their ERP investment and reduces potential financial risks.

SAP’s Approach to Licensing

SAP licensing has evolved significantly with the introduction of S/4HANA. Historically, SAP ERP was licensed primarily based on named users and software components. With S/4HANA, SAP offers more flexible licensing options, especially for digital innovation and new deployment models.

The licensing model now focuses on consumption and business metrics, aligning with S/4HANA’s capabilities to provide greater transparency and flexibility. This evolution reflects SAP’s commitment to offering simpler, more predictable licensing while accommodating diverse business needs, whether on-premise, in the cloud, or through hybrid deployment.

Differences Between SAP ERP and SAP S/4HANA Licensing

License Model Differences

The licensing model for traditional SAP ERP differs considerably from that of SAP S/4HANA. In the traditional model, the primary focus was licensing named users—individuals who accessed the system—and licensing by specific software modules. In contrast, SAP S/4HANA introduces more flexible licensing options, allowing companies to base licensing on outcomes and value metrics, such as the amount of business conducted through the platform rather than merely the number of users.

S/4HANA licenses are more focused on enabling business processes rather than specific components. This process-oriented approach offers increased agility, allowing companies to add modules or features as they expand their system use. This particularly benefits enterprises looking to scale their operations while maintaining predictable costs.

New Features Impacting Licensing

With S/4HANA, SAP has introduced various new features and digital capabilities that directly impact licensing terms. The S/4HANA suite includes embedded analytics, machine learning, and IoT integration, leading to new licensing considerations.

• Digital Access Licensing: Digital access refers to how third-party applications indirectly access SAP data. S/4HANA introduced digital access licenses to account for the increasing use of APIs and automation, ensuring that customers remain compliant even as their systems become more interconnected.
• Business Value Licensing: The move towards licensing based on business value metrics means that customers pay for the value the software delivers rather than a static number of users. This fundamental shift encourages greater system utilization without necessarily increasing costs proportionally.

SAP S/4HANA On-Premise vs. Cloud Licensing

On-Premise Licensing

For organizations opting for on-premise deployment of SAP S/4HANA, licensing remains similar to the traditional perpetual license model. Companies purchase licenses upfront and often pay a maintenance fee for continued support and updates. On-premise licenses are typically calculated based on user roles and functionalities. This approach offers significant control over the IT environment, with costs concentrated in upfront capital expenditure and ongoing operational expenses for infrastructure and maintenance.

The on-premise model benefits organizations with specific data residency requirements or those wanting greater control over their ERP ecosystem. However, significant IT infrastructure investments and staffing are required to manage deployments effectively.

Cloud Licensing

Cloud-based licensing for SAP S/4HANA provides a different approach. Its subscription model typically covers the software and associated infrastructure. Customers can choose between public (multi-tenant) and private (single-tenant) options. Cloud licensing is billed on a pay-as-you-go basis, and the organization can scale resources up or down according to its needs.

The subscription nature of cloud licensing shifts the financial model from a large capital expenditure to operational expenses, allowing businesses to predict costs better and align spending with system usage. The cloud model also reduces the burden on IT teams, as SAP manages infrastructure, software updates, and maintenance.

Comparison

• Flexibility: Cloud licensing offers more flexibility than on-premise licensing, as businesses can easily add or remove users or features. On-premise licenses require more effort to scale due to the need for additional infrastructure and upgrades.
• Costs: On-premise licensing involves large upfront payments, whereas cloud licensing provides a subscription-based model, reducing the initial financial burden.
• Implementation: On-premise licensing allows greater customization and control but requires complex implementation. In contrast, cloud licensing offers standardized deployments managed by SAP, which can speed up implementation.

SAP S/4HANA Digital Core Licensing

What is the Digital Core?

The SAP S/4HANA Digital Core refers to the essential modules that form the backbone of business processes, including finance, sales, procurement, and manufacturing. The digital core serves as a unified data model, bringing together transactional and analytical processes in real-time, helping businesses gain insights and make decisions more effectively.

SAP’s digital core goes beyond traditional ERP by integrating modern capabilities like artificial intelligence, predictive analytics, and machine learning into standard processes. It is the foundation upon which additional, specialized business processes can be built and expanded.

Core Licensing Requirements

Licensing the S/4HANA digital core involves understanding several key elements:

• User Licensing: Depending on the deployment model, companies must license users based on their access and roles within the system (e.g., professional users, casual users, and core users).
• Digital Access: The digital access component covers indirect usage of the digital core, such as data access by external applications and automated processes. Companies can choose between traditional user-based licenses or pay for digital document usage.
• Add-Ons and Extensions: Beyond the digital core, companies can license add-ons based on their specific needs, such as industry-specific solutions or integration with additional SAP or third-party systems. These add-ons come with separate licensing requirements and can be added to the core license.
• Consumption Metrics: SAP S/4HANA also allows licensing based on consumption metrics such as transactions processed or volume of data handled, allowing for more accurate licensing that directly correlates to the business value derived from the system.

Migrating from SAP ERP to S/4HANA Licensing

Migration Path

Migrating from an existing SAP ERP license to an S/4HANA license can be a complex process that requires careful planning. The transition involves converting legacy licenses to new licensing terms that align with the features and capabilities of SAP S/4HANA. Here are the key steps to transition:

• License Assessment: The first step is to assess existing SAP ERP licenses. This assessment determines the valid licenses that must be converted to fit the new S/4HANA landscape.
• Choosing Deployment Option: Decide whether the deployment will be on-premise or cloud-based. The chosen deployment model will impact both licensing costs and migration approaches.
• Mapping Roles and Processes: Identify the roles and business processes within the organization and map them to the relevant S/4HANA modules and functionalities. This helps ensure the appropriate licenses are acquired.
• Conversion Assistance from SAP: SAP provides tools such as SAP Transformation Navigator to guide organizations through migration. Additionally, SAP’s Product Conversion Policy helps simplify converting existing on-premise licenses to new S/4HANA licenses.

Conversion Scenarios

Several scenarios might apply when transitioning licenses from SAP ERP to S/4HANA:

• One-to-One Conversion: Existing licenses can be directly converted to S/4HANA equivalents in simple cases. This is common when functionality requirements do not change significantly.
• License Reorganization: When additional capabilities of S/4HANA are required, organizations may need to adjust their existing licenses. This might involve upgrading some licenses or acquiring new ones to align with the expanded scope.
• Indirect Access Licensing: Organizations may also need to re-evaluate indirect access licenses, especially if third-party applications interact with SAP more extensively in the S/4HANA environment.

SAP S/4HANA Licensing Costs Explained

Cost Elements

Licensing costs for SAP S/4HANA consist of multiple elements. Understanding each cost element is crucial for planning and budgeting:

• Initial License Cost: This is the upfront cost of acquiring the software licenses, typically calculated based on the deployment model (on-premise or cloud).
• User Licenses: S/4HANA charges based on the number and type of users accessing the system. User types vary (e.g., professional, functional) and influence cost accordingly.
• Digital Access: SAP uses a Digital Access model for indirect access scenarios, where third-party systems use SAP data. This cost is calculated based on document types generated through digital interaction.
• Support and Maintenance: Organizations must also pay annual support fees for updates, maintenance, and customer support. These fees are generally a percentage of the initial license fee.

Factors Influencing Costs

Several factors can influence the overall licensing costs for S/4HANA:

• User Counts: More users translate to higher costs, especially if those users require higher-level access or have more significant system responsibilities.
• Deployment Types: The costs differ for on-premise, cloud, and hybrid deployments. Cloud-based solutions often involve ongoing subscription fees, whereas on-premise deployments have higher upfront costs.
• Support Packages: Different support packages, such as SAP Enterprise Support or SAP Standard Support, affect the overall costs and offer various service quality, updates, and proactive monitoring.

Licensing User Types in SAP S/4HANA

User Categories

SAP S/4HANA offers several user types, each with specific roles and responsibilities. Licensing costs vary depending on the category of user, and understanding these distinctions is vital for accurate budgeting:

• Professional Users: These power users require full access to SAP functionality, including the ability to make configuration changes and perform administrative tasks.
• Functional Users: Functional users can access specific modules based on their roles, such as finance or procurement. They work within designated areas of SAP S/4HANA but lack system-wide permissions.
• Limited Users: Limited users have restricted access. They can perform specific tasks like data entry or view reports but cannot make significant changes. This type of user is generally the least costly to license.

Pricing Based on User Types

• Professional Users: These users are the most expensive due to the level of access they require. Organizations should limit these licenses to those who genuinely need them.
• Functional Users: Functional users are mid-tier in terms of cost, offering a balance between access and price, making them ideal for team leads or department-specific roles.
• Limited Users: These are the least expensive, making them suitable for casual or infrequent users. Organizations often leverage this category to minimize overall licensing expenses.

Customizing SAP S/4HANA Licensing Models

Flexible Licensing Options

SAP understands that not all businesses have identical needs, and S/4HANA licensing models are designed to be flexible. Organizations can customize licensing to match their specific requirements.

Some customization options include:

• Pay-As-You-Go: SAP offers consumption-based pricing for organizations that need flexibility. This model particularly benefits companies with varying usage patterns, as they pay based on system usage rather than upfront costs.
• Enterprise Management Licenses: Companies can acquire licenses for specific modules, such as finance, procurement, or supply chain, to ensure that they only pay for features that they actively use.
• Mix-and-Match User Types: Organizations can mix user types to match business needs. This ensures that departments that require higher-level access have it while other areas remain cost-effective with limited user licenses.

Common Adjustments

Examples of common licensing customizations include:

• Seasonal User Adjustments: Businesses that experience seasonal changes in workforce size can adjust user licenses accordingly. This is common in industries like retail, where user counts spike during peak sales periods.
• Licensing for Hybrid Environments: Companies with both on-premise and cloud components can customize licensing to account for usage in both environments without overpaying.
• License Consolidation: For companies migrating from multiple SAP instances to a unified S/4HANA environment, consolidating licenses can help reduce costs by avoiding redundant licensing and improving system efficiency.

SAP S/4HANA Industry-Specific Licensing

Industry Adaptation

SAP S/4HANA provides specialized licensing models tailored to the unique needs of different industries. This approach ensures that automotive, retail, healthcare, and manufacturing businesses can access functionalities that fit their specific operational requirements. For example:

• Automotive: SAP offers modules for supply chain optimization and production planning tailored to automotive production’s high-volume, precision-driven nature. Licensing for automotive businesses often includes access to tools for supplier collaboration and quality management.
• Retail: Retail companies can leverage SAP S/4HANA’s inventory management and point-of-sale integration capabilities. The licensing here often aligns with the number of stores, transactional volume, and features like omnichannel management.
• Healthcare: SAP licenses might include access to patient data management and regulatory compliance modules in healthcare, enabling hospitals to manage complex administrative needs.

By offering industry-specific licensing, SAP helps organizations avoid paying for generic modules they do not need while focusing on features that add the most value to their business processes.

Additional Industry Features

Each industry often has unique requirements, and SAP S/4HANA caters to these through additional industry-specific functionalities. These additional features require tailored licensing, depending on the scope of operations:

• Advanced Manufacturing: SAP provides advanced features for manufacturing industries that require IoT integration and predictive maintenance. These features come with specific licensing add-ons.
• Financial Services: Financial institutions may require tools for risk management, asset management, and regulatory reporting. Depending on the complexity and scale of the operations, these features are licensed separately.
• Retail Promotion Management: Retailers can opt for licenses that include promotion and discount management, which help optimize customer engagement and boost sales. These features are licensed based on usage volume and transactional data.

SAP S/4HANA Indirect Access Licensing

Understanding Indirect Access

Indirect access occurs when third-party applications or non-SAP systems interact with data stored in the SAP S/4HANA environment. This means that even if users aren’t directly logging into SAP, accessing SAP-managed data through external applications can count as indirect usage, which requires proper licensing.

Indirect access is increasingly important because of growing connectivity through APIs, IoT devices, and third-party applications. For example, a CRM system that updates customer information in S/4HANA or a web portal that pulls data from SAP for end users counts as indirect access, which must be licensed correctly.

Pricing and Compliance

SAP introduced the Digital Access Adoption Program to help customers better understand and manage indirect access. This program charges based on the number of digital documents created or accessed via indirect usage, including sales orders, purchase orders, or invoices.

Compliance with indirect access licensing requires careful monitoring of third-party system interactions with SAP data. Best practices include:

• Track Third-Party Integrations: Maintain a log of all third-party systems and integrations that interact with SAP S/4HANA to identify and quantify indirect access.
• Audit Regularly: Conduct regular audits to ensure that indirect access is appropriately tracked and licensed and to prevent unplanned costs during official SAP audits.
• Consultation: Engage with SAP or licensing experts to properly classify third-party interactions and estimate the costs associated with indirect access.

License Audits in SAP S/4HANA

Audit Process

SAP license audits for S/4HANA are conducted to ensure that companies comply with licensing agreements. Typically, SAP sends a notification to initiate the audit, followed by a formal request for usage data.

The audit process involves:

• Data Collection: SAP collects data from LAW (License Administration Workbench) and other relevant tools to assess user and system usage.
• Verification: SAP cross-references the data provided with the existing license agreements to ensure compliance.
• Resolution: Once discrepancies are identified, the organization must resolve any under-licensing issues, which may involve purchasing additional licenses or paying back fees.

Common Triggers for Audits

SAP audits can be triggered by several factors, including:

• Usage Growth: A significant increase in users or data volume might prompt SAP to verify that adequate licenses are in place.
• Indirect Access Indicators: Integration with multiple third-party systems can prompt an audit to ensure that all indirect access points are appropriately licensed.
• Non-Compliance History: SAP is more likely to initiate subsequent audits if an organization has previously been found non-compliant.

Preparation for Audits:

• Documentation: Maintain clear and organized documentation of all user licenses, roles, and instances of indirect access.
• Periodic Internal Audits: Conduct internal audits regularly to identify and correct any discrepancies before SAP initiates an official audit.

Optimizing SAP S/4HANA Licensing for Cost Savings

Rightsizing Licenses

Rightsizing licenses involves matching the right license type to each user or process, ensuring cost efficiency without over-licensing or under-licensing.

Here are some steps to achieve rightsizing:

• User Analysis: Conduct a thorough analysis of user roles and activities. Based on each user’s needs, assign appropriate licenses (e.g., limited, functional, or professional).
• Periodic Review: Reassess user roles periodically. Users may move between roles or departments, and their access requirements could change. Regular reviews ensure that user licenses are still appropriate.
• Automated Tools: Utilize SAP or third-party SAM (Software Asset Management) tools to track user behavior and recommend license adjustments to minimize costs.

Avoiding Over-Licensing

Over-licensing occurs when an organization pays for more licenses or features than they need. To avoid over-licensing:

• Evaluate Feature Usage: Regularly evaluate which features and modules are actively used. If certain features are underutilized, consider scaling back to a more cost-effective license.
• Leverage Licensing Flexibility: SAP S/4HANA offers different user categories and deployment models (on-premise, cloud, hybrid). Leverage this flexibility to select the most cost-effective option based on actual needs.
• Tailored Licensing Packages: Work with SAP to develop tailored licensing packages that align closely with current and future needs, ensuring no unnecessary expenditure on unused features.

By rightsizing and avoiding over-licensing, organizations can save significant costs while ensuring compliance and efficient use of SAP S/4HANA capabilities.

SAP S/4HANA Licensing for SMBs

Specific Needs of SMBs

SAP S/4HANA licensing can be adapted to meet the specific needs of small and mid-sized businesses (SMBs), allowing them to take advantage of powerful ERP functionalities without overwhelming costs.

SMBs typically need a scalable, simple solution to manage and offer essential functionalities without the complexities larger enterprises require.

• Scalable Packages: SAP provides licensing options that scale with business growth, ensuring that SMBs pay only for the features they use and add new capabilities as they expand.
• Simplified Modules: SMBs often do not require the full range of modules available to large enterprises. SAP allows customization in licensing, enabling SMBs to choose core functions like finance, inventory management, and sales, making the ERP deployment more manageable.

Affordable Licensing Options

To make SAP S/4HANA more accessible to SMBs, SAP offers a variety of affordable licensing models:

• Subscription Licensing: The subscription model is a popular choice for SMBs. It allows them to pay a monthly or annual fee based on the number of users and required functionalities. This model reduces upfront costs and makes budgeting more predictable.
• Public Cloud Deployment: The public cloud option provides a lower-cost solution with essential SAP S/4HANA features. SMBs can benefit from reduced infrastructure costs, as SAP manages the cloud environment, resulting in significant savings.
• Pay-As-You-Go: This flexible option allows SMBs to pay only for what they use, making it ideal for businesses with fluctuating needs. It reduces financial risk and keeps costs aligned with actual usage.

Enterprise Licensing Strategies for SAP S/4HANA

Licensing for Large-Scale Deployments

Large enterprises face unique challenges regarding SAP S/4HANA licensing, particularly due to the scale of deployments involving multiple locations and many users.

Developing an effective licensing strategy helps minimize costs and ensure compliance across the entire organization.

• Centralized License Management: Enterprises benefit from managing licenses centrally, ensuring that entitlements are distributed efficiently across different locations. A centralized approach helps prevent over-licensing or under-licensing in any part of the business.
• Volume Licensing: Enterprises can use volume licensing agreements, which provide cost savings by bundling licenses for users and processes across different departments and geographic locations. Volume licensing ensures better pricing while simplifying license management.
• Hybrid Deployment Considerations: Enterprises often deploy a hybrid of on-premise and cloud instances. Strategically licensing these environments can optimize costs, as on-premise instances may require different licensing terms than cloud environments.

Managing Multiple Instances

In complex enterprise environments, managing multiple instances of SAP S/4HANA requires a robust strategy to ensure compliance and efficiency:

• Instance Consolidation: Where possible, consolidate multiple instances into fewer centralized environments. This reduces the number of licenses required and simplifies overall management.
• User Access Optimization: Allocate licenses based on actual user needs. Ensure that high-level licenses are used by those requiring them while users with limited roles receive more cost-effective ones. This helps in optimizing license costs.

Digital Access Licensing in SAP S/4HANA

What is Digital Access?

Digital Access refers to the licensing needed when third-party applications or automated processes indirectly access SAP data. This access could occur through APIs, third-party applications, IoT devices, or robotic process automation.

For example, if a CRM system sends customer orders into SAP S/4HANA without direct user intervention, it is considered indirect or digital access.

Digital access licenses are based on the type and volume of documents processed indirectly through SAP, such as sales orders, purchase orders, and invoices. This model ensures that businesses remain compliant even as they use multiple integrated systems.

Licensing Implications

• Document-Based Licensing: SAP charges for digital access based on the number of documents created or accessed via indirect use. Organizations must understand what types of interactions require licensing to avoid non-compliance.
• Monitoring Tools: Use SAP tools like SAP Document and Reporting Compliance to estimate costs and stay compliant. These tools help track indirect access points and identify where digital access fees might apply.
• Engaging Experts: Consult with SAP licensing experts to assess which digital documents might be impacted by indirect access and to determine the most cost-effective way to manage these licenses.

SAP S/4HANA Licensing Best Practices

Best Practices

• Conduct Regular Internal Audits: Regularly audit SAP usage internally to ensure licenses are being used correctly and compliance is maintained. This helps identify underused licenses or cases where rightsizing might lead to cost savings.
• Use Licensing Tools: Use tools like License Administration Workbench (LAW) to track usage effectively. Third-party SAM tools can also provide additional visibility and help optimize license allocation.
• Rightsize Regularly: Adjust licenses to match current user needs. This involves downgrading high-cost licenses for users with minimal access requirements or upgrading if roles expand.
• Educate Teams: Training IT and procurement teams on licensing models ensures they understand the impact of system changes on licensing and helps avoid costly missteps.

Staying Updated

• SAP License Model Updates: Stay updated on changes to SAP’s licensing models, which frequently evolve to accommodate new functionalities and deployment options. Keeping informed about changes helps prevent surprises during audits.
• Contract Reviews: Regularly review SAP contracts to ensure they align with your business needs and remain beneficial as the organization scales or shifts strategies. Re-negotiating terms during contract renewals can sometimes lead to more favorable conditions.

How to Calculate SAP S/4HANA Licensing Metrics

License Metric Elements

When calculating SAP S/4HANA licensing metrics, several key elements need to be considered. Understanding these metrics is essential to determine licensing costs accurately and to ensure compliance:

• Number of Users: The licensing cost is often driven by the number of users and their roles. User categories such as professional, functional, and limited users are priced differently depending on the level of system access they require.
• System Interactions: Licensing also depends on indirect access, where third-party systems or applications interact with SAP data. This metric considers how many documents are generated or accessed through these external integrations.
• Transaction Volume: Some license models may factor in the number of transactions processed within the system, such as the volume of sales orders, purchase orders, or invoices handled.
• Digital Access: The use of digital technologies like IoT devices or automated systems that indirectly access SAP data is calculated based on the number and type of digital documents generated.

Tools to Help Calculate

Calculating these metrics can be complex, especially in a large enterprise with numerous integrations and users. To simplify the calculation process, SAP and third-party providers offer several tools:

• License Administration Workbench (LAW): LAW consolidates data from multiple SAP systems to generate a unified report, making it easier to track user licenses and compliance.
• SAP License Utilization Information (LUI): LUI provides detailed insight into current license consumption, enabling companies to monitor and manage their license allocations more effectively.
• Third-Party SAM Tools: Tools like Flexera and Snow Software offer advanced capabilities to track license usage, optimize costs, and ensure compliance by providing automated and comprehensive licensing reports.

Global SAP S/4HANA Licensing Requirements

Cross-Border Licensing

For multinational organizations, managing SAP licenses across different countries requires careful consideration of cross-border licensing rules.

The key challenges include:

• Global Visibility: Ensuring licenses are distributed effectively across different branches while avoiding redundant licenses in multiple countries. Centralized management tools can help maintain visibility and optimize the allocation of licenses globally.
• Data Residency Compliance: Each country may have unique data residency requirements that affect how data is managed within the SAP system. Licensing agreements must accommodate these requirements, especially when deploying on-premise solutions in countries with strict data localization laws.
• License Portability: In some regions, licenses may need to be portable for a dynamic workforce. Ensuring that SAP licenses can be reassigned across locations is key to maintaining flexibility while meeting regional licensing requirements.

Localization Requirements

SAP S/4HANA licensing is also impacted by localization requirements—specific legal and regulatory requirements that vary by region:

• Local Taxation and Compliance: Some regions require specific modules or add-ons for local tax calculation and compliance. Licensing these modules may be mandatory to meet local government regulations.
• Language and User Interfaces: Licensing for local language versions or additional user interfaces may be required in multilingual environments, especially when an enterprise spans several countries.

Cloud Extensions in SAP S/4HANA Licensing

Licensing Extensions

Cloud-based extensions are increasingly popular in SAP S/4HANA deployments, providing enhanced functionalities and additional scalability. Licensing cloud extensions involves a few specific considerations:

• Subscription-Based Licensing: Most cloud extensions are licensed using a subscription model, with pricing based on the number of users or the amount of data processed. These licenses are typically billed monthly or annually.
• Packaged Solutions: SAP offers pre-packaged solutions like SAP Cloud Platform Integration and SAP Analytics Cloud that provide additional functionalities to S/4HANA. Each cloud extension requires separate licensing, typically linked to specific metrics like data volume or API calls.
• Flexible Scaling: Cloud extensions allow for scalable pricing, meaning businesses can adjust licensing as they grow or shrink without being tied to a rigid pricing model. This is particularly useful for businesses experiencing seasonal fluctuations.

Cloud Integration Costs

Integrating cloud-based extensions into SAP S/4HANA can involve additional costs that need to be considered:

• Integration Licensing: Licensing may be required for integration tools to connect third-party cloud applications to SAP S/4HANA. The number of integration points and the complexity of data flow can impact licensing costs.
• Data Transfer Costs: Data transfer between different environments may also be costly when integrating cloud solutions. These costs are typically based on data volume and can vary significantly based on the frequency and size of transfers.
• Consulting Services: Integrating cloud extensions often requires technical consulting for configuration and deployment, which adds to the overall cost. Consulting services can be bundled into the licensing package, but it’s essential to understand the associated fees.

SAP S/4HANA Licensing for Multi-Tenant Environments

Understanding Multi-Tenant Licensing

Multi-tenant environments are shared cloud infrastructures where multiple customers share the same hardware and software resources, but each tenant’s data and configurations remain isolated. SAP S/4HANA can be deployed in a multi-tenant setup, which has specific licensing implications:

• Shared Resources: Licensing in a multi-tenant environment often involves subscription fees that account for the shared use of cloud resources. This typically makes multi-tenant deployments more cost-effective compared to dedicated single-tenant solutions.
• User-Based Licensing: In multi-tenant deployments, licenses are often allocated based on the number of users across different tenants. SAP provides options to add users incrementally, giving businesses flexibility as they grow.
• Service-Level Agreements (SLAs): Licensing agreements in multi-tenant setups may also include SLAs that outline the level of support and uptime guaranteed by SAP. Understanding these terms is crucial to ensure they meet the business’s operational needs.

Cost and Compliance Factors

Multi-tenant licensing comes with both advantages and challenges:

• Cost Benefits: Multi-tenant deployments offer reduced costs due to shared infrastructure and simplified management. Subscription pricing makes budgeting easier, as costs are predictable and tied to user counts or resource usage.
• Compliance Challenges: Data compliance is more complex in multi-tenant environments, as companies must ensure that their data management practices adhere to regional laws and industry standards. Proper auditing and monitoring are essential to meet compliance in these setups.
• Scalability: Multi-tenant environments allow businesses to scale up or down easily by adjusting the number of users or resources. This flexibility is a significant cost-saving factor, particularly for enterprises with dynamic operational needs.

SAP S/4HANA Licensing FAQ

What are the main elements of SAP S/4HANA licensing? SAP S/4HANA licensing includes user-based pricing, deployment type costs (cloud or on-premise), digital access fees for third-party integration, and subscription or perpetual license models.

How does SAP S/4HANA cloud licensing work? Cloud licensing is based on a subscription model, with costs tied to the number of users, features needed, and cloud infrastructure managed by SAP.

What is digital access in SAP S/4HANA? Digital access refers to the indirect use of SAP data by third-party applications or systems. It is licensed based on the type and number of documents created or accessed.

How can SMBs benefit from SAP S/4HANA licensing? SMBs can leverage scalable and affordable licensing models like subscription-based or pay-as-you-go options, allowing them to access enterprise-level ERP without significant upfront investment.

What are the key user categories in SAP S/4HANA? SAP S/4HANA users are categorized as professional, functional, and limited, with each type having different access levels and associated costs.

What are the differences between cloud and on-premise licensing? Cloud licensing involves subscription payments and SAP-managed infrastructure, while on-premise licensing requires upfront payment and customer maintenance of the infrastructure.

How do I manage SAP S/4HANA license audits? Prepare for license audits by maintaining accurate user data, tracking digital access, using tools like SAP LAW, and conducting regular internal compliance checks.

What is SAP S/4HANA’s digital core? The digital core includes essential ERP modules like finance, procurement, and sales. Licensing the core covers an organization’s foundational business processes.

How do cross-border licenses work in SAP S/4HANA? Cross-border licensing allows multinational companies to allocate licenses across different countries. It requires managing compliance with regional laws, data residency, and SAP’s global licensing policies.

What are the cost elements of SAP S/4HANA licensing? Costs include initial license fees, user-based licensing, digital access fees, support and maintenance costs, and additional cloud extensions or integration expenses.

How is indirect access licensed? Indirect access is licensed based on the number and type of documents generated by third-party systems that access SAP data, requiring a digital access license.

Can I customize my SAP S/4HANA license? Businesses can customize their licenses based on user needs, deployment models, and required modules. Options like mix-and-match user types or scaling cloud services are available.

How do enterprises handle multi-tenant SAP S/4HANA environments? Multi-tenant licensing is subscription-based, with shared cloud resources. Enterprises benefit from lower costs and flexible user management across shared infrastructure.

What tools help calculate SAP S/4HANA licensing metrics? SAP’s License Administration Workbench (LAW) and third-party SAM tools like Flexera and Snow Software can help calculate user counts, document interactions, and ensure compliance.

How can I optimize SAP S/4HANA licensing for cost savings? Regularly auditing usage, rightsizing user licenses, leveraging cloud scalability, and avoiding over-licensing are effective ways to reduce unnecessary costs.