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SAP Licensing Quick Guide

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Headquarters of SAP AG, located in Walldorf, Germany

Headquarters of SAP AG, located in Walldorf, Germany

This Quick Guide is available in PDF format – Simply subscribe to our free newsletter to receive a free copy instantly.

Introduction

The SAP Licensing model is considered to be among the most complex and confusing in the generally bewildering area of software licensing. While many software vendors typically calculate their license fees by counting the number of active and inactive users, or by considering the number of servers and CPUs, SAP defines licenses according to usage — without really examining usage — an omission that may well be the root cause of the confusion. Adding to the lack of clarity are the issues related to “named users” – the basic unit of the SAP licensing model.  For example, there are no real names behind named users — and, a named user can have multiple usernames in different systems. This article will describe the basic SAP licensing model, its difficulties, and how SAP customers typically handle the issue of licensing. In order to keep it simple, we will not include a discussion of “engines” (e.g., payroll, etc.), which are additional components that are charged separately, on top of the basic licensing fees.

The SAP Licensing Model

SAP licensing is based on “named users”. Customers buy various types of “named users” from SAP, such as: Professional named users, Limited Professional named users, Employee named users, etc. Each “named user” may have a real username(s) attached to it at a given date. That means that throughout the specified period of time, if you purchased, say, 50 Professional type user names from SAP, you must not exceed the maximum of 50 usernames that are defined as Professional in your system. You can, it should be noted, switch the username(s) attached to a “named user” if, for example, the user has left the company or has changed his license type. Confounding the issue are the SAP definitions of user/license types, which are quite vague, as you can see from the following short versions of the definitions of the three most-popular SAP license types:

  1. “Professional User” is a named user who is authorized to perform operational-related and system administration / management roles supported by the licensed software, and has also been given the rights granted under the SAP Application Limited Professional User.
  2. “Limited Professional User” is a named user who is authorized to perform limited operational roles supported by the licensed software.
  3. “Employee User” is a named user who is authorized to perform the following roles supported by the licensed software, all solely for such individual’s own purpose and not for or on behalf of other individuals.

Classifying Users

Distinguishing between and determining the correct classification for SAP users is fraught with difficulties. For example, if a user is using three different usernames in three different SAP systems –(1) a BI system for managerial reports, (2) an ERP system for stock transfer reports, and, (3) a second ERP system for monthly invoice approvals – should he be classified as an Employee, a Limited Professional or a Professional – or perhaps one of the many other license types that populate the SAP universe?

Unfortunately, SAP does not supply a simple tool to quickly classify users according to their de-facto activity. What SAP does supply is a standard SAP program (SAP transaction SLAW) to collect and consolidate the classifications that the customer has previously defined in all of the organization’s systems, and send them to SAP for annual inspection.

The issue of assigning license types to users becomes more crucial when we consider two issues: the cost of the licenses and the size of the companies involved. The difference between a Professional user license type (± US$ 4,000-5,000, plus 22% annual maintenance) and, say, an Employee license type (± US$ 1,000, plus 22% annual maintenance) is significant — and causes one to think twice before assigning a higher-level license type to a user. In addition, an average SAP customer has 3,000-5,000 SAP users – of which 300 are typically replaced each year, and another 700 change positions (and, thus, SAP usage) each year – making user classification a lengthy and Sisyphean task.

For all these reasons, SAP customers try to create simple, logical ways in which to classify their users … simple, in order to save time and resources – and logical, in order to maintain the spirit of SAP’s definitions.  Over the years, SAP customers have successfully developed a number of informal methods to classify users.

Classifying SAP Users by Authorizations

Organizations often begin the search for a workable classification method by considering the classification of their users according to their “static” authorizations. In effect, this means that if a user is authorized to perform certain activities, he will be classified accordingly, even if he has never actually performed these activities. Organizations typically abandon this method rather quickly, since it is based on the assumption that users are using 100% of their authorizations, when, in fact, in most organizations, less than 10% of “static” authorizations are actually used. Having understood that this method will not deliver accurate results, they search for ways to classify users according to actual authorization usage, i.e., “dynamic” or “de-facto” authorizations.
Below are summaries of three of the most popular usage-based, customer-developed methods of classification.

Classifying SAP Users by Usage

  • Amount of Activity – The most popular method of assigning license types to users is by the amount of their activity. The more activity a user performs in the system, the higher the level of license type he should have. “Activity” is measured in SAP by “Dialog Steps”, which, in practical terms, are the number of key strokes and screens that are used. You can see these counts, for example, in SAP Activity ST03N (Workload Statistics). Using this method, the customer pre-sets a scale. For example, for users whose activity is up to 1,000 dialog steps per month, their license type will be set to “Employee”; for those with dialog steps totalling between 1,001 and 5,000, their license type will be set to “Limited Professional”, and so forth. The scale can be set for an entire year, as a monthly average, or as a monthly maximum (i.e., the maximum value for all months in the last year). For users with multiple usernames in multiple systems, it is common to consider the highest value as the user’s representative value.
  • Number of Different Activities – Another method used for classifying users is according to the number of different activities. This is based on the assumption that the more different activities a user performs, the “more widely” he is using the system, and therefore should be classified as a higher level user type. As with the “Amount of Activity” method, here, too, the customer pre-sets a scale. For example, if a user has up to 2 different activities per month, the license type will be set to “Employee”; for between 3 to 10 activities, a user’s type will be set to “Limited Professional”, etc. With this method also, the scale can be set for an entire year, as a monthly average, or as a monthly maximum.  Though it is common – when classifying users with multiple usernames in multiple systems – to consider the highest value as the user’s representative value, the calculation is sometimes more complicated (mainly with BI or CRM systems) when using this method.
  • Activity Group/Type of Activity – This method is considered to be the “closest” method to SAP definitions. However, it is also the most time-consuming to perform. The Activity Group method establishes the license level by the type of activity performed by the user.  Generally, more important activities require a higher-level license.  For example, only Professional users perform activities associated with monetary transfers, while Employee users would typically perform activities related to viewing reports. The Activity Group method requires a definition of groups, such as Create, Change, and Display. You can say, for example, that a user who uses activities from Group “Display” will be classified as “Employee” – while a user who uses activities from Group “Change” will be classified as “Limited Professional”. If a user is using activities in two or more Activity Groups, the license type would be set to the highest type attached to these groups. Some SAP customers include additional inspections when using this method – and may further classify users according to the number of different activities.

Classifying users according to the above (and other) methods is, of course, much easier and more “logical” than classifying them according to the strict definitions of the SAP agreement. However, the use of these methods requires a significant investment of time and resources. Therefore, many SAP customers use automated tools that are dedicated to SAP licensing. A leading example of such a tool is LicenseAuditor by Xpandion.

Moshe Panzer, Xpandion

Moshe Panzer, Xpandion

Optimizing SAP Licenses over Time

Most SAP customers are large organizations that plan several years ahead. Therefore, they need a tool that will classify users according to an appropriate (and logical) method, will intelligently handle their license inventory over time, and will enable them to predict annual licensing expenditures for one, two, five and ten years down the road, in order to prepare accurate budgets.  Since it is almost impossible to implement these methods using Excel, many SAP customers turn to automated tools like the ones mentioned above.

Wrap Up

In an attempt to overcome the complexities inherent in the SAP licensing model, SAP customers have developed a number of informal methods for classifying users and assigning them SAP license types. Although these methods are simpler and more logical than the strict SAP definitions, their implementation requires the expenditure of significant organizational resources. However, help is out there — Automated tools are available that enable organizations to quickly and easily manage their SAP licenses – saving time and resources and enabling reliable budgetary planning.

Moshe Panzer owns a SAP consultancy firm and has, over the past 15 years, accumulated extensive experience in SAP Development, Security and Licensing. He is also the Founder and CEO of Xpandion, a company that develops automated management solutions in the areas of SAP licensing and SAP security, based on the visibility of actual real-time SAP usage.

This Quick Guide is available in PDF format – Simply subscribe to our free newsletter to receive a free copy instantly.

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Martin Thompson

Martin is an independent software industry analyst, SAM consultant and founder of The ITAM Review and The ITSM Review. Learn more about him here and connect with him on Twitter or LinkedIn.

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6 Responses to " SAP Licensing Quick Guide "

  1. Ma. Wilma M. Corella says:

    May I request for a free copy of the SAP Licensing Quick Guide in pdf? Thank you and more power to you.

  2. Selva K says:

    Some of the simple steps which can be taken for reducing the license cost is the following

    1. Locking users for inactivity on a regular basis
    2. Making sure users are classified across all the system by proper license type
    3. Having the the same first and last name in all the systems
    4. Turning on the parameter so users cannot have multiple logons 

    SAP Audit |SAP Controls| SAP Security Audit 

  3. ricky says:

    hi,
    my company have 2 box (finance + logistic box and HR box ). for profecional lisence does it apply only one system(box) or can be for all box?

  4. Vel Jayapaul says:

    SAP will count Unique User IDs with Highest chargeable License type such as Professional Users regardless of how many SAP system(s) are being used. If you have duplicate User IDs for same user then it will be counted twice. Auditbot, SAP Partner ( http://www.auditbot.us ) has best algorithm to classify SAP users based on their assigned/executed TCodes.

  5. Krishna Kumar says:

    My Company develops our own add-on. We need to install GTS system. Do we need license for development system and sandbox too . we are not using it for Production.

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