The ITAM Review

News, reviews and resources for worldwide ITAM, SAM and Licensing professionals.

Making sense of SAP’s new Indirect Access license

One of the biggest ITAM stories right now has been SAP’s lawsuits against two of its customers – the drinks manufacturer Diageo and the Belgian brewer Anheuser-Busch InBev. Both lawsuits have centred around, or at least paid close attention to, indirect access – particularly accessing SAP via multiple levels of 3rd party software such as SalesForce.

Many of SAP’s customers have been left angry and confused by the vendor’s willingness to aggressively pursue large damages against its own customers. This criticism has only been galvanised by the lack of clarity from SAP on its position on indirect access. In what appears to be an attempt to allay fears and stop customers looking around at solutions from other vendors, SAP have finally unveiled a series of licensing changes (released 10th April 2018).

What’s changed?

SAP will differentiate between two types of users:

Direct (Human) Access

SAP define this as occurring:

when people log on to use the SAP Digital Core by way of an interface delivered with or as a part of the SAP software”.

This will continue to be charged on a “per-user” basis.

Indirect (Digital) Access

This new license offering is aimed at access by 3rd parties, IoT (Internet of Things) devices, bots etc. and will be licensed based on transactions/documents processed by the SAP system.

SAP define this as occurring:

“when devices, bots, automated systems, etc. directly access the Digital Core. It also occurs when humans, or any device or systems indirectly use the Digital Core via a non-SAP intermediary software, such as a non-SAP front-end, a custom-solution, or a third-party application”

This new model will be available for the traditional SAP ERP application as well as S/4HANA and S/4HANA Cloud.

This appears to directly address the issue at the centre of the Diageo case – when “humans…indirectly use [SAP ERP] via a…third-party solution”.

How does Indirect access licensing work?

SAP have identified 9 document types that will be chargeable under this new model, other document types will not be charged. These are:

How is it charged?

  • Customers are charged only for the initial document creation; reading/updating/deleting a document does not incur further charges.
  • Some documents are weighted differently too – while most are weighted at 100%, those of a lower value/more frequently used will be weighted at 20%.
  • The more documents you create, the lower the price per document will be.

The “SAP ERP Pricing for the Digital Age” document (linked in the Further Reading section) gives several examples, for each of the document types, as to when licenses will/won’t be required.

Existing customers wishing to use this new licensing model, historical data will be used to estimate how many documents will be required. For new customers, benchmark data applicable to their business will be used.

This suggests an up-front payment model, which isn’t too surprising. I do wonder what will happen at the end of the license period should the estimate not be exact – which it almost certainly won’t.

Under-estimate

Should more documents have been used, I imagine there will be a “True Up” process in place, like a Microsoft Enterprise Agreement. Will these additional documents be prices the same as those already paid for or, like in the early days of Microsoft Azure, will customers face a premium for exceeding their initial estimate?

Over-estimate

This could be the most interesting situation – what happens if, at the end of the license term, the number of documents created is lower than that initially estimated and paid for?

Will there be a refund policy? Will the excess roll over to the next year/agreement? Or will that money already paid, but not used, be forfeited?

How to take advantage?

SAP are making two options available to existing customers wanting to use this new license model.

License Exchange

This keeps the existing contract in place and adds an addendum coving the new Indirect Access licensing.

Organisations can trade-in existing licenses, such as Purchase Order Processing or Sales & Service Order Processing, for an “up to” 100% credit which is balanced against the new document licenses. 100% of the “maintenance base of the converting licenses” is also carried forward.

Contract Conversion

ERP customers licensing SAP S/4HANA can convert their legacy contracts to the new format and receive “up to” 100% credit of the old contract value, which is then applied against the new contract. Again, the maintenance base will see no reduction.

Feedback from User Groups

Many of the various SAP User Groups have been involved in discussions with SAP that have helped shape these changes. Some of their feedback to the changes was featured in the announcement from SAP.

DSAG – the German Speaking SAP User Group – say these changes are “the remarkable consequence of intensive workshops and discussions with DSAG” and that they “continue to work together on an unprecedented pricing model for the Internet of Things”.

The SAP User Group Executive Network (SUGEN) “applaud SAP for bringing to market this new model that should bring transparency and simplicity to customers for future SAP software use cases” but also point out that this doesn’t solve the problem for all customers and have asked that SAP “demonstrate to customers that the new model will be cost-neutral for their existing use cases”.

What about the threat of back maintenance?

Confusion for customers remains here. While SAP have previously stated:

“SAP assures customers who proactively engage with us in good faith that we will not pursue back maintenance for under-licensing of SAP Software associated with indirect access”

SUGEN have also said:

“Customers need reassurance that if they believed they were correctly licensed, due to factors such as discussions or communication with SAP or ambiguous contract clauses, they will not face new license costs”

So SUGEN are not just demanding protection from back maintenance, but a guarantee that, through licensing their scenario correctly from now on, a customer won’t pay any more than under the old model – which was licensed incorrectly; an Indirect Access Amnesty, if you will.

Will SAP do something like this – both to win back customer favour and to drive adoption of their new licensing metric? The new model will surely lead to significant revenue for SAP as IoT and bots continue their seemingly inexorable rise. Which will win out – the short-term gain of suing more customers for indirect access breaches or the long-term plan of moving customers to the new model, with a view to increased license expenditure over the next 5, 10, 15+ years? SAP will need to make a call on this and clarify (and justify) its position with its customers.

What’s next?

It’s an interesting move from SAP.. Will they forgo all that back maintenance? Will customers receive 100% credits if they make the switch? Will this create new areas of uncertainty and simply move the problem around within an organisation?

This is yet another element that the next-generation ITAM department must consider. ITAM departments must understand their organisation’s plans around digital access, now and in the future, to best determine which of the contract options to opt for now.

Looking ahead, understanding how 3rd party software, bots and Internet of Things (IoT) devices interact with the SAP system is going to be crucial to ensuring compliance, and this will require good communication between ITAM and other areas of the business such as Enterprise Architects and the ERP teams. They will need to understand the impact their designs could have on the organisation’s licensing position – having 1 bot that creates a certain document type from an external action could add a significant amount to the SAP bill. This needs to be worked through and modelled across departments. Bots and IoT are the shiny new things for many people and I’m sure they’ll start to appear in places where they’re not strictly necessary…making people aware of the financial implications should help to temper this.

Over-licensing: The new SAP risk?

The challenge for SAP customers now is that the new Indirect Access license could lead to the risk of over-licensing. Without a deep understanding of which documents are being created in which scenarios, it may become much easier to overpay for indirect access under this new model.

One potential issue will be correctly counting the documents.

SAP are clear that it’s only the initial document creation that incurs a charge, so a Time Sheet record being created will be a charge – but if it then creates a Financial Document in the SAP system too, that secondary document will not have a cost associated.

How easy will it be to track the origin of all the documents in a system? To say which were triggered by internal or external systems, or which are original documents vs. those which are derivatives of other documents? Customers will need exemplary record-keeping and audit trails to fully prove their decisions to SAP. Likewise, getting these wrong and counting too many documents will lead to overspend… Perhaps organisations will prefer to err on the side of caution rather than risk a lawsuit from SAP?

Conclusion

It will be interesting to see how this impacts customer interactions and perceptions of SAP, and whether this new licensing model removes – or at least reduces – the confusion and potential liability around SAP indirect access.

Will we see a surge in indirect license models over the coming years as other large vendors follow suit in devising licensing models tailored to the emerging world of bots and Internet of Things devices? And does this mark the end of SAP’s customer litigations in this area? Only time will tell.

Further Reading

https://news.sap.com/sap-unveils-first-of-its-kind-new-pricing-model/

http://news.sap.com/wp-content/blogs.dir/1/files/Pricing_for_Digital_Age_Overview-3.pdf

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About Rich Gibbons

Rich has been in the world of IT and software licensing since 2003, having been a software sales manager for a VAR, a Microsoft licensing endorsed trainer, and now an ITAM analyst looking at software licensing and cloud.

A Northerner renowned for his shirts, Rich is a big Hip-Hop head, and loves travel, football in general (specifically MUFC), baseball, Marvel, and reading as many books as possible. Finding ways to combine all of these with ITAM & software licensing is always fun!

Connect with Rich on Twitter or LinkedIn.

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