SAP Licensing 101 for SAP Customers

Ann Marie Gray
Ann Marie Gray in Licensing, Indirect Access April 10, 2018

The Background on the SAP Licensing Conversation

Since September 2017, ASUG and other global user groups (including DSAG and SUGEN) have brought the voice of the customer into the decision-making process at SAP to address some challenges related to licensing, sales, and audits.

 Through the process, ASUG has remained focused on what we consider the top three objectives:

  • Define and clarify the key terms related to licensing, especially indirect access (also known as indirect use).
  • Identify the actions customers can take to understand whether they’re compliant based on these definitions.
  • Explain what customers can do if they find licensing gaps.

Looking for the latest updates on the topic of indirect access and SAP licensing? Visit ASUG's Licensing Resource Center.

Our Disclaimer

If any information described here conflicts with what’s written in your contract with SAP, your contract always wins. SAP’s new pricing model and the associated changes will only apply to new contracts—they do not change what’s in an existing agreement. Please also be aware that these definitions and descriptions apply to SAP ERP systems only and not to SAP’s cloud-based applications.

Key SAP Licensing Definitions to Know

What is Use? Use is use. All use must be licensed, regardless of whether that license requires a fee. Any SAP processes that you engage in your business must be licensed. If you create transactions in SAP, that is use. This is how SAP protects its intellectual property, just as any other technology company.

This is SAP’s on-premise contractual definition of use: “’'Use’ is defined as to activate the processing capabilities of the software, load, execute, access, employ the software, or display information resulting from such capabilities. Use may occur by way of an interface delivered with or as a part of the software, a licensee or third-party interface, or another intermediary system. All ‘use’ of SAP software, regardless of the method of access, requires an appropriate license.”

What is Direct Access (or Direct Use)? This describes the traditional way of licensing SAP products by counting the number of human users with hands on keyboards.

SAP calls this “direct human access" and defines it like this: “Direct Human Access occurs when humans log on to use the ERP system by way of an interface delivered with or as a part of the ERP system. Direct Human Access is licensed based on users.”

What is Indirect Access (or Indirect Use)? This is everything else that does not qualify as hands on keyboards from human users. Think interfaces, bots, EDIs, Internet of Things (IoT) networks, and more. If data gets into SAP or a transaction is created through a non-human action, this is considered indirect access, also known as indirect use.

SAP defines indirect use as “when people or things use the Digital Core without directly logging into the system.”

What is Indirect Static Read? When data is exported out of SAP for use in downstream business processes in a batch-related way, whether through reports or data sent to third-party systems. Indirect static read is considered use, but it is free of charge when done out of your ERP system.

What Indirect Static Read Is (and Isn’t): If you export your customer master data to analyze in a spreadsheet or send on to another application, that is considered static read, with no associated charge.

One example of what indirect static read is not? Constructing a real-time interface that accepts a customer number and returns customer information.

SAP does not require a license for indirect static read if it meets ALL of these criteria:

  • The process was initiated by an individual licensed to use the SAP ERP system from which the information is being exported.
  • It runs automatically on a scheduled basis, and
  • The use of such exported information by the non-SAP systems and/or their users does NOT result in any updates to and/or trigger any processing capabilities of the SAP ERP system.

How to Determine Whether I’m in Compliance With SAP

  1. Once place to start is to audit your contracts, looking into the products you’ve licensed and the associated entitlements. You should know:
  • The number and types of your user licenses.
  • What engines you have and what they entitle you to do.
  • What other license types you may have (for example, Sales Order Processing).
  1. When you look at your enterprise architecture, ask yourself what has changed since your original SAP purchase. What contract amendments have you added over time? Has your business substantially changed since your license went into effect? (For example, has your sales volume increased substantially, have you completed any mergers or acquisitions, or have you expanded a critical area of your operations such as procurement? This may offer a clue that your licensing agreement could be out of sync with the reality of your day-to-day business operations.

As you investigate this:

  • Don’t assume that you are properly licensed.
  • Don’t assume that the project team did the necessary due diligence when they updated the technology architecture.

These are some areas to look for potential changes that could affect whether you’re in compliance with your licensing agreement:

  • Interfaces that connect with SAP and create transactions.
  • eCommerce functions, including order entry, inventory availability, etc.
  • Third-party applications that may be integrated with your systems, such as Workday, Infor, or Salesforce.
  • Internal applications creating transactions that trigger SAP processes.
  • IoT transactions that create sales orders, service orders, or purchase orders.
  1. It’s a good time to re-evaluate your user licensing agreement to identify the user types you have available and what they can do. How are these users getting access to SAP systems? Are they using these systems through “hands on keyboards,” or sitting behind an aggregator application?

You can measure the activity levels that these user licenses are supporting to make sure they are realistic. For example, if you have 10 user licenses in accounts receivable and you are processing a million accounts receivable transactions each year, it’s possible that your current use doesn’t align with your contract.

Cleaning up your user lists can actually deliver some efficiencies. If you have a set of unused user licenses, it may be possible to exchange these for credit toward a new contract. If you choose to pursue this with SAP, make sure you have documentation that supports your calculations.

 What Are My Options?

If you believe you are appropriately licensed: Do your homework and prepare sufficient supporting documentation in case of an audit. SAP has made changes to the audit process to make it more transparent and fair for customers. Know your rights and take advantage of the opportunity to appeal the results of an audit if you don't agree with them.

If you believe you have a licensing gap: You can stall and do nothing, but this will not work forever. You can buy more of what you currently license to close the gaps. Or you can evaluate whether the new document-based licensing model is a good fit for your business.

SAP’s New Document-Based Licensing Model

What is SAP’s document-based pricing model? This new model eliminates the challenges related to reconciling human users and indirect use. Rather than measuring use by the number of “hands on keyboard” users, the new model counts the total number of documents created through both direct and indirect methods. These are the documents created during sales, invoicing, and purchasing activities, for example. The new SAP pricing model covers nine document types:

  • Sales Document Line Item
  • Invoice Document Line Item
  • Purchase Document Line Item
  • Service & Maintenance Document
  • Manufacturing Document
  • Quality Management Document
  • Time Management Document
  • Financial Document Line Item
  • Material Document Line Item

What is not counted? Updates, reads, and deletes, as well as cascading documents created based on one document that is counted. (For example, a sales order document that generates a number of associated financial accounting documents.)

Positive Changes to SAP’s Audit Practices

Based on the input of ASUG and other user groups, SAP made significant organizational and policy changes to move all audit-related decisions and activities to a separate global audit organization. The SAP team has put a lot of conscientious thought into how the audit process can be more transparent and fair. We believe these changes will result in a much better experience for SAP customers.

Here’s what you should know about SAP’s sales and audit changes:

  • There will no longer be any crossover between sales and audit functions.
  • Sales is only responsible for selling licenses to customers.
  • Audit is only responsible for making sure a customer’s consumption aligns with their contract.
  • There are no more regional audit and compliance teams, only one global team.
  • Customers can expect a transparent and consistent audit process.
  • The scope of the audit will be specific and documented, including what the audit is not covering.
  • Customers will receive a report with the audit findings.
  • That report will include confirmation that the customer has complied, for future reference.
  • Customers will have the right to make appeals, with the support of a neutral third party through the resolution process.

An important distinction between SAP audit types: SAP conducts two types of audits. The basic annual audit is conducted by customers themselves and is not comprehensive. Passing this audit does not mean you are in full compliance. You can only know whether you’re in compliance if you undergo an enhanced audit, which is led by SAP.

How can you avoid an audit? Unfortunately, all you can do today is be prepared for an audit, should you be selected. But in the future, SAP is working on consumption dashboards that will empower customers to self-monitor their systems and arm you to address any compliance issues before they happen.

How ASUG Can Help With Licensing Questions

To start, you can visit our Licensing Resource Center for our latest coverage of this topic.

You can also send your questions to licensing@asug.com so we can answer them directly and share useful feedback with SAP. Your comments, questions, and observations will help shape our conversations as we continue to engage with SAP on these topics. We need to hear your voice to continue to make change.