CIO Playbook: Navigating Licensing for New SAP S/4HANA Embedded Features
Executive Summary
Modern CIOs must grasp the licensing implications of SAP S/4HANA’s embedded capabilities to drive maximum value and avoid compliance risks. SAP S/4HANA introduces powerful embedded features – from real-time analytics and the Fiori user experience to intelligent automation – that did not exist in the legacy ECC system.
These innovations enable transformative business benefits (real-time insights, intuitive UX, proactive alerts, machine learning) and are included as part of the S/4HANA solution. However, understanding exactly what is covered by the core S/4HANA license versus what requires additional licenses is strategic for IT leaders.
Missteps can lead to unintended costs, such as the surprise licensing of add-on tools, or expose the organization to audit risk if features are used beyond their intended scope. This playbook provides a structured guide for CIOs at large enterprises to confidently adopt S/4HANA’s new embedded functionalities while staying compliant.
It covers key new capabilities in S/4HANA, clarifies which ones are included under standard licenses, identifies scenarios that trigger additional licensing (such as third-party analytics or advanced AI), and offers strategic guidance on managing usage.
By following this guidance, CIOs can maximize the use of S/4HANA’s built-in innovations, plan for necessary add-ons intentionally, and ensure software contracts and audits pose no surprises.
In summary, licensing savvy around S/4HANA’s embedded features is now a core competency for CIOs to both fully leverage S/4HANA’s potential and protect their organization from licensing pitfalls.
Overview of Key S/4HANA Embedded Capabilities
SAP S/4HANA represents a new generation ERP with many integrated tools that enhance analytics, user experience, and intelligent automation.
Below is an overview of major new embedded features (not present in ECC) that CIOs should understand:
Embedded Analytics
S/4HANA delivers real-time operational analytics embedded directly in the transactional system. Using SAP’s in-memory HANA database and Core Data Services (CDS) views as a virtual data model, users can run real-time reports on live transactional data with minimal latency.
This includes predefined analytical content (hundreds of prebuilt CDS view-based reports and KPIs), SAP Smart Business cockpits (real-time dashboards with drill-down), the Query Browser and Query Designer for self-service reporting, and a “BW-lite” approach that eliminates the need to offload data to a separate warehouse for operational reporting.
In essence, S/4HANA’s embedded analytics allows end-users to analyze up-to-the-moment data within the same system where transactions occur, enabling insight-to-action on one platform. This is a major shift from ECC, where users relied on basic ABAP reports or a separate SAP BW system for complex analysis.
S/4HANA’s approach simplifies the landscape by providing integrated business intelligence capabilities out of the box (e.g., real-time sales order backlogs, inventory levels, and finance reports with Fiori visuals) as part of the core ERP.
SAP Fiori User Experience (UX)
SAP Fiori is the modern user experience (UX) for S/4HANA, offering a consumer-grade, role-based interface that replaces the traditional SAP GUI screens. S/4HANA comes with thousands of standard Fiori applications covering transactions and analytics for various business roles. These are accessible through the Fiori Launchpad, a web- and mobile-friendly portal.
Key benefits of Fiori include an intuitive, consistent design across devices, embedded analytical tiles and charts in operational apps, and the ability for users to take action through a simplified interface.
Custom Fiori apps can also be developed to extend S/4HANA processes or tailor the user experience. In ECC, comparable UX improvements were not available; SAP GUI was the primary interface, with limited mobile or graphical capabilities unless enhancement packages or sidecar UI solutions were implemented.
With S/4HANA, the Fiori 3 UX is delivered as an integral part of the system, enabling higher user productivity and satisfaction through features like overview pages, list reports, and object pages that blend analytics with transactions. The standard Fiori apps cover most core business scenarios, and customers can also personalize or extend them (using SAPUI5 or low-code tools) to meet company-specific needs.
Situation Handling (Proactive Alerts)
A noteworthy innovation in S/4HANA is Situation Handling, an embedded framework that automatically detects exceptional conditions in business processes and notifies the right users.
This feature introduces intelligence by monitoring transactional data against predefined or custom conditions (e.g., a delivery is delayed, an invoice is blocked, a project milestone is overdue) and creating “situations”.
When a situation is triggered, S/4HANA will proactively alert users via Fiori notifications (or email or mobile push) and provide context and recommended actions to resolve the issue. This capability did not exist in ECC; it represents a shift to proactive, exception-driven management.
For example, a procurement manager might get an alert that a purchase order’s delivery is past due and see suggestions in the app for expediting or finding alternate suppliers.
Situation Handling helps organizations become more agile and responsive by bringing potential issues to users’ attention before they escalate. It is built into the S/4HANA core and uses the Fiori UX to present these alerts and decision support info.
CIOs should note that this embedded AI-driven alerting can reduce manual monitoring and improve business outcomes, effectively embedding a level of automation and intelligence directly into standard ERP processes.
Predictive Analytics and Machine Learning (Embedded Insights)
SAP S/4HANA also introduces embedded predictive and machine learning capabilities, sometimes referred to as Intelligent Insights. The S/4HANA application leverages the HANA in-memory engines and SAP’s data science libraries to support scenarios such as predictive analytics within transactions and machine learning augmentations of processes.
Examples of new intelligent features include Predictive Accounting, which can forecast financial outcomes based on current data, predictive stock in inventory management, or the use of machine learning for cash application matching and sales forecasting.
Technically, S/4HANA includes the Predictive Analytics Integrator (PAi) and its successor, Intelligent Scenario Lifecycle Management (ISLM), which allow S/4 to consume machine learning models (either pre-delivered by SAP or custom models) and integrate their predictions into ERP workflows.
Some modules, such as S/4HANA Sales, Service, and Finance, come with prebuilt ML scenarios – for example, predicting the probability of a sales quote converting to an order or suggesting responses in customer service.
These run directly within the S/4 system, taking advantage of the HANA Predictive Analysis Library and Automated Predictive Library for in-database machine learning. In ECC, any such capability requires completely separate tools or custom development. With S/4HANA, basic AI/ML features are embedded to provide “augmented ERP” functionality.
CIOs should differentiate between these standard embedded ML features and more advanced AI projects: while S/4 provides a foundation for intelligent processes, more complex machine learning use cases (building entirely new models, big data integration, etc.) might require additional platforms (like SAP Analytics Cloud or SAP Business Technology Platform services).
Licensing Clarity for New S/4HANA Features
Understanding which of the above capabilities are included in your S/4HANA license, and under what conditions, is critical. SAP has generally packaged these new features into the core S/4HANA product for customer convenience, but there are limits and separate products at certain points.
Below is a breakdown of licensing implications for each key feature:
- Embedded Analytics: All the built-in analytics content and tools within S/4HANA are included with the standard S/4HANA user licenses. In other words, if a user is licensed for S/4HANA (e.g. as a Professional or Functional user), they can utilize the S/4HANA embedded analytics features without any extra license fees. This covers viewing and interacting with CDS view-based reports, Fiori analytical apps, Smart Business KPIs, etc. There is no separate “analytics module” charge – it’s part of the Digital Core license. However, this entitlement assumes that the analytics are used within the S/4HANA environment by S/4HANA-licensed users. If an organization’s needs extend beyond the embedded scope – for example, enterprise data warehousing across multiple systems or complex historical analysis – they will likely need to deploy SAP BW/4HANA or SAP Data Warehouse Cloud, which are separate products that require additional licensing. S/4HANA’s embedded analytics is sometimes called “operational reporting” or “BW Lite” because it is optimized for real-time insights on S/4HANA data. The moment you need to blend S/4 data with non-SAP data or provide analytics to a broader audience outside of S/4, you may need to invest in a dedicated analytics solution and its licenses. In summary, S/4HANA covers embedded analytics for free.In contrast, external or advanced analytics scenarios (e.g., using SAP Analytics Cloud or a full BW system) are not covered and must be licensed separately. It’s worth noting that SAP Analytics Cloud (SAC), SAP’s flagship cloud business intelligence (BI) tool, is not included in a typical S/4HANA license. Using SAC (even if live-connected to S/4) requires a separate subscription per user or capacity. Embedded analytics can meet many needs without SAC, but SAC offers additional capabilities, such as dashboards, planning, and AI visualization.at an extra cost.
- SAP Fiori UX (Standard and Custom Apps): The use of SAP Fiori apps and the Fiori Launchpad in S/4HANA does not require an additional license – it is included as part of the S/4HANA software entitlement. SAP does not charge separately for the Fiori user interface or the SAP Gateway/OData technology when used for S/4HANA functionality. In practical terms, if you have named users licensed for S/4HANA, those users can execute transactions via Fiori apps or SAP GUI interchangeably under the same license. All the standard Fiori apps delivered with S/4 (for the modules you’ve licensed) are covered. Developing or extending custom Fiori apps on the S/4HANA system is also covered by your S/4 license. There is no separate’ developer fee” beyond having the appropriate user license (e.g., a Developer user license, which is often included in the S/4HANA package). The only time additional licensing around Fiori might come into play is if you choose to deploy Fiori technology outside of the S/4HANA environment. For example, if you use the SAP Business Technology Platform (BTP) to build a separate Fiori application that calls S/4 via APIs, you would need a BTP account and possibly pay for services (like SAP Cloud Portal or SAP Mobile Services) on that platform. Similarly, suppose you expose Fiori apps to users who are not S/4HANA-licensed users, such as external suppliers or customers accessing a limited portal. In that case, you might need to license them with a specific role (SAP has special user types or an “indirect access” model – see below). But fundamentally, there is no additional license fee for the Fiori UX itself – it’s bundled with the S/4HANA software. This is an important point for CIOs, as it encourages enabling modern UX without incurring extra costs. (Contrast with the older ECC era, where SAP GUI was included but a newer UI like NetWeaver Portal or third-party mobile apps could introduce license considerations – in S/4HANA, Fiori is the native UI assumed for all users.)
- Situation Handling is delivered as a core functionality of S/4HANA and does not require a separate license or add-on purchase. SAP includes this framework as part of the standard S/4HANA Enterprise Management license. When you install S/4HANA (on-premise or in the cloud edition), the Situation Handling capabilities are available for you to configure and use. There is no need to license an external alerting or automation module – it’s a built-in benefit of S/4. This means a CIO can encourage business process owners to utilize proactive situation alerts without worrying about an extra line item in the SAP contract. All users licensed for S/4 can receive and act on situation notifications relevant to their role. The only caveat is that Situation Handling covers scenarios within the S/4HANA system. If you wanted a similar alerting mechanism for events in non-SAP systems, you would need other tools, but those would be outside the scope of the S/4HANA license anyway. As long as situations are about S/4HANA business objects (e.g., a delivery in S/4, an invoice in S/4), and the recipients are S/4 users, you are fully entitled to use this feature. SAP has made it clear that Situation Handling is a standard part of the “Intelligent ERP” value proposition and is not a separately charged component.
- Predictive and AI Features: SAP S/4HANA’s embedded machine learning and predictive features (such as the Predictive Analytics Integrator or the newer ISLM framework, and any pre-built ML scenarios SAP delivers within S/4) are also included in the S/4HANA license. Essentially, S/4HANA comes with the technical capability to consume and operationalize ML models using the HANA ML libraries, with no additional license required to use these built-in capabilities. For example, if S/4HANA Finance provides a “predictive liquidity forecast” or S/4HANA Procurement provides a supplier delivery performance prediction, you can use those features as part of the module you’ve licensed. Likewise, the ability to train and deploy custom predictive models within S/4, using the provided framework that leverages HANA’s in-database ML functions, is included. There is no separate ML engine fee for using PAi or ISLM. However, this covers scenarios where S/4HANA’s native tools do the ML processing on S/4 data. If your enterprise wants to do more advanced AI/ML – for instance, training complex machine learning models on large datasets, or using natural language processing, or computer vision – you may need to look at SAP’s broader AI offerings (which are separate). These could include SAP Analytics Cloud’s Smart Predict features, the SAP AI Business Services library (e.g., invoice recognition, service ticket intelligence), or SAP Data Intelligence for data science pipelines. Those are not included in S/4HANA and require their licenses or subscriptions. In short, S/4HANA provides a platform to run basic embedded AI, enhancing ERP processes without requiring an extra license. Still, any heavy-duty or externally facing AI capability would be through a different product. CIOs should differentiate between “embedded ML” (free with S/4) and “extended AI” (add-on licensing).
In summary, S/4HANA’s user license generally covers all usage of these new embedded features by named S/4HANA users, with no separate fees. There is no additional cost to leverage embedded analytics, standard Fiori apps, situation handling, or delivered ML within the S/4 environment.
Additional licensing is only required when you go beyond the S/4HANA embedded scope, such as using a distinct product or enabling access for users or systems not covered by the S/4 license.
Key examples of when extra licenses are needed include: connecting S/4 data to SAP Analytics Cloud or third-party BI tools (requires SAC licenses or possibly third-party licenses and consideration of SAP indirect use), implementing SAP BW/4HANA for advanced data warehousing (requires a BW/4HANA license), using advanced Fiori development on SAP BTP (consumes cloud platform services), or deploying SAP AI Business Services or other ML engines beyond what S/4 provides (requires SAP BTP service subscriptions).
The next sections will explore scenarios that commonly trigger these additional licensing needs and provide guidance on how to manage them.
Scenarios That May Trigger License Escalations
CIOs should be vigilant about certain use cases where usage of S/4HANA’s data or features can cross into territory that SAP considers outside the standard S/4HANA license.
Here are key scenarios that could trigger licensing escalations or require clarification:
- Exposing Analytics to Non-S/4 Users or External Audiences: If the organization wants to share S/4HANA analytical insights with users who are not licensed on S/4, this can be a form of “indirect usage.” For example, suppose you build a dashboard of S/4HANA data for executives or field users who don’t log into S/4HANA regularly, or you publish S/4 analytics on a portal for customers/suppliers. In SAP’s licensing terms, any individual accessing S/4-derived data in real-time may need to be licensed. This can be addressed by obtaining named user licenses for those individuals (e.g., a low-cost “ESS” user or a read-only analytical user license, if available) or by using SAP’s Digital Access model (discussed below) if the access is indirect. Simply put, S/4HANA embedded analytics is free for your S/4 users, but it’s not a free corporate BI tool for all employees unless they are S/4 users. A common triggering example is connecting Microsoft Power BI or Tableau to S/4HANA to feed reports to a broad audience: SAP will consider that an indirect access unless each viewer is an S/4 user. Similarly, feeding S/4 data into a web portal for customers would likely require a special license. SAP has an “SAP Enterprise Portal” or, more commonly now, suggests using SAP BTP with a per-user or usage model for external participants. Failing to license these users can lead to compliance issues in an audit. Rule of thumb: analytics kept within S/4 for S/4 users is fine; if you broadcast it outside S/4’s user base, check licensing.
- Standalone or Advanced Dashboards and Reports: Building standalone dashboards often involves tools like SAP Analytics Cloud (SAC) or legacy SAP BusinessObjects or non-SAP BI platforms. If your enterprise decides to extract data out of S/4HANA into these tools for more complex analysis or visualization, you will need additional licenses for those tools. For instance, SAP Analytics Cloud licensing is entirely separate from S/4HANA – each user of SAC (even if viewing S/4 live data) needs an SAC license. Similarly, suppose you still use SAP BusinessObjects BI for enterprise reporting on S/4 data. In that case, you must have the appropriate BI licenses (note: S/4HANA doesn’t automatically grant you rights to a BusinessObjects server, unlike some limited use rights that existed in ECC contracts for embedded Crystal/Lumira content).Additionally, from an SAP contract perspective, extracting data from S/4 into another system doesn’t usually violate any license as long as it’s your data. However, the act of having an automated third-party system query S/4 data could be seen as indirect access. SAP’s Digital Access Document model focuses on documents created, so pure read-only access has been a gray area historically. SAP typically requires that any user, whether human or system, who indirectly queries S/4 data be licensed, unless they are using a licensed interface. To avoid issues, if you plan to regularly feed S/4 data to external dashboards, formalize this with SAP – either by named user licensing for a “technical user” plus appropriate third-party user licenses, or by the digital access approach if any document creation is triggered. Always remember: if you implement a new analytics platform or data lake involving S/4 data, budget for its license and ensure S/4 data access is properly licensed too.
- Enterprise Data Warehouse Scenarios: S/4HANA’s embedded analytics is not meant to replace an enterprise data warehouse for complex multi-system analytics. Suppose you find that you need to perform extensive data modeling, combine S/4 data with other sources, or retain large volumes of historical data beyond what S/4 production holds. In that case, you will likely need SAP BW/4HANA or another warehousing solution. Using SAP BW/4HANA will require a license, even though S/4HANA technically comes with an “embedded BW” component for limited use. This component is only suitable for certain integrated scenarios and is not suitable for customer-developed reporting. For example, S/4HANA’s embedded BW is typically only used for S/4’s analytics or specific add-ons, such as Integrated Business Planning. You cannot build a full-blown corporate data warehouse on the embedded BW without a license – SAP would expect you to purchase BW/4HANA for that purpose. Also, if you use the S/4HANA provided CDS views as extractors into a third-party data warehouse or lake, consider indirect use: the safer route is to use SAP-provided interfaces (like ODP extractors) which SAP has authorized, and ensure the consuming system’s users don’t interact with S/4 directly except via those interfaces. In summary, going beyond the “single S/4 system” analytics (especially consolidating multiple systems) usually triggers the need for separate analytics product licenses.
- Indirect Document Creation (Digital Access): While not a feature per se, it is crucial to mention the Digital Access licensing model in the context of new S/4HANA usage patterns. S/4HANA introduced SAP’s new approach for licensing indirect access by external systems: rather than requiring a named user for each non-SAP user or device, SAP offers to license the outcomes (documents) of indirect usage. There are 9 document types (sales orders, invoices, purchase orders, etc.) that, if created in S/4 by an external application, count toward your digital access license consumption. How can embedded features trigger this? Imagine you build a fancy mobile app (not using Fiori, but a custom app) for your salespeople to create orders, or you use a web e-commerce front that pushes orders into S/4 via API – these are indirect creations of documents. This scenario wasn’t new with S/4, but S/4’s emphasis on APIs and integration makes it more common to integrate non-SAP apps. CIOs should be aware that if any of S/4HANA’s functionality (like an analytical insight or an ML outcome) is exposed to an external system that then triggers a transaction in S/4, you may need to license that under Digital Access. For example, if a predictive scenario in S/4 suggests a restock and automatically creates a purchase order via integration, and that integration is with a non-SAP system, it would fall under Digital Access, counting as a Purchase Order document. SAP audits after S/4 migration often scrutinize digital access, since many companies integrate S/4 with cloud apps, supplier portals, robotic process automation bots, etc. Ensure you evaluate whether the Digital Access document-based licensing might be more cost-effective or necessary for your use cases, versus forcing each external user or device to have a traditional license. In summary, any scenario where S/4HANA is accessed or updated by something other than a human using an SAP GUI or Fiori (e.g., an external application using an API) should trigger a review of indirect license implications. Proactively address this to avoid surprise fees.
- Advanced Machine Learning or IoT Scenarios: If your S/4HANA system is part of a larger intelligent enterprise initiative, you might feed S/4 data to data science environments or IoT platforms, or call external AI services from S/4. As noted, the embedded ML capabilities in S/4 don’t require a license. Still, if you go for advanced scenarios – say, training a custom machine learning model on a large dataset of quality inspections, or using an IoT service to predict machine downtime and then creating maintenance orders in S/4 – those typically involve additional components. SAP might offer solutions like SAP Data Intelligence, SAP IoT, or SAP AI Core on BTP, which are separately licensed by throughput or capacity. Using those services is outside the S/4 license, as they each have their own licensing metrics. So a CIO should map out where S/4’s built-in intelligence suffices versus when a more robust external AI service is needed, and plan licensing accordingly. A concrete example: S/4HANA might predict late deliveries with its embedded tools, but if you wanted to use a sophisticated neural network from Azure ML on S/4 data, you’d have to license Azure’s service and possibly an SAP integration if that ML writes back into S/4 (again, consider if that writing back triggers a digital document like a quality notification). These are edge cases, but as AI usage grows, it’s wise to keep licensing in mind for any non-standard extensions of S/4 functionality.
Strategic Guidance for CIOs
To successfully leverage S/4HANA’s new embedded features while maintaining cost control and compliance, CIOs should adopt a proactive strategy.
The following guidance ensures you maximize the value of what you’ve already paid for and make informed decisions on any enhancements:
- Maximize Adoption of Included Functionality: Drive your teams to fully utilize the embedded capabilities that come with S/4HANA. Often, companies underutilize these features because they are unaware of them or default to legacy habits. As CIO, ensure that during your S/4HANA implementation or upgrade, you identify all relevant new features (analytics, Fiori apps, situation handling, etc.) and include them in the project scope. Provide training to end-users and analysts on using the Fiori analytical apps and self-service query tools so they don’t immediately resort to extracting data to Excel or legacy BI tools. Encourage business process owners to enable and configure Situation Handling for critical processes, as it can yield quick wins in productivity. By embedding these capabilities into daily operations, you not only get better ROI from your S/4 investment but also reduce the need for shadow IT solutions that might carry extra licensing. Essentially, get the most out of what you already own. Build an internal culture where, whenever a reporting requirement or UX improvement is needed, the first question is “Can S/4HANA do this internally?” before considering purchasing new software. SAP continues to add to these embedded features with each release, so staying on a current release and reviewing release notes for new analytics or intelligent scenarios is another best practice to maximize value.
- Avoid Inadvertent License Violations: Even with included features, it’s possible to drift into non-compliant usage if not governed. Establish clear internal policies for any integration or access involving S/4HANA data. For instance, if a department wants to use a third-party analytics tool on S/4 data, require them to involve the SAP architecture team to vet how data will be accessed and ensure proper licensing (maybe you decide all such use must go through a controlled OData interface with a licensed service user). Educate your developers and IT architects on the rules of indirect access: a well-meaning team might build a customer mobile app that calls S/4 APIs, not realizing each customer might technically need a license or that Digital Access documents will accrue. So, incorporate license impact as a checkpoint in solution design reviews. Use the tools SAP provides: for example, SAP offers a “Digital Access Evaluation Service” and an auditor tool to estimate document counts – run this periodically to see if you are within your purchased limits. Also, strictly limit use of the S/4HANA embedded BW or any technical component to its intended scope – if teams start building generic data models in the embedded BW, halt that and procure a proper BW/4HANA license to remain compliant. By instituting governance and awareness around these pitfalls, you can prevent accidental overuse that only comes to light during an SAP audit. It’s much better to self-correct or license appropriately in advance than to face penalties or unbudgeted true-up costs later.
- Plan for Add-Ons Deliberately and Wisely: There will be cases where the functionality included in S/4HANA is not enough for your business needs. The key is to recognize those early and make conscious decisions (with cost-benefit analysis) to invest in additional solutions, rather than stumble into needing them after an audit. For example, if your organization truly needs a global analytics portal for all employees, acknowledge that SAC or a similar tool is the right strategic choice and budget for its license – don’t try to stretch S/4’s embedded analytics to serve that purpose if it’s not a fit. Similarly, if advanced planning or what-if analysis is needed, consider licensing SAP Analytics Cloud Planning or Integrated Business Planning, rather than misusing S/4’s basic tools. Align your IT roadmap with licensing requirements: When you decide to extend S/4 with new functionality (whether it’s complex planning, advanced warehousing, AI, etc.), engage SAP (and perhaps independent licensing advisors) to determine if it falls under your current entitlements or not. It’s often possible to negotiate favorable terms when planning an expansion of usage (for instance, bundling a new product in your ELA) versus being caught by surprise. Also, evaluate whether higher license tiers of S/4HANA can meet some of your needs. SAP offers extensions or higher-level packages (for example, S/4HANA for Advanced Cash Management, which has an extra fee for capabilities beyond basic cash management in the core). Understanding these distinctions can help you decide when to pay for an add-on vs. when to use the standard feature. In summary, treat new requirements as a fork: “CanS/4 do it with what we have – yes or no? If no, what product covers it and what does that cost?” Then make a strategic decision, rather than retroactively dealing with it. This approach ensures no unpleasant “surprise bills,” and that you invest only in capabilities that truly justify their cost.
Contract and Audit Tips
Licensing for S/4HANA embedded features can be nuanced, so it is wise for CIOs to actively manage contract language and audit preparation regarding these topics:
- Get Clarity in Writing: When you negotiate your S/4HANA contract or annual renewals, explicitly document any understanding about included features. SAP’s contracts (and associated documents, such as the SAP Software Use Rights) describe what is included, but they can be complex and dense. To avoid ambiguity, ask your SAP account executive to provide or sign off on a brief license clarification document. For example, state that “SAP Fiori usage and S/4HANA embedded analytics are included in the S/4HANA Enterprise Management license at no additional charge” – having this affirmed in writing can prevent later disputes. If you foresee a specific scenario (e.g., using a certain embedded BW object or an ML scenario), describe it and get confirmation that it’s covered. SAP is typically willing to confirm standard inclusions, as they have publicly stated them. Also clarify boundaries: e.g., “if embedded BW is used purely for S/4HANA’s analytics, is that OK without a BW license? (Yes), But any separate BW usage will require a license (understood).” Documentation of these points can be appended to your contract or kept in a formal meeting record.
- Understand Your Entitlements: Ensure your procurement and SAP Basis teams have a clear understanding of the licenses you’ve purchased and the user types. S/4HANA often comes with a mix of user types (e.g., Enterprise, Professional, Functional). Know which level grants which access. Higher-tier users can typically do anything, including running all apps and analytics, while limited users may be restricted. Ensure you allocate the right user licenses to people who will use advanced features. For instance, a “Warehouse clerk – limited use” license might not legally cover running broad financial analytics, whereas a Professional user would. If there are “Engine” metrics (some add-ons are licensed by engine metrics rather than users), keep track of usage (for example, if you licensed SAP Cash Application as an add-on for ML in finance, monitor how many transactions it’s processing against the contract). Keeping an internal license usage register, aligned with SAP’s definitions, will make audits less painful.
- Leverage SAP’s Digital Access Adoption Program (if applicable): If you are migrating from ECC to S/4HANA, SAP offers programs like the Digital Access Adoption Program (DAAP), which allows customers a one-time opt-in to document licensing with incentives. If indirect access is a significant concern for your enterprise (with many interfaces to S/4), consider negotiating a conversion to the document model with SAP. Often, SAP gave a huge discount to encourage this. If you missed that window, still be aware of the metric so that you can measure and approach SAP for a licensing construct that suits your usage (some customers choose to continue with pure named-user licensing and lock down interfaces; others go hybrid). The contract should reflect whichever model you choose. The key is to avoid paying twice: you don’t want to be charged for named users and also for digital documents without knowing it. Clarify with SAP how they will treat your indirect scenarios and include that in the contract to avoid future arguments.
- Audit Readiness: Internally, treat SAP license compliance as an ongoing task, not a once-a-year scramble. Implement tools or procedures to log how embedded features are used. For example, you might log which custom Fiori apps exist and what data they expose, or maintain a list of third-party systems integrated with S/4HANA. When SAP’s Global License Audit and Compliance (GLAC) team comes knocking, you should already have a good picture of where you stand. Conducting your own “mock audits” is a great practice: use SAP’s license measurement tools (SLAW, USMM reports) on user licenses; use the Digital Access estimation tool in S/4HANA (if you’re on a release that has it, it can count documents created indirectly). If something is unclear, engage an external licensing expert for a health check before an official audit – they can often spot indirect usage or engine usage that SAP will flag. During audits, having documentation (as noted above) that certain usage is permitted can save you. If an auditor claims you need a license for X, you can produce an official clarification letter that says X is included with S/4. Maintain careful records of user assignments, especially if you have user-based packages. Also, watch out for “multiplexing” (one technical user feeding data to many people) – SAP auditors look for that; ensure you have a rationale (like “these 50 people viewing data via that technical user are all individually licensed” documented). Ultimately, building a transparent and defensible usage report will turn an audit from a feared event into a mere formality.
By staying on top of entitlements and usage and keeping open communication with SAP about your deployment of new features, you can largely de-risk the audit scenario. The goal is to have no surprises: both you and SAP should have the same understanding of your rights. This requires effort upfront, but it pays off by avoiding hefty backbills or having to suddenly disable a valuable feature due to compliance issues.
Recommendations and Next Steps for CIOs
To ensure effective use of S/4HANA’s embedded innovations with proper licensing, CIOs should take the following actions:
- Educate and Align Stakeholders: Brief your IT architects, project managers, and business power users on which S/4HANA features are freely included and which require caution. Ensure everyone understands the “rules of the road” (e.g., embedded analytics is free for licensed users, but it should not be exposed to outsiders without checking licenses). This will create a culture of compliance and smart usage from day one.
- Inventory Your Usage of New Features: Post-migration, catalogue which embedded features (analytics, Fiori apps, situations, etc.) you are using and which ones you plan to enable. Map these against your license entitlements. This inventory helps identify any gaps – for example, if a team wants to start using SAP Analytics Cloud with S/4 data, you’ll spot the need for SAC licenses early. Regularly update this inventory as you adopt more S/4 capabilities.
- Engage SAP Early for Clarification: Don’t wait for an audit to address licensing questions. Proactively reach out to your SAP account manager or SAP’s license advisory services when planning new integrations or extensions of S/4. Ask scenario-based questions (e.g., “We want to feed S/4 data to a supplier portal – what’s the recommended licensing?”). Getting SAP’s guidance or even written approval ahead of time can save headaches. Remember that SAP is pushing these new S/4 features for value; they will typically cooperate to ensure you’re licensed correctly if you involve them upfront.
- Govern Integration and BI Architecture: Establish an architecture review board for any system that will interface with S/4HANA or any new reporting initiative on S/4 data. This board should include someone knowledgeable in SAP licensing. Its mandate is to approve designs that meet business needs and comply with licensing. For instance, if a department proposes a new analytics solution, the board might decide: use S/4 embedded analytics if possible, or if not, ensure the proposed tool’s licensing (SAC or others) is budgeted and that indirect usage is controlled. This prevents rogue solutions from inadvertently breaching license terms.
- Optimize License Allocation and Procurement: Continuously analyze whether your current license mix is optimal given how people use S/4. If many users only need occasional analytics access, perhaps a lower-tier license or a read-only license type (if offered by SAP) could suffice instead of each being a Professional user. Conversely, if people are bumping against limitations, you might need to upgrade some user licenses to higher tiers. Work with SAP to adjust your license counts as your usage pattern of embedded features evolves. Also, watch SAP’s evolving offerings – for example, if SAP bundles some SAP Analytics Cloud rights with S/4 in the future or introduces a new user type for digital access, be ready to adapt and potentially negotiate those into your contract if beneficial.
- Document and Train for Audit Defense: Treat compliance as a continuous process. Keep all relevant documentation, including contracts, SAP notes, and clarifications, in a central repository. Train your software asset management team on SAP license specifics, especially those unique to S/4HANA, such as digital core and indirect documents. Conduct internal audits focusing on new features – e.g., verifying that all users building CDS queries are properly licensed, or that no one has created an unofficial data dump in an unlicensed data lake. By regularly self-auditing, you ensure that by the time an official SAP audit happens, you have a clean bill of health and any required licenses already in place.
- Leverage What You Paid For: Finally, champion the use of S/4HANA’s modern capabilities throughout the enterprise. Many of these features can significantly improve business processes (real-time insight, better UX, intelligent automation) at no incremental cost. Often the biggest barrier is not licensing but awareness and change management. As CIO, you should communicate to business leaders what new tools they have gained with S/4HANA and encourage their adoption. This not only drives digital transformation but also justifies the investment in S/4HANA. Every feature you use is one less separate system or license you might need. So, align your digital strategy to utilize the rich suite of S/4HANA embedded functions as much as possible before looking outside.
By following these steps, CIOs will create a balanced approach: the enterprise will fully leverage S/4HANA’s built-in innovations to accelerate business value, while also maintaining a strong handle on licensing compliance and cost control. This playbook approach ensures that the journey with SAP S/4HANA remains both innovative and safe, unlocking the promised benefits of the digital core with no unwelcome licensing surprises.
