Negotiating Indirect Use Terms in SAP Contracts
SAP “indirect use” refers to third-party systems or external users accessing SAP data without a direct SAP login. Unmanaged, this can result in unexpected licensing fees and compliance risks.
CIOs and CTOs should negotiate clear contract clauses that define and cap indirect usage costs, ensuring predictable budgeting and avoiding multi-million-dollar surprises.
Read Measuring SAP Indirect Usage: Tools and Methods to Detect Third‑Party Access.
Indirect Use: The Hidden SAP Licensing Risk
Indirect use (or indirect access) occurs when people or applications interact with SAP data via non-SAP systems. For example, a customer web portal, third-party CRM, or IoT device that reads or writes SAP data without a direct SAP user account
. The danger is that SAP may consider these interactions to be unauthorized usage. A famous cautionary tale is the 2017 Diageo case, in which SAP pursued approximately £54 million in fees from Salesforce users for pulling data from SAP.
Soon after, another global firm (Anheuser-Busch InBev) reportedly settled for $600 million over indirect usage.
These cases highlight that even read-only or automated connections can incur massive costs if not properly licensed. In short, indirect use is a licensing “gray area” that can become a costly trap for unwary CIOs.
Why CIOs/CTOs Should Care:
Indirect access fees are often unexpected and unbudgeted. They can derail IT budgets and force hard choices (pay unplanned fees or shut down integrations).
They also create fear and uncertainty – some organizations delay digital projects or integrations to avoid triggering SAP’s licensing landmines. By addressing indirect use upfront in your SAP contract, you turn an unpredictable risk into a manageable cost.
Read SAP Indirect Usage Alternatives and Mitigations for S/4HANA and ECC.
Indirect Usage = Unpredictable Costs
Without contractual clarity, indirect usage costs can skyrocket. Consider a scenario: you integrate an e-commerce portal with SAP.
If 10,000 customers place orders via that portal, under SAP’s traditional rules, you might owe 10,000 extra user licenses (potentially millions of dollars).
In contrast, if you have negotiated terms for this scenario (for example, using SAP’s digital document model or an agreed flat fee), those same 10,000 external transactions could cost only tens of thousands.
This stark difference illustrates how crucial it is to have the right terms:
- Audit Surprises: SAP regularly audits customers. If they find unlicensed indirect usage, they can demand back-license fees at list price plus maintenance. Many CIOs have been shocked by compliance bills in the seven- or eight-figure range.
- Business Impact: Uncapped indirect fees don’t just hit IT financially – they hinder innovation. Teams become reluctant to connect new systems, partner portals, or automation tools to SAP, fearing unknown costs and potential liabilities. The result is a less integrated, less efficient business.
- Vendor Leverage: SAP is aware of the leverage audits provide. Without negotiated terms, you may end up settling for high fees or buying additional licenses under pressure. Proactively negotiating caps and definitions removes this leverage, keeping the relationship on a level playing field.
SAP’s Digital Access Model – Clarity or Complexity?
To address the indirect use issue, SAP introduced the Digital Access licensing model. Instead of requiring a named-user license for every indirect user or device, Digital Access charges based on the number of documents or transactions created in SAP by external systems.
There are approximately nine document types (e.g., Sales Order, Invoice, Purchase Order) that fall under this model. For example, an external e-commerce order would consume one document license (a sales order).
How Digital Access Works:
Companies purchase a quantity of document licenses (often in blocks, e.g., per 1,000 documents per year). If an external system creates those documents in SAP, it draws from this pool. This model can significantly reduce costs for high-volume scenarios – e.g., 10,000 external orders might simply require 10,000 documents, which is far cheaper than maintaining 10,000 named users.
It also provides more predictability: as long as you stay within your document volume, you can accurately predict your costs. Many organizations now use a hybrid approach: traditional named-user licenses for internal staff and low-volume partners, and Digital Access licenses for high-volume external data flows (customer portals, integrations, IoT sensors).
This avoids double-paying: internal users can use any interface freely (covered by their user license), while purely external interactions consume documents.
Challenges:
Digital Access isn’t a panacea. You must carefully estimate and monitor document volumes – if your business grows or new interfaces produce more transactions, you may exceed your purchased volume and need a costly true-up.
Pricing for documents is negotiated (SAP does not have a public price list), so discounts are crucial. Typically, volume discounts are applied (larger commitments result in drastically lower per-document costs). Be sure to lock in rates for anticipated growth.
Also, insist that no “double dipping” occurs – if you pay for a document license, SAP should not also require a named user for that same interaction.
SAP has stated that one or the other suffices; please confirm this in writing.
In summary, SAP’s document model brings clarity and can eliminate the nightmare of unquantified indirect use.
But it shifts the effort to capacity planning – similar to how you plan for database size or transactions, you must plan for document usage. If negotiated well, Digital Access terms can effectively cap your indirect costs.
Key Contract Clauses to Manage Indirect Use
The heart of mitigating indirect use risk is strong contract language.
When negotiating or renewing your SAP agreement, focus on inserting clauses that clarify usage and limit costs:
- Explicit Definitions of “Use” and “User”: Vague definitions favor the vendor. Ensure your contract clearly states that only direct, named individuals count as users requiring a license. For example, define “Named User” as a human accessing SAP directly or via an interface, and exclude technical integrations or data exchanges from counting as a “user.” This prevents SAP from later calling an API or a third-party system an unlicensed “user.”
- Indirect Static Read Clause: Include a clause permitting read-only access to SAP data by external systems without extra fees. Commonly referred to as an “Indirect Static Read” clause, it covers scenarios where SAP data is exported or queried in a non-SAP tool for informational purposes only. For instance, if you replicate SAP data to a data warehouse or allow a business intelligence tool to query SAP in read-only mode, there should be no charge. Ensure the clause aligns with SAP’s criteria (e.g., data exported by a licensed user on a scheduled basis, with no updates triggered in SAP). This ensures purely informational access doesn’t trigger licenses.
- Named User License Only for Direct Use: If you remain on traditional licensing, state that only direct login users require licenses. Clarify that third-party applications acting on behalf of licensed users are permitted. For example, one company’s contract addendum specified that external systems (like a cloud CRM or customer portal) exchanging data with SAP “do not require separate SAP user licenses, provided the SAP data is used in support of licensed internal users.” Such language, if SAP agrees, provides you with peace of mind that integrations are secure.
- Enumerate Allowed Interfaces: Document all known third-party systems and integrations in the contract (or an appendix) and note that these are authorized. Listing your current interfaces – e.g., Salesforce CRM, e-commerce site, warehouse management system – and stating that data flows between these and SAP are covered under existing licenses can prevent future arguments. If SAP approves them in the contract, they can’t later claim those connections violate the terms.
- No Double Licensing: As mentioned, include a clause that prevents double charges for the same activity. If you adopt Digital Access, stipulate that any interaction counted under the document model does not also require a named user license (and vice versa). This avoids overlap costs and aligns with SAP’s stated policy, but having it in writing protects you if interpretations change.
Capping and Controlling Indirect Usage Costs
Beyond clarifying definitions, savvy negotiators will cap the financial exposure of indirect use:
- Volume Caps or Fixed Fee: Negotiate a cap on annual indirect usage charges. For example, suppose you’re using Digital Access licensing. In that case, you might include a provision like: “Digital Access fees shall not exceed $X per year regardless of volume,” or arrange tiered pricing that flattens out beyond a certain document count. In some cases, customers have secured a flat fee or bulk license for a critical interface, essentially granting unlimited use of a particular integration for a one-time price. While SAP won’t advertise this, they have accepted fixed-fee deals for large, important customers to close a sale. Use your leverage (e.g., a planned S/4HANA migration or a major purchase) to discuss an “all-you-can-eat” interface clause if you have a high-impact scenario (such as all customers ordering via an online portal).
- Future Growth Allowances: Build in buffers. If you negotiate for, say, 500,000 documents per year under Digital Access, try to secure an allowance to exceed that by 10-15% before incurring additional fees, or lock in the price for extra documents if needed. This way, a surge in business won’t immediately break your budget. Similarly, true-up options are vital: agree that if you exceed licensed volumes, you can purchase the overage at the same discounted rate as your initial purchase (rather than punitive list prices). This encourages compliance without punishing success.
- Tie to Business Metrics: Some companies tie indirect fees to a business metric as a cap, for example, an indirect usage fee that cannot exceed 10% of your total annual SAP spend. This creates a ceiling, ensuring that costs remain proportional regardless of usage growth. SAP may not readily agree to percentage caps, but it’s a point of negotiation for large deals.
- Review and Adjust Clauses: Indirect usage and SAP policies evolve (e.g., new kinds of integrations, IoT growth, etc.). If you sign a long-term agreement (3-5 years), include a clause that you will review indirect use terms annually with SAP. The goal is to adjust or clarify as needed rather than letting a misunderstanding fester. While SAP won’t give you open-ended flexibility, even an informal agreement to revisit terms can be useful when new technologies come into play. At minimum, ensure any contract amendments (like moving to cloud or adding new SAP products) carry forward your negotiated protections so you don’t lose them in new paperwork.
Recommendations
- Inventory Your Integrations: Immediately map out all third-party systems, user portals, and automated processes interacting with SAP. This “integration inventory” enables you to identify where indirect access is occurring and assess the associated risk.
- Engage SAP Proactively: Don’t wait for an audit. If you identify potential indirect use exposure, engage your SAP account team early. Use upcoming purchases or renewals as an opportunity to negotiate favorable terms (e.g., when moving to S/4HANA or RISE, resolve indirect use then).
- Choose the Right Licensing Model: Evaluate whether sticking to named-user licenses, adopting Digital Access, or a hybrid approach best suits your usage. Perform a cost analysis: compare the status quo (with possible audit penalties) against the document model under various growth scenarios. Pick the model (or mix) that offers the lowest risk and cost for your situation.
- Negotiate Protective Clauses: Never sign an SAP contract “as is” regarding indirect use. Insist on including definitions for indirect use, static read exemptions, a list of approved interfaces, and caps or volume allowances. These clauses should be written into your agreement or order forms – verbal assurances mean little later.
- Secure Pricing Caps: Push for caps on indirect costs – whether it’s a maximum annual fee or locked discount rates for additional licenses. Ensure any future increase in usage can be addressed at predictable costs. This will safeguard your budget as your business evolves.
- Monitor and Govern Usage: Treat indirect access as an ongoing governance issue. Implement monitoring (SAP’s License Audit tools or third-party SAM tools) to track external document counts and interface usage. Review this data regularly (e.g., quarterly) to catch any spikes or new integrations. Internally, educate project teams: anytime a new system connects to SAP, involve your licensing experts to evaluate the impact.
- Prepare for Audits: Although you may have taken your best efforts, SAP may still audit your deployment. Having everything documented – including your integration list, license assignments, and contract clauses – will enable you to respond confidently and effectively. If you negotiated a true-up period or cure clause, exercise those rights if needed. Always respond to SAP audit findings within agreed timeframes to avoid escalating issues.
- Stay Informed and Adapt: Keep up with SAP’s licensing updates and industry best practices to ensure ongoing compliance. SAP’s policies (and product offerings) change, so review your contract at least annually. If SAP introduces a new model or program (for example, new cloud packages that include indirect usage), assess if it benefits you. Make indirect use a standing item in your vendor management strategy so it never catches you off guard.
FAQ
Q1: What is SAP indirect use, and why is it a problem?
A: Indirect use means accessing SAP’s software or data through a third-party system or an external user rather than via a direct SAP login. It’s problematic because SAP’s licensing agreements can require you to license those indirect interactions. If not addressed, indirect use can lead to compliance audits and hefty fees for “unlicensed” users or documents. Essentially, you might be using SAP in ways you didn’t realize require a license, and SAP can demand payment after the fact. This is why CIOs must identify and license indirect usage properly or negotiate exceptions.
Q2: How can indirect usage drive up costs for my organization?
A: Indirect usage costs often come as surprise bills. For instance, if your customer portal or CRM system isn’t covered under your SAP license terms, SAP could claim that every user or transaction from that system needs a license. That can amount to millions in fees (as seen in real cases). Without limits, the more your business grows and integrates with SAP, the more you might owe. Indirect use costs are unpredictable unless they are specified in the contract. By negotiating clear rules (or adopting SAP’s document licensing), you convert unknown liabilities into known, capped costs.
Q3: What is SAP’s Digital Access license, and should we consider it?
A: Digital Access is SAP’s newer model for licensing indirect use. Instead of buying a named-user license for each external user or device, you purchase licenses for the documents (business records) that those external systems generate in SAP (like orders or invoices). You should consider it if you have large volumes of external transactions – it can be more cost-effective and audit-safe. However, it requires careful planning: you need to estimate your document volumes and negotiate a good price. Some companies find a hybrid approach best: use Digital Access for high-volume integrations (to avoid an explosion of named user licenses), but keep traditional licensing for low-volume, interactive users. Ultimately, evaluate the cost of both models for your use cases – and remember, you don’t have to switch if your current model, with some contract protections, is working well.
Q4: Can we negotiate indirect use terms in our SAP contract?
A: Absolutely. You should insist on it. SAP’s standard contracts often don’t explicitly define indirect use, which leaves you vulnerable. During negotiations (especially when starting a new agreement or a big renewal), you can add clauses that define what counts as indirect use, what is exempt, and how any indirect usage will be charged. Key terms to negotiate include: an Indirect Static Read clause (to allow read-only data sharing without fees), explicit confirmation that certain interfaces or third-party systems are permitted, and caps or fixed fees for indirect usage. SAP may not volunteer these clauses, but they will often agree if it means closing a large deal or keeping a customer satisfied. Work with your legal and procurement teams to propose contract language – it’s much easier to handle this upfront than to dispute fees later.
Q5: If we move to S/4HANA or SAP’s RISE cloud, do indirect use issues go away?
A: Not automatically. S/4HANA (the latest SAP ERP) still employs the same licensing concepts – you’ll need to address indirect use either through the document approach or by using named users. SAP encourages digital access when customers migrate to S/4HANA, sometimes offering discounts or conversion credits to make the transition more attractive. RISE with SAP (the subscription cloud bundle) often includes some level of indirect usage in the subscription metrics, but the details can vary. Don’t assume everything is covered – you should explicitly confirm in your RISE contract how indirect usage is handled. Even in the cloud, if you connect non-SAP systems to your SAP environment, ensure that those scenarios are licensed or exempt. In short, moving to a new SAP product or cloud service presents an opportunity to renegotiate and clarify indirect use terms – take advantage of this, rather than leaving them vague.
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