Optimizing SAP Named User Licensing for Cost Savings
SAP’s named user licenses have different tiers, from Professional users with full access to Limited and Employee Self-Service users with restricted usage.
This article guides CIOs and IT procurement leaders on analyzing their SAP user base and negotiating the optimal SAP license mix.
Organizations can significantly cut SAP licensing costs by right-sizing licenses to actual needs.
SAP User License Types and Costs
SAP offers multiple named user license categories with varying access rights and prices:
- Professional User – Full access across SAP modules, for power users and admins. (Highest cost per user.)
- Limited Professional (Functional) User – Restricted to specific modules or tasks, for narrower roles. (Typically around 50% of a Professional user’s cost.)
- Employee Self-Service (ESS) User – Very limited access (e.g., personal HR/self-service tasks). (Lowest cost tier.)
In practice, a professional license typically costs around $3,000, a limited license approximately $1,500, and an ESS under $100. Proper classification is crucial – assigning everyone a Professional license when many don’t need it wastes budget.
| User License Type | Scope of Access | Relative Cost |
|---|---|---|
| Professional User | All modules (full functionality) | 100% (baseline) |
| Limited/Functional User | Specific modules or roles | ~50% of Professional |
| ESS/Employee Self-Service | Self-service personal use only | ~5–10% of Professional |
Auditing Your SAP User Base
Start with an internal user audit:
- Analyze Usage Patterns: Use SAP’s measurement tools to see each named user’s actions (transactions, modules accessed).
- Identify Over-licensed Users: Identify users with Professional licenses who perform only limited tasks. Often, many “Professional” users don’t use capabilities that require that level.
- Remove Inactive Accounts: Retire or reassign licenses for employees who left or duplicate accounts. An inactive user still assigned a license can needlessly inflate your compliance count (and cost).
This audit might reveal, for example, that many users could be on cheaper license types. Use these facts to inform your negotiation strategy.
Rightsizing License Assignments
Using the audit data, reclassify and right-size license allocations:
- Downgrade Where Feasible: If certain users don’t need full access, downgrade their license type. For example, an engineer using only one module can be assigned a Limited license instead of a Professional license.
- Check Contract Limits: See if your SAP contract imposes any ratio restrictions (historically, SAP sometimes limited the number of Limited users you could have relative to Professionals). If so, prepare to negotiate the removal of those limits so you can fully optimize.
- Ensure Compliance: Downgrade users only if their role falls within the scope of the lower license. Document each change. If there’s any doubt, keep them as Professional to avoid compliance penalties. The aim is to save money without incurring non-compliance risks.
Rightsizing exercises often result in savings of 20% or more in licensing costs. Plus, you’ll be armed with data to drive an informed discussion with SAP.
Read Cutting SAP Maintenance Costs: Negotiation Strategies for Support Contracts.
Negotiating a Better License Mix with SAP
Now, approach SAP to negotiate the optimal license mix:
- Leverage Your Data: Present your usage findings to justify purchasing more lower-tier and less expensive licenses. If SAP pushes back, your evidence of actual usage supports your position.
- Seek Volume Discounts: For any new licenses you must buy (e.g., additional ESS or Limited users), negotiate bulk pricing. Large orders should be accompanied by substantial discounts (30–50% off the list price, or more for large deals).
- Include Flexibility Clauses: Aim to include contract terms that let you adjust license counts later. For example, build in the right to swap certain Professional licenses for Limited ones later if the requirements change. This prevents being locked into an overpriced allocation as your organization evolves.
- Grandfather Lower Tiers: If SAP discontinues a license type (such as the old Limited Professional category) in new contracts, negotiate an equivalent or an exception. Ensure a future migration (to S/4HANA or cloud) won’t force all users onto high-cost licenses – preserve lower-cost tiers for appropriate users.
You can often secure a more suitable and flexible license mix by clearly communicating your needs and showing commitment to SAP (while insisting on cost alignment).
Ongoing License Management
After your negotiation, practice continuous license management:
- Regular Reviews: Monitor SAP usage periodically (e.g., quarterly). Catch any “scope creep” – if a user’s role expands beyond their current license, adjust promptly (upgrade their license or restrict access) before an audit does.
- Maintain Correct Classification: Ensure every user account in SAP has the proper license type assigned. In SAP’s view, unclassified users default to Professional, which can lead to inflated compliance findings. Make it standard to tag new users correctly and purge or reassign unused accounts.
- Stay Current: Keep up with SAP’s licensing changes or new user models. If SAP introduces a new low-cost user category or changes its definitions, adapt your strategy and contracts to take advantage of it, rather than automatically paying for more expensive licenses.
Proactive management ensures your cost savings persist and prevents unpleasant surprises in the next SAP audit.
Recommendations
- Schedule Annual License Audits: Regularly analyze user activities to align licenses with actual needs.
- Use Data as Leverage: Bring concrete usage data (with industry benchmark comparisons) in negotiations to justify your requests and push for strong discounts.
- Negotiate Flexibility: Secure contract clauses that allow license swaps or adjustments as your needs change.
- Avoid Over-licensing by Default: Don’t give every user a Professional license “just because” – tailor license levels to job roles.
- Document and Educate: Document which roles correspond to which license type, and ensure administrators assign licenses accordingly for every new user.
- Benchmark Costs: Familiarize yourself with typical discount levels and peer benchmarks to identify a fair deal on SAP pricing.
FAQ
Q: What are the main SAP named user license types?
A: The primary types are Professional (full access to all features), Limited Professional/Functional (access to specific modules or functions), and Employee Self-Service (very limited, self-use features like HR self-service).
Q: How can I tell if a user needs a Professional license?
A: Analyze the transactions and modules the user accesses. If they only use a single area (say, HR self-service or basic data entry in one module), they likely don’t need a full Professional license. Professional is for broad, cross-module, or administrative use.
Q: How much cheaper is a Limited user license than a Professional?
A: It varies, but Limited licenses are often roughly half the cost of Professional licenses (or even less). Often, it costs roughly half or even less, depending on your SAP price list and discounts.
Q: Can we switch a user’s license type after purchasing?
A: You can adjust user license assignments in the system, but you must own the corresponding license entitlement contractually. In negotiations, you may request SAP to exchange unused Professional licenses for Limited licenses as part of an optimization.
Q: What if someone’s role grows after we downgraded them to a Limited user?
A: If a user’s role expands significantly, upgrade their license accordingly to stay compliant. It’s essential to monitor role changes – if a Limited user begins performing out-of-scope tasks, you must address this issue before an SAP audit flags it. Always err on the side of compliance.
Q: Are “Limited Professional” licenses still available in new SAP contracts?
A: SAP has introduced new categories like “Functional User” in S/4HANA, and sometimes doesn’t include the old “Limited Professional” in new contracts. However, these functional users serve a similar purpose (lower-cost restricted usage). If you’re migrating to S/4, negotiate to ensure you have an appropriate lower-cost user license option.
Q: How do I avoid paying for users who have left the company?
A: Remove or reassign licenses when employees leave. At contract renewals or true-ups, formally terminate those user licenses so you stop paying maintenance.
Q: What is a license ratio clause, and does SAP still use it?
A: In the past, SAP contracts sometimes limited the number of lower-tier users you could have relative to Professional users (to prevent overuse of cheap licenses). Many modern contracts have dropped this restriction, but if yours still has one, consider pushing SAP to remove it at renewal time.
Q: Can optimizing user licenses save that much money?
A: Yes. Many companies achieve savings of 20% or more, and even double-digit percentage savings, by downgrading certain users. It’s often one of the quickest ways to reduce SAP spend.
Q: Should I involve SAP in our internal license audit?
A: It’s wise to do your internal analysis first. Once you have clear data, you can share the relevant points with SAP when negotiating. You are not obligated to share every detail of your findings with SAP – just use the insights to drive a better deal. Only involve SAP’s auditors when required, on your schedule.
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