SAP Audit Response Plan
Executive Summary – When the Audit Notice Arrives
Imagine this scenario: a CIO receives an unexpected SAP audit notice. Immediately, alarm bells ring across IT, finance, and procurement teams.
The stakes are sky-high – an unfavorable audit could expose a multi-million dollar licensing shortfall that wasn’t budgeted.
With auditors looming, CIOs, IT Asset Management (ITAM) managers, and compliance officers face intense pressure to respond quickly and correctly.
The good news is that SAP audits are survivable. With a clear SAP audit response plan, you can regain control and avoid panic. Read our SAP License Audits & Compliance Guide.
This step-by-step SAP audit playbook will walk you through exactly how to respond to an SAP audit from day one through the final post-audit negotiation.
By following these SAP audit steps, you’ll stay organized, minimize financial exposure, and negotiate on your own terms – turning a potential crisis into a manageable process.
Day 1–30: First Response Actions
- Day 1: Assign a dedicated internal audit lead to oversee and coordinate the response. This person (often a senior ITAM or compliance manager) will coordinate all tasks and be the single point of contact with SAP. Simultaneously, notify a C-level executive sponsor (like your CIO or CFO) that an audit is underway to ensure top-level support and attention.
- First Week: Assemble your cross-functional audit response team and hold a kickoff meeting. Include IT (especially SAP Basis administrators), ITAM/licensing staff, procurement, finance, and legal counsel. Review your SAP contract’s audit clause together – understand the scope SAP is entitled to, the data you must provide, and the timeline. Define each team member’s role (who will gather what data, who will handle communications, etc.). Early internal alignment prevents chaos and confusion.
- By Week 2: Begin internal data gathering (more on data collection below), but do not submit anything to SAP yet. Outline all information requested in the audit notice: user counts, license types, engine metrics, integrations, etc. Assign owners to collect each item. If the audit notice’s deadline is too tight or some requests are unclear, have your audit lead formally request an extension or clarification from SAP now – it’s better to negotiate a reasonable timeline upfront than to scramble later. Keep the tone cooperative, but make sure you get adequate time and a clear scope definition in writing.
- Weeks 3–4: Continue collecting data and start internal validation (cleaning and double-checking the data as described in the next section). Throughout this month, keep senior leadership informed of progress and any red flags. Ensure all communication with SAP flows through your single point of contact to avoid mixed messages. By Day 30, aim to have your data fully collected, internally vetted, and ready for submission (assuming SAP’s deadline requires it). If you aren’t fully confident by this point, consider requesting a bit more time rather than rushing with bad data.
Data Collection & Validation
Once your team is mobilized, the next step is to gather all required data and make sure it’s accurate before you hand it over to SAP.
Key steps in data collection and validation include:
- Run SAP’s measurement tools: Follow SAP’s instructions to run USMM (the user measurement program) on every SAP system in scope. Then use LAW (License Administration Workbench, or SLAW2 in newer S/4HANA environments) to consolidate the results across systems. Double-check that all relevant systems are included in the measurement so nothing gets omitted or double-counted.
- Consolidate usage metrics: In addition to users, SAP auditors often ask for specific usage data – for example, engine metrics (like number of employees in SAP HR or sales documents in SAP SD) or information on third-party systems that connect to SAP (indirect usage). Collect these additional metrics from your system logs or reports.
- Clean up the numbers: Before submitting anything, scrub your user lists and data. Remove or deactivate obvious inactive user IDs (accounts with no recent login, test accounts, etc.) so they don’t inflate the count. Ensure each active user has the correct license type assigned in SAP; if you find “unclassified” users, classify them appropriately now to prevent SAP’s tools from defaulting them to expensive license types. Eliminate duplicate accounts (the same person with access to multiple systems) from your counts where possible.
- Validate internally first: Treat your LAW results and other data as drafts until verified. Have team members cross-verify the consolidated results. If LAW shows an unexpected spike (say, significantly more users than your employee count), investigate and correct the cause (perhaps old unused accounts or misclassified users). Fix any errors you can (with proper documentation) and only then generate the final data set for SAP.
- Document assumptions and fixes: Keep a log of everything you adjusted or any assumptions you made during this process. If you excluded 50 training system users or found that some “users” were actually duplicate entries, document it. That way, if SAP later questions differences between their expectations and your data, you can explain the rationale. A paper trail of how you prepared the data adds credibility to your submission and helps counter any overreaching claims.
Stakeholder Communication
Effective communication – both within your organization and with SAP – is crucial throughout the audit.
Here’s how to manage stakeholders and messaging:
- Inform leadership and legal immediately: The moment an audit notice arrives, loop in your C-suite (CIO, CFO) and legal counsel. Brief them on the situation, potential risks, and your response plan. Early notification ensures they’re prepared for any necessary approvals (such as budgeting for outside help or eventual purchase) and can provide support.
- Centralize communication with SAP: All correspondence with SAP or their auditors should funnel through your designated audit lead. By having a single voice, you avoid inconsistent answers or accidental admissions. If auditors call random staff or send side emails, politely redirect them to the point person. Internally, instruct everyone to refer any audit-related inquiries to the audit lead – no rogue replies.
- Acknowledge, but don’t overshare: When you first reply to SAP’s audit notice, keep it short and professional. Acknowledge receipt of the notice and confirm you’re mobilizing to comply. If anything in the notice is unclear, ask for clarification. Do not volunteer extra information or commentary (“We’ve been meaning to clean up some licenses” or “We might be out of compliance in X area”). Provide only what is asked, when it’s asked. Oversharing can unintentionally broaden the audit’s scope or create new questions.
- Keep communications formal and documented: Treat every interaction with SAP as part of an official record. Whenever possible, keep communications in writing (email) to maintain a clear trail. If you have phone calls or meetings, follow up with a summary email of what was discussed. Maintaining a paper trail protects you if disputes arise later and demonstrates that you’re organized and serious about compliance.
Engage External Support
An SAP audit is high stakes – you don’t have to go it alone. Knowing when to pull in outside experts can tilt the odds in your favor:
- Bring in license experts if needed: If this is unfamiliar territory or the compliance exposure looks huge, consider hiring a third-party SAP licensing advisor or audit defense consultant. These specialists have seen many audits. They can quickly spot errors or overreaches in SAP’s claims and advise on the best strategy to minimize your costs. If your team lacks SAP audit experience or the stakes are particularly high, bringing in an expert early can help you avoid costly mistakes.
- Involve legal counsel on contracts: Make sure your legal team (in-house or external counsel specialized in IT contracts) is engaged, especially during the results analysis and negotiation phase. They will ensure SAP’s requests stay within the bounds of your contract and that you only provide data you’re obligated to. Legal experts also help interpret any vague licensing terms and make sure you don’t inadvertently agree to something outside your contract’s scope.
- Use benchmarks and negotiation know-how: Seasoned advisors can also share benchmark insights from other audit settlements (e.g., typical discount levels or concessions SAP has granted). This intel strengthens your negotiation position – you’ll know what’s realistic to ask for. In some cases, external negotiators can even assist directly in discussions or coach your team on effective tactics.
Read our SAP License Audit FAQ: 15 Common Questions Answered for SAP Customers.
Reviewing Audit Results
After you submit your data, SAP’s auditors will analyze it and eventually send you an audit findings report.
This report typically lists any compliance gaps (e.g., number of users over license entitlements, engine usage over limits, indirect usage estimates) and an initial proposal for remediation (often accompanied by a hefty price tag).
Treat this report as the auditor’s version of events, not the final truth.
Now it’s your turn to respond critically:
- Line-by-line analysis: Go through each finding in SAP’s report with your team. Verify the details against your own data. Are there users listed as unlicensed that you know have left the company, or are duplicate entries? Do the totals in SAP’s report match what you submitted, or did they include something incorrectly? Make an inventory of any discrepancies or questions. Even small differences (like a few users here or there) can add up to big money, so be thorough.
- Cross-check your entitlements: Ensure SAP didn’t overlook any licenses you already own. Compare their shortfall claims against your purchase records. They may have outdated entitlement info – for example, perhaps you purchased additional licenses last year that aren’t reflected in the audit report. If you find any instance where SAP’s numbers undercount your entitlements, highlight it and gather proof (license certificates, purchase orders) to get the findings corrected.
- Challenge questionable classifications: Look at the license types SAP says you need and make sure they’re justified. Auditors sometimes assume a user needs a more expensive license than they actually do. For example, if the report counts 100 “Professional” users, check if some of those users perform only limited activities that could be covered by a cheaper license type (such as an Employee or ESS user). Prepare evidence to reclassify those users in SAP’s view. Also scrutinize any indirect usage findings: if SAP claims a large number of documents or external system accesses, ask how they calculated it and validate those figures against your own logs – you may find they counted transactions that shouldn’t require a license under your agreement.
(By the end of this review, you should have a clear understanding of which findings are valid and which you will dispute, and a realistic idea of your exposure after correcting any errors.)
Formulating a Negotiation Strategy
Before you engage with SAP to settle the audit, take time to build a clear strategy. Rushing into negotiation without a plan can leave money on the table.
Consider these steps:
- Pick your battles: Decide which compliance gaps you will dispute and which you’re prepared to accept/resolve. Rank the findings by how strong your counterarguments are. For example, you might plan to fight SAP’s indirect usage claim (if you have evidence it’s overstated), but you may be willing to purchase licenses for a straightforward shortfall in named users. Knowing where to concede versus where to stand firm will focus your efforts on the most impactful issues.
- Define your ideal outcome: Determine what a “win” looks like for your organization. Is it minimizing the spend to a certain amount? Ensuring you purchase licenses only for current needs (and not hefty back-maintenance fees)? Maybe converting to a new licensing model that covers the usage in the future (if SAP offers an option like that). Also, decide on your maximum acceptable outcome – for instance, the upper budget limit or specific terms you cannot go beyond without higher approval. Having a clear goal and boundary in mind will guide your negotiation moves.
- Leverage timing and packaging: Examine your broader relationship with SAP and the upcoming event to optimize your approach. If you have a contract renewal or planned SAP purchase in the near future, consider tying the audit resolution into that deal. For example, you might negotiate that as you renew your SAP agreement or buy additional products, SAP will forgive certain audit findings or extend a special discount. Conversely, be mindful of SAP’s sales timeline: quarter-ends or year-ends can make SAP more eager to close deals (including audit settlements). Use those moments to push for better terms if the timing aligns.
Negotiating with SAP
When it’s time to sit at the table with SAP (figuratively or literally), keep these best practices in mind to protect your interests and get the best result:
- Maintain a factual, calm tone: Base all your arguments on evidence and data. Walk SAP through your analysis of their findings, showing where numbers should be adjusted. For example, “We discovered 25 users in your list who were actually terminated employees – here is the report of their last login dates showing none in the last 18 months.” By being methodical and professional, you establish credibility. Emotions might be running high, but don’t let frustration or anger into the negotiations. Also, avoid rushing to apologize or making statements that sound like an admission of wrongdoing – stay focused on solutions rather than blame.
- Share information thoughtfully: Throughout negotiation, only provide information that bolsters your case or that you’re required to provide. If SAP asks new questions, answer them truthfully but sparingly. For instance, if they inquire about a system not originally in scope, you might respond, “Let us verify if that’s relevant to the audit scope defined in our contract.” Be helpful, but not overly forthcoming in a way that opens new cans of worms. You want to contain the scope of the discussion to what’s on the table.
- Use deadlines to your advantage: If you’re nearing a financial quarter-end (yours or SAP’s) and discussions are dragging, remember that SAP’s sales team likely wants to wrap this up. While you shouldn’t artificially delay without reason, a bit of patience can lead SAP to improve its offer. They might come back with a discount or a more palatable proposal if they sense the deal could slip past their deadline. Conversely, ensure any internal deadlines on your side (like budget approvals) are communicated – e.g., “Our fiscal year closes next month, and we’d like to finalize this with you by then too.”
- Escalate if necessary: If you hit a wall with the audit team or SAP’s negotiator, don’t hesitate to go up the chain. Engage your SAP account manager or ask for a meeting with an SAP sales executive. Higher-level SAP reps often have more flexibility (and incentive) to maintain a good customer relationship. By respectfully escalating (“We value our partnership with SAP and would like to involve our account executive to help find a mutually acceptable solution”), you signal that you’re serious about a fair outcome. This can sometimes soften SAP’s stance, especially if you are a significant client or if future business is at stake.
- Get every agreement in writing: As you negotiate, keep notes of what is being proposed and agreed upon. If SAP offers a concession verbally, promptly email them to confirm it in writing (“Just to confirm our call, SAP has agreed to waive past maintenance fees on X licenses if we purchase Y new licenses…”). Ultimately, the final settlement should be documented in a formal agreement or amendment, but having a clear written record during negotiation prevents any “misremembering.” Never rely on handshake deals or verbal “trust me” assurances – in a compliance dispute, only the written terms count.
Closing the Audit
Bringing the audit to a close properly is as important as the initial response. This ensures there are no loose ends or surprises down the road:
- Secure a formal settlement agreement: Once you and SAP reach a negotiated resolution, insist on a written agreement that details everything. This could be an amendment to your license contract or a separate settlement letter. It should list any licenses you are purchasing (including quantities, types, and costs) and any one-time fees or retroactive charges you’ll pay, as well as any special terms (e.g. fee waivers or adjusted entitlements). Review it carefully with your legal and procurement teams to ensure it matches what was agreed.
- “Full and final” language: Make sure the agreement clearly states that it is a full and final settlement of the audit findings. In other words, once you fulfill the settlement (e.g. purchase the agreed licenses or pay the agreed amount), SAP agrees not to pursue any additional fees or claims for the period that was audited. This clause protects you from surprise “oh, we missed this” charges later related to this audit.
- Clarify future obligations: If the settlement involves any forward-looking commitments (for example, moving to SAP’s digital access licensing model for indirect use, or a plan to retire certain systems by a date), get those details in writing. You should know exactly what is expected of you after the audit. Likewise, if SAP is granting any concession contingent on future behavior, this should be clearly stated. Clarity now prevents disputes later.
- Confirm audit closure: Finally, obtain a simple confirmation from SAP that the audit is closed and you comply. This might be an official letter or even an email from the SAP audit team or your account executive. File this away with your audit records. It’s your proof that, as of the settlement, you have satisfied the audit – useful if someone at SAP (or a new auditor down the line) ever questions that same period again.
Post-Audit Follow-Up
With the audit officially behind you, take proactive steps to strengthen your software license management and prevent future pain:
- Conduct a lessons-learned session: Gather the core team for a retrospective meeting. What did you learn from this SAP audit? Identify the root causes of any compliance gaps or process breakdowns. Discuss what went well in your response plan and what could be improved. Document these insights so you can refine your internal processes and audit response playbook. (For example, you might realize you need a better system for tracking SAP users or a clearer internal communication protocol during audits.)
- Strengthen license management: Use this audit as a springboard to improve your processes. Immediately clean up any excess access (remove unneeded users or high-level access rights) so you’re compliant going forward. Implement ongoing controls like regular internal license audits (using SAP’s tools) and strict joiner/mover/leaver procedures to keep user counts in check. Set up alerts or reports to monitor usage and identify if it is approaching license limits or if a new integration may trigger additional licensing. Catching issues early means the next audit will be far less painful.
Audit Response Checklist
Here’s a quick checklist to ensure you’ve covered all bases during your SAP audit response:
- ✓ Assign audit lead & team
- ✓ Review contract audit clause
- ✓ Run USMM & LAW internally
- ✓ Validate & clean user data
- ✓ Engage external experts
- ✓ Prepare negotiation strategy
- ✓ Document settlement terms
- ✓ Launch post-audit prevention measures
(Use this checklist as a handy guide during the audit – check off each item as you go to stay on track.)
Conclusion
An SAP license audit may be daunting, but with the right approach, it’s a challenge you can manage and even turn to your advantage. By responding methodically – assembling a capable team, controlling the data and narrative, and assertively negotiating – you protect your organization from needless costs. Remember, software compliance is not just a one-time scramble; it’s an ongoing discipline. Treat this SAP audit as a catalyst to strengthen your governance. With a solid audit response plan and a commitment to continuous compliance, you’ll not only survive the audit, but come out the other side with a tighter ship and confidence in your software asset management.
FAQ
Q: How often can SAP audit us?
A: Most SAP contracts give the vendor the right to audit annually (typically with some notice). In practice, SAP doesn’t audit every customer every year – many companies see audits every 2–3 years. However, suppose you just went through a significant audit and resolved major issues. In that case, SAP will usually not audit you again immediately (you can expect at least a year of breathing room). Keep in mind that certain triggers (like a big spike in usage or a major new SAP purchase) can prompt an out-of-cycle audit as well.
Q: What if we find compliance issues ourselves before SAP does?
A: If you discover a problem while preparing for the audit, the best approach is to quietly correct what you can before submitting data. For example, remove any obviously unlicensed or unused accounts and fix misclassified users internally. You don’t need to volunteer a confession to SAP about issues they haven’t asked about – just provide the cleaned, accurate data. If SAP’s report later flags something you already addressed, you can show that you’ve fixed it. Never falsify data, though – be truthful in what you submit. The strategy is to fix internally and only discuss problems with SAP if and when their findings arise.
Q: Can we refuse to provide certain audit data to SAP?
A: You cannot refuse a legitimate audit request that falls under your contract’s audit clause – doing so would violate your agreement. That said, you can and should ensure the auditors only get what they are contractually allowed to. If SAP asks for something that seems outside the audit’s scope or overly broad (for example, detailed data on a system not included in the defined scope), you have the right to question it. Ask how it relates to verifying license compliance. In many cases, SAP will either justify it or back off if it’s not truly required. In short, you must cooperate with an SAP audit, but you don’t have to hand over more information than the contract stipulates.
Q: How long does an SAP audit usually take?
A: It varies, but typically an SAP license audit can stretch 3–6 months from the initial notice to final resolution. The data collection phase typically lasts a few weeks (SAP allows ~4 weeks for gathering and submitting data). Then the auditors analyze and often come back with questions – that exchange can take another month or two. Negotiating the settlement might add a few more weeks on top of that. Some audits wrap up faster (within a month or two) if compliance gaps are minor. More complex audits with lots of disputes can take longer.
Q: Can we negotiate the settlement terms of an SAP audit?
A: Absolutely. The audit report is just SAP’s opening offer. You can negotiate both the findings and the financial terms. In most cases, SAP is willing to discuss discounts or alternative arrangements once you engage. For example, you might provide additional data that reduces the number of licenses SAP claims you owe, and then negotiate a reasonable price for the remaining shortfall (often at a discount or with some fees waived). The key is not to accept SAP’s first demand. Come with your facts and a target outcome. Many companies end up paying far less than the initial audit quote by negotiating and finding a solution that works for both parties.
Read more about our SAP Audit Defense Service.
