SAP Contract Renewal Playbook – 120 Days Out: Pre-Renewal Audit
CIOs and CTOs should initiate an SAP pre-renewal audit approximately 120 days prior to contract renewal.
This early audit compares actual usage vs. entitlements, uncovering misalignments such as unused licenses or compliance gaps.
By auditing well in advance, enterprises gain leverage to optimize licenses, avoid surprises, and enter renewal talks with data-driven negotiation power.
Why a Pre-Renewal Audit 120 Days Out is Critical
An SAP usage analysis dashboard enables CIOs to visualize current license consumption and identify any misalignments.
Starting an internal SAP license audit 3–4 months (120 days) before renewal is crucial for several reasons. First, many SAP contracts require a 90-day notice if you plan to reduce or drop any licenses or maintenance.
A 120-day head start provides ample time to identify what can be cut and officially notify SAP before the window closes. Second, early auditing prevents last-minute surprises.
If you discover overuse or compliance issues too late, you might scramble under pressure or end up accepting unfavorable terms.
By beginning at 120 days out, you have time to address findings methodically and incorporate them into your renewal strategy.
It sets a proactive tone – instead of reacting to SAP’s quotes or potential audit findings, you drive the conversation with facts about your environment.
Moreover, initiating the audit early aligns internal stakeholders. CIOs, CTOs, IT asset managers, and procurement can review the data together and form a unified plan.
This collaborative review surfaces any internal disagreements or questions well before you’re in the heat of negotiations.
The result is a cohesive approach: leadership understands the planned license changes (e.g., dropping unused modules or reallocating users), and everyone agrees on goals like cost savings targets or risk tolerance.
In short, 120 days out is the sweet spot that balances having fresh usage data and providing enough lead time to act on it.
Read the SAP Contract Renewal Playbook for Mixed Landscapes.
Inventory Your SAP Entitlements
The first step in a pre-renewal audit is to catalog all your SAP entitlements.
Gather every contract, order form, and license schedule to build a clear inventory of what you’re entitled to use.
This includes:
- License counts and types: List the number of each SAP license type you own – e.g., 500 Professional User licenses, 300 Limited Professional, 200 Employee Self-Service, 10 Developer, etc. Document also any package or engine licenses (e.g., if you have an SAP module licensed by metric, like eight cores of HANA, or 1000 CRM Full Users).
- Maintenance Terms and Costs: Please note the annual support/maintenance fee for each item. SAP maintenance is typically ~20–22% of the license purchase price, so it’s a significant ongoing cost. For example, a Professional user license with a one-time cost of $3,000 carries approximately $660 per year in support. Multiply that by hundreds of users, and you see why eliminating unused licenses can save big on support fees.
- Contractual parameters: Check your agreements for any renewal clauses, such as the notice period for reductions. Also, note if you have any special terms (such as flexible use rights, conversion rights, or previous commitments) that affect what you can do at renewal.
- SAP product modules and cloud subscriptions: If your SAP estate includes cloud subscriptions (such as SuccessFactors or Ariba) or multiple on-premise products, inventory them as well. List each subscription, its user count or usage metric, and renewal date. Even if they renew separately, it’s good to have a consolidated view.
Having a single source of truth document (e.g., a spreadsheet or SAM tool report) of all entitlements is foundational.
CIOs often discover that simply pulling this together is enlightening – it may reveal forgotten shelfware (e.g,. a module purchased years ago that no one uses) or show how many high-cost licenses you’re paying maintenance on.
This entitlement baseline is what you’ll compare against actual usage data in the next steps.
Measure Actual Usage Against Entitlements
With your entitlements listed, the core of the pre-renewal audit is measuring actual usage of SAP systems and comparing it to those entitlements.
This usage data collection should be thorough:
- User license consumption: Use SAP’s built-in measurement tools (such as transaction USMM and the License Administration Workbench (LAW) for on-premise SAP ERP systems) to tally how many users are active and what license type they require. For each SAP system, extract user lists and usage statistics. Identify dormant accounts – e.g., users who haven’t logged in for 90+ days – as these may represent licenses that can be reclaimed. In SAP cloud products, check the admin or “SAP for Me” portal for current assigned users and their activity levels.
- Engine/package metrics: If you have SAP packages licensed by metrics (such as gross revenue, number of employees, system memory, or documents processed), gather the current values for those metrics. For instance, if you’re licensed for up to 1,000 employees on SAP Payroll, what’s the current employee count? If you have a HANA database license for 2TB of memory, what’s your actual database size usage? This ensures you spot any growth beyond entitlements.
- Indirect usage tracking: List out any third-party applications, middleware, or non-SAP systems that interface with SAP. Indirect usage (when external systems or users access SAP data indirectly) can trigger license requirements under SAP’s rules. Check if you have metrics for documents created via non-SAP systems (SAP’s “Digital Access” documents, such as orders and invoices generated indirectly). Many companies overlook this, so it’s crucial to identify whether your SAP environment generates or queries significant amounts of data via interfaces.
- Concurrent or peak usage (if applicable): Some older contracts or certain SAP products might have concurrent user metrics or peak consumption measures. If so, monitor the peak usage over the last year. For example, if transactions per month license an engine, what was the highest monthly count?
Collecting this data may involve multiple teams, including SAP Basis administrators to run measurement reports, database administrators for system metrics, and business owners for module-specific statistics. Plan to gather and verify the data over some time (hence starting 120 days prior).
If you lack in-house tools, consider engaging an SAP licensing expert or using a third-party software asset management (SAM) tool to do a one-time measurement. The goal is to have an accurate and current snapshot of how your organization utilizes SAP.
Identify Shelfware and Underutilization
Once you have usage data, compare it against your entitlement inventory to pinpoint shelfware – licenses and products you’re paying for but not fully using.
CIOs often find areas of over-licensing: perhaps you bought 1,000 Professional user licenses but only 700 users are active, or you pay maintenance on an SAP module that only a handful of employees use. These represent immediate cost-saving opportunities.
Analyze for each category of license or module: how many are allocated vs. purchased. For example, if 300 of your 500 Limited Professional user licenses are in use, you have 200 unused.
That unused 40% is shelfware, incurring maintenance costs. Multiply by the maintenance fee and you see the waste. It might look like this:
| License/Module | Entitled | In Use | Unused | Annual Maintenance Waste (approx.) |
|---|---|---|---|---|
| SAP Professional Users | 500 | 450 | 50 | $660 × 50 = $33,000 |
| SAP Limited Professional | 300 | 200 | 100 | $330 × 100 = $33,000 |
| SAP Module XYZ (engine) | 1 license (up to 8 cores) | Using 4 cores equiv. | n/a (50% underused) | (Opportunity to downsize at renewal) |
In this simplified example, the enterprise has 50 additional Professional user licenses and 100 additional Limited users; each unused license still incurs yearly support fees.
Together, that’s approximately $66,000 per year wasted on support – money that provides zero value because the licenses remain idle. Over a typical 3-5 year period, that adds up significantly.
By identifying these, you can decide to terminate or reallocate them at renewal:
- Unused named user licenses: plan to remove them from the contract or reduce the count to what’s needed. This immediately reduces future maintenance costs. (Be mindful of any minimums in the contract, but SAP generally allows reductions with notice.)
- Underutilized modules or engines: if you have an entire SAP component that’s lightly used, evaluate if it’s truly needed. Perhaps a module can be retired or replaced with a cheaper alternative, or you can negotiate to swap it for something more useful.
- Oversized capacity metrics: Maybe you’re licensed for far more volume (users, transactions, hardware capacity) than you currently require. This could be leverage to negotiate a smaller tier (if SAP offers tiers) or simply to not purchase additional capacity until you approach the limit.
Real-world example:
A global manufacturer conducted a pre-renewal audit and discovered ~30% of their SAP named user licenses were “shelfware”. Dozens of employees had left the company or changed roles without their licenses being reassigned, and many occasional users had been given expensive Professional licenses when a less expensive license type would have been sufficient.
By identifying over 300 such cases, the company eliminated more than $1 million in unnecessary license fees and reduced annual support costs by hundreds of thousands.
This kind of clean-up not only saves money but also simplifies compliance management in the future.
The key is to turn shelfware into an advantage: it’s your evidence to negotiate down your renewal. If you can show SAP that “we only need X licenses instead of Y,” you can firmly request to pay less. And internally, CFOs and CIOs love reclaiming budget from unused software.
Address Compliance Gaps and Indirect Access Risks
The flip side of unused licenses is identifying areas where usage exceeds entitlements – compliance gaps that could come back to haunt you later.
A pre-renewal audit should reveal if you have more users or usage than you’re licensed for.
Common findings might include:
- Extra users beyond license count: For instance, you have 500 Professional licenses, but LAW results show 550 active users requiring that category. This means 50 users are unlicensed – a compliance issue. It’s far better to catch this yourself now than to have SAP’s auditors catch it. At renewal, you can plan to purchase additional licenses (ideally at a negotiated discount as part of the renewal package, rather than paying full price in an audit).
- Users assigned to a license type that is too low: Perhaps some users are engaging in activities that contractually require a Professional license, but you have only assigned them a Limited license. In an audit, SAP could flag those as under-licensed. Identifying this now allows you to correct the allocations (upgrade those licenses or restrict usage). It might mean buying a few more of the higher-tier licenses, but again, you can do this in a negotiated way.
- Indirect access (Digital Access) usage: This has been a hot spot in SAP compliance. Suppose non-SAP systems are creating or accessing SAP data (such as sales orders via a web portal or a CRM pulling customer data from SAP). In that case, SAP may require additional licenses or a Digital Access Document license to cover this. If your audit finds significant documents created indirectly (e.g., millions of invoice records from an external system), quantify that. SAP now sells Digital Access in packages (such as 1,000 document bundles). If you foresee a compliance issue here, consider addressing it by negotiating a digital access license in the renewal. It’s better than SAP later hitting you with a surprise bill for documents.
- Geographic or divisional use beyond scope: Check if any usage violates geographic restrictions or named entity restrictions in your contract (some older contracts tie usage to a specific subsidiary or location). Ensure you remain within scope, or plan to get SAP’s permission (often in the form of contract amendments) to cover any expanded use.
Addressing compliance gaps proactively is about risk mitigation.
The benefit of finding an under-licensing situation at 120 days out is that you can include the needed licenses in your renewal under normal discounted pricing and maintain goodwill.
It avoids the worst-case scenario: SAP conducting a formal audit and charging back maintenance and penalties for overuse, which can be extremely expensive (often list price plus years of support fees for each deficiency).
By being honest and proactive, you maintain control.
For example, suppose you realize you’re 50 Professional users short. In that case, you can approach SAP, saying, “Our business grew and we need to legitimize that with additional licenses as part of this renewal.”
SAP sales reps prefer this to dragging you through an audit, and you can often fold the cost into the renewal deal more favorably. In short, find any compliance gaps and decide how to remediate them on your terms.
Align Licenses with Business Needs and Future Plans
A pre-renewal audit isn’t only about cutting fat and plugging holes – it’s also a chance to ensure your SAP licensing aligns with where your business is headed.
Over the next 1-3 years, your needs may change. Use the audit phase to talk with business unit leaders and project teams about upcoming changes:
- Planned growth or projects: Are you rolling out SAP to new user groups or new regions soon? If a division will add 200 new SAP users next year, factor that in – you might negotiate a higher license count now or secure pricing for future expansion. Conversely, if a business line is spun off or a plant closes, you may be over-licensed post-divestiture; plan for a clause to reduce licenses if that happens.
- New SAP modules or alternatives: If the company intends to implement a new SAP module (e.g., adding SAP SuccessFactors for HR or migrating to S/4HANA) shortly, consider this in the renewal. It might be advantageous to negotiate it now rather than later, or at least not lock yourself in a long renewal that doesn’t account for that addition. On the flip side, if you’re planning to retire an SAP component or try a non-SAP solution for a certain function, you’ll want to drop those licenses or ensure you aren’t stuck paying for them.
- License type optimization: Aligning licenses means ensuring each user has the appropriate type for their job. The audit data may indicate that many users with Professional licenses primarily utilize basic functions. It’s worth downgrading some users to cheaper license categories if allowed. For example, moving a user from a $3,000 Professional license to a $1,500 Limited Professional could cut that cost in half (and save $330/year in maintenance on that user). Multiply that across dozens of users and the savings are substantial, with little impact on the user’s work. Conduct this analysis in collaboration with department heads to ensure they approve the changes.
- Budget and cost objectives: Align the renewal outcome with the CIO/CFO’s budget goals. If the company mandates a 10% IT cost reduction, identify where license cuts or contract tweaks can contribute to that. If a cost increase is inevitable due to growth, at least quantify it and try to offset it elsewhere. Having usage data and a clear picture of needs means you can prioritize spending on what delivers business value and cut spending on what doesn’t.
By the end of this alignment exercise, you should have a refined target state for your SAP contract: e.g., “We need 100 fewer of X licenses, 50 more of Y licenses to cover growth, to drop module Z completely, and possibly add new cloud product Q in a year.”
This vision ensures the renewal conversation with SAP is about right-sizing — not just renewing what you had, but adjusting to what you need moving forward.
It also demonstrates to SAP that you have done your homework; a well-prepared customer who knows their usage is more likely to get a favorable deal, because SAP sales teams recognize they can’t easily upsell unnecessary products to you.
Recommendations
- Begin renewal preparation early (at least 120 days out): Don’t wait until the last minute. Start auditing usage at least 4 months before your SAP renewal to give your team time to analyze and act on the findings.
- Consolidate entitlement and usage data: Create a detailed inventory of your SAP licenses and compare it against actual usage. Use SAP’s measurement tools or third-party audits to ensure the data is accurate. This single source of truth will guide all decisions.
- Identify and eliminate shelfware: Pinpoint unused or underutilized licenses. Plan to terminate support on these or reallocate them instead of renewing. This reduces wasteful maintenance costs (typically around 22% annually per idle license).
- Address overuse proactively: If you find areas where you’ve exceeded entitlements, develop a plan to resolve it during renewal. It’s better to buy needed licenses under negotiation (with discounts) than to risk an official audit and penalties later.
- Review contract notice periods: Check your contract for any required notice (often 90 days) to drop licenses or maintenance. Use your 120-day audit findings to inform SAP of reductions in time. Preserving the option to cut licenses (via formal notice) gives you leverage, even if you later decide to keep some during negotiation.
- Engage stakeholders and align on actions: Involve IT, procurement, finance, and business leaders in reviewing the audit results to ensure alignment and informed decision-making. Ensure everyone agrees on what will be cut, added, or changed. Internal consensus prevents backtracking during talks with SAP.
- Leverage findings in negotiations: Use your usage data as a factual foundation in discussions with SAP. For example, present the evidence of 50 unused licenses when requesting a cost reduction, or show growth data to negotiate volume discounts on new licenses. Data-driven arguments carry weight.
- Consider future needs and flexibility: Based on your audit and business plans, negotiate for flexibility to accommodate future needs. If you anticipate changes, seek contract clauses or shorter terms that let you adjust licenses without penalty. This prevents paying for excess if your situation evolves.
FAQ
Q1: Why start an SAP license audit 120 days before renewal?
A1: Because most SAP contracts require advance notice (often ~90 days) to reduce or cancel any licenses at renewal. By auditing 120 days in advance, you can identify potential cuts and still have time to notify SAP. It also provides a buffer to address compliance issues or refine your strategy without the pressure of an imminent deadline. Essentially, starting early ensures you control the narrative rather than rushing to react to SAP’s renewal quote.
Q2: What’s the best way to assess our actual SAP usage?
A2: Leverage SAP’s own tools and usage reports. If you’re on-premise, run the USMM transaction in each system and consolidate results using LAW (License Administration Workbench) to get a global view of named user activity. Review engine metrics (SAP provides specific measurement reports for many modules). For cloud products, use the admin console or SAP’s “Usage and Analytics” tools, which are available (for example, SAP provides a dashboard in the SAP portal for tracking usage of cloud services). If available, use a software asset management tool that can inventory SAP usage. And don’t forget to talk to application owners – sometimes manual checks (like asking HR how many employees are in the system) help verify the numbers.
Q3: What should we do if we discover a lot of unused SAP licenses?
A3: Unused licenses (shelfware) are a prime opportunity to save money. Identify exactly which licenses are not being used (e.g., unused accounts or modules). Plan to decommission or remove those that are due for renewal. This can involve formally notifying SAP that you won’t renew maintenance on those licenses. The result: you stop paying ongoing support on software you aren’t using. You might also explore whether those licenses can be repurposed elsewhere in your organization (instead of buying new ones for another department, consider reassigning an idle license). Either way, go into renewal negotiations prepared to explain which licenses you’re dropping and why – and ensure your internal teams are on board so nothing vital is accidentally cut.
Q4: How do we handle it if we’re using more licenses than we bought (i.e., overuse)?
A4: First, confirm the extent of overuse through your internal audit. If it’s confirmed, devise a plan to address it. In many cases, the best approach is to proactively own up during renewal discussions: inform SAP that usage has exceeded entitlements and that you intend to rectify the issue as part of the new agreement. By doing so, you maintain credibility and can usually negotiate to purchase the extra licenses at your standard discount levels. This avoids an unpleasant compliance audit later where SAP could charge list price plus back fees. Additionally, implement internal controls to prevent future unintentional over-deployment – for example, by establishing tighter user provisioning processes or conducting regular internal audits annually.
Q5: What is “indirect access” and why is it important in a pre-renewal audit?
A5: Indirect access (now also referred to as Digital Access by SAP) refers to scenarios where users or systems that are not directly logged into SAP still access or create data within SAP. Classic example: a third-party e-commerce system that creates an order in SAP – the customer or system never logged into SAP, but SAP data was utilized. Historically, SAP has required licensing for this indirect usage, which caught many customers off guard. During a pre-renewal audit, it’s essential to identify all interfaces and external applications that interact with SAP. If they generate a significant number of SAP business documents (sales orders, invoices, etc.), you may need to license that via SAP’s digital access model. It’s better to quantify it now and discuss a solution (such as purchasing a block of document licenses or adding an indirect usage clause) during renewal, rather than risking an audit dispute later. Indirect usage can be a costly “hidden” liability, so shining light on it in your audit is a smart risk avoidance move.
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