To prepare for a SAP License Audit, consider the following steps:
- Understand Contract Terms: Familiarize yourself with the SAP licensing agreement and terms.
- Internal Audit: Conduct a self-audit to assess current SAP software usage.
- Documentation: Gather and organize relevant documentation and usage records.
- Identify Discrepancies: Compare actual usage with licensed entitlements to identify any discrepancies.
- Rectify Issues: Address any under-licensing or compliance issues found during the self-audit.
- Prepare a Response: Organize findings and prepare a response for the SAP audit.
- Seek Expert Advice: Consult SAP licensing experts for guidance and support.
SAP License Audit Preparation – How to Build Your Defense
Facing an SAP license audit can be daunting. SAP’s Global License Auditing and Compliance (GLAC) team conducts formal audits, typically every one to two years. The outcomes can lead to substantial true-up costs if you’re not prepared. However, with the right approach, you can turn an audit from a threat into a manageable exercise.
Audit preparation is about doing your homework in advance: understanding your license entitlements, comparing them with your actual usage, and having a clear strategy to address any gaps.
Essentially, you want to build a “defense” that demonstrates to SAP (and yourself) that your organization is compliant, or that you have a plan to remedy any shortfalls. This article provides a step-by-step guide for SAM managers and licensing pros on preparing for an SAP license audit and defending your license position.
Understanding the SAP Audit Process (Briefly)
Before preparing, it’s helpful to know how a typical SAP audit unfolds. After you sign your SAP agreement, SAP can usually audit you, typically after the first two years, and then annually (although not every customer is audited every year).
There are Basic audits (standard remote audits via LAW/USMM data submission) and Enhanced audits (more detailed, sometimes on-site, targeting specific customers】.
The process often starts with a notification email. Then, you run measurement programs (USMM) in each system, consolidate the results via LAW, and send those results along with a self-declaration to SAP. SAP reviews the data, asks questions as needed, and then shares the findings, which may indicate compliance or any required license purchases.
Knowing this, our goal in audit preparation is to ensure that when we run those measurement tools and declarations, there are no surprises.
Key Elements of Audit Preparation
Let’s break down the core elements you should focus on when gearing up for an SAP audit:
1. License Inventory and Agreement Review
Start with what you’ve agreed to:
- Review Your SAP License Agreements: Pull out the contracts, order forms, and any addenda related to SAP. Key things to note: the number of each type of named user license purchased (e.g., 100 Professional, 200 Limited, etc.), any package/engine licenses and their metrics (e.g., up to X revenue, Y employees, etc.), the products/modules you’re entitled to use, and any special clauses (like special licensing terms for indirect access or a migration credit if you’re moving to S/4HANA). Understand your obligations – for instance, some contracts might explicitly require you to count certain third-party usage as named users. Also note the maintenance agreements – if you dropped certain modules from maintenance, you must not be using them.
- Identify Relevant Documents: Besides the contract, ensure you have documentation such as the SAP Pricing and Licensing Guide from the year you signed (to interpret definitions) and any correspondence or emails from SAP that clarify usage rights. Companies sometimes overlook special terms. For example, maybe SAP granted you a special discount on Digital Access documents for a period, or you have a contractual cap on price increases. These can become negotiation points if the audit findings differ from expectations.
2. Internal Usage Assessment
Next, review what you’re using in detail:
- Conduct an Internal License Audit: Essentially, perform the steps we outlined in the first article as an internal audit. Run SAP’s measurement tools (USMM and LAW) internally (if you haven’t done so recently) to see what numbers they produce. Analyze user lists for classification issues, clean up inactive users, and ensure each user has the correct license type. This internal check might reveal, for instance, that LAW is counting 10 more Professional users than you thought, because some users in the HR system were unclassified and defaulted to the Professional Category. You should discover and fix it now rather than SAP doing so.
- Compare Usage to Entitlements: Take the results of your internal measurement and compare them side by side with your license entitlements. If you have 100 Professional licenses but the internal count shows 120 users effectively require Professional, you have a gap. Check engines too: If you’re licensed for “SAP Digital Payments” and can process up to $1 billion in transactions per year, and your FI system shows $1.2 billion processed, that’s a red flag. By doing this comparison, you create a list of discrepancies to address.
- Focus on Indirect Usage: As part of the usage review, specifically look at indirect access scenarios. Use SAP’s Digital Access Estimation Note or any custom tracking you have to count documents created indirectly (sales orders from a web shop, etc.). If you haven’t moved to Digital Access licensing and are still using traditional named-user rules for indirect access, list all third-party systems and check if those users are accounted for. For example, if 50 sales agents use a Salesforce CRM that creates quotes in SAP, do you have 50 SAP licenses for them? If not, this is a known area SAP audits will probe. During preparation, you might decide to quickly license that via Digital Access or true-up user licenses to cover them, instead of being caught short.
3. Remediation Plan
Now, with knowledge of any gaps, decide how to address them before the audit:
- True-Up or Optimize: For each discrepancy, can you resolve it proactively? Options include:
- Reassign or Cleanup: If you found 50 extra Professional users but realize 30 of them were inactive, removing those accounts might bring you back into compliance. If some users were overclassified (given too high a license), downgrading them (if justified by their usage) could resolve a compliance issue. Essentially, optimize your current usage to fit within entitlements.
- Purchase Needed Licenses (in advance): If, after optimization, you still have a shortfall (for example, you have 10 more heavy users than licenses), consider buying the needed licenses before the audit concludes. The reason is strategic: if SAP finds you under-licensed, you’ll pay the list price plus back maintenance from the date the usage began. If you buy proactively, you might be able to negotiate a better discount or bundle it with something else. But timing is key – if the audit has already been formally launched, any purchases may still be counted as a result of the audit. Some companies prefer to quietly engage their SAP account manager before submitting audit data, to top up licenses in a way that avoids non-compliance findings.
- Document and Justify: For any grey areas, prepare a justification. For instance, if you have a technical system user that SAP’s tools count as a Named User, but your contract says system accounts don’t need a license, flag that clause. You may need to explain to SAP why you didn’t count certain IDs. Having the documentation ready, such as the contract excerpt, strengthens your defense.
- Address Indirect Access Now: If indirect use is significant, one remediation option could be to opt into SAP’s Digital Access Adoption Program (DAAP) before the audit. SAP’s DAAP offers a steep 90% discount for licensing indirect document】. By measuring your documents and purchasing digital access licenses through the program, you essentially resolve indirect use compliance issues and lock in favorable terms. The program has specific rules (e.g., Option B grants 90% off, but no further negotiation is allowed on that item). Weigh this if indirect usage is your big worry – it might be better to settle it proactively rather than haggle during an audit resolution when SAP has more leverage. Always run the numbers: maybe your indirect count is small and existing Named Users cover it, or maybe it’s huge and DAAP is worth it.
- Plan for Engines: If an engine metric is overused, try to limit its technical usage. For example, if a BW data volume exceeds the licensed TB limit, can you archive some data to reduce it? Or if you exceeded a user metric, was it a one-time spike that’s now back to normal? Document those circumstances. If unavoidable, talk to SAP about adjusting the license metric (perhaps by moving to a higher-tier license) proactively.
4. Documentation and Audit Process Readiness
Preparation isn’t just about licenses; it’s also about how you’ll handle the audit process itself when it occurs:
- Prepare Documentation Package: Organize a central repository of all documents that you might need to provide or refer to during the audit. This includes the contracts (with key pages highlighted for easy reference), recent USMM/LAW measurement results, and a written explanation for any non-standard aspects of your landscape. For example, list all your SAP installations and their System IDs, highlighting which ones are for backup, disaster recovery (DR), and non-productive use (because non-production users may not be counted in the same way, depending on your contract). If you’ve carved out an exception (like a training system with generic users), note how those are isolated. The goal is to show you’re on top of your environment. Having a clear License Entitlement vs. Usage spreadsheet is powerful – it can mirror SAP’s compliance report format, showing each category as either OK or with a planned action.
- Define Roles & Responsibilities: Decide who will be the point of contact for the auditors (usually someone in SAM or IT asset management). Also, who will be on the internal “audit response team”? This often includes a representative from procurement or legal (to handle contractual interpretation and any negotiations), the SAP Basis administrator (to run measurements and gather data), and possibly a finance person (if financial discussions are involved). Let this team know their roles ahead of time, even run a drill: for example, practice how you would respond if SAP queries why a certain user is classified in a certain way. This avoids confusion when you’re under time pressure during an audit.
- Communication Strategy: It’s wise to have a strategy for how you communicate with SAP during the audit. Generally, you want to be cooperative and transparent (hiding stuff can raise suspicion), but also measured and consistent in your responses. If a question arises that you’re not ready to answer, it’s fine to say you need to investigate and will get back to you, then consult your internal team or external advisors. Part of the preparation is listing out potential questions SAP might ask and prepping answers. For instance, “We see you have an interface to a non-SAP warehouse system. How are you licensing that?” You should be ready to say, “Yes, we have 30 employee user licenses assigned to cover those external warehouse users, which we’ve accounted for in our count.” Proactive and confident answers show control.
5. Seek Expert Help if Needed
Audit defense is a nuanced field. If your SAP estate is especially large or complex (say you’re using many industry solutions, or you suspect a big indirect use exposure), consider engaging a third-party expert or legal counsel before the audit happens.
They can help refine your preparation:
- External SAP Licensing Consultants: Firms that specialize in SAP licensing can offer a pre-audit assessment, effectively simulating an audit by SAP, and advise on areas of risk. They can help interpret tricky clauses (such as how to count a certain metric) and suggest creative solutions, like using a contract negotiation loophole or leveraging an upcoming purchase for better terms.
- Legal Counsel for Software Licensing: If you anticipate a contentious audit (or already have a dispute with SAP), having legal counsel briefed is crucial. They would ensure you don’t accidentally admit to non-compliance in writing, and that any settlement is negotiated fairly. They can also advise on your rights – for instance, you generally are not obligated to give SAP remote access; you typically just provide data. Understanding boundaries can help you manage the audit efficiently.
During the Audit: Building Your Defense in Real-Time
When SAP notifies you of an audit, your preparation efforts come into play:
- Kick-off Meeting: SAP often holds a kick-off call. Use this to your advantage – ask them to clarify the scope. Are they looking at all systems? Do they want to include cloud solutions? The more you know, the more you can focus your defense. Reconfirm timelines and deliverables. This also shows SAP that you’re organized.
- Data Collection and Submission: Execute the measurement as required. Thanks to your prep, this should be straightforward. Double-check the data before sending – e.g., ensure you applied the correct consolidation in LAW (so duplicates are merged), and the classification texts align with your contract terminology (SAP’s default user types may have changed names; map them if needed, e.g., “Employee” vs “ESS User”). Submit the data professionally, perhaps with a cover letter highlighting any special points (“We’ve excluded system X as it’s a decommissioned instance with no use, per our agreement, see attached proof”).
- Anticipate Findings: While waiting for SAP’s analysis, prepare your defense for each likely finding. If you suspect they’ll say “you need 20 more Professional users”, have your counter ready. Maybe you can show that you’ve actually reclassified some and now only need 5, or you have an order for those 5 already in process, demonstrating good faith. If indirect documents arise, be prepared to discuss how you measured them and that you are evaluating the Digital Access license option (or have it in place).
- Challenge Where Justified: When SAP shares preliminary findings, scrutinize them. Sometimes, SAP can count users in non-production systems or test IDs – if your contract states that these don’t count, push back with evidence. Or if they assumed all “unclassified” users are Professionals, but you have since corrected that, show them the updated classification and measurement. You are allowed to contest findings – audits can be a negotiation. The key is having the facts and documentation to support your position.
- Negotiation and Settlement: If it turns out you do owe licenses, use your preparation to negotiate the best outcome. Because you did your internal assessment, you know exactly how many you truly need (sometimes SAP’s initial number overshoots – they might try to sell more as a buffer). You can negotiate down to the precise number required. Also, you might be able to negotiate terms: for instance, if you have to buy licenses, you could ask for retroactive maintenance waivers or a discount, given that you promptly complied. It’s not uncommon to treat an audit true-up like a mini license purchase negotiation – stay firm but reasonable. Remember, SAP audits are also a sales touchpoint for them. If you plan to expand your SAP usage or purchase new SAP products soon, mention it; you might be able to fold the compliance purchase into a larger deal for better discounting.
Building a Long-Term Defense Strategy
After going through (or in anticipation of) an audit, aim to strengthen your processes:
- Post-Audit Review: Conduct a lessons-learned meeting. What caught you off guard? Was there an area where data was hard to get or interpret? Use that to improve future preparations.
- Continuous License Compliance Program: As covered in previous articles, implement regular internal audits and governance so that your “defense” is always up. Ideally, you want to reach a state where an SAP audit is just another external check that you’re already 99% confident about.
- Documentation Updates: Keep your documentation up to date. If you purchased new licenses or changed contract terms as a result of the audit, update your records so that next time you start from the new baseline.
Recommendations
In summary, here are actionable recommendations to build a solid audit defense:
- Know Your Contract: Have a deep understanding of your SAP agreements – keep a summary of entitlements and any special conditions readily available.
- Audit Yourself First: Never walk into an SAP audit blind. Always perform an internal measurement and compliance check before SAP does】. This lets you fix issues on your terms.
- Close Gaps Proactively: If you find you’re under-licensed in some area, address it. This could mean cleaning up unused accounts or purchasing needed licenses. It’s better to negotiate a purchase outside the pressure of an audit.
- Document Everything: Maintain meticulous records of your license allocations and usage. During an audit, strong documentation, such as user lists, system lists, and explanations for non-standard scenarios, is your best defense for justifying compliance.
- Be Organized with SAP: When the audit starts, engage with SAP professionally. Provide requested data promptly, and communicate how you manage licenses. This sets a cooperative tone.
- Don’t Settle for First Findings: Analyze SAP’s findings critically. If something seems off, ask for clarification or correction respectfully. Use the negotiation as an opportunity to ensure you only pay for what you truly need.
- Leverage Programs and Experts: Consider using SAP’s official programs, like DAAP, for indirect access if they benefit your situation. And don’t hesitate to bring in outside help for an objective assessment or legal perspective.
- Future-Proof Your Licensing: During settlement, if you know that future changes (such as a migration to S/4HANA or business growth) will increase your needs, try to address them in the agreement now. For instance, secure pricing protections or include additional licenses at a discount, to avoid another audit surprise down the road.
- Continuous Vigilance: Finally, treat audit readiness as an ongoing discipline. Regular internal audits, staying up to date on license rules, and fostering a culture of compliance will make each subsequent audit easier.
By taking these steps, you build a robust defense against SAP license audits. Not only can you emerge from an audit without unexpected bills, but you’ll also have optimized your SAP licensing, ensuring your organization pays only for what it truly needs.
Remember, preparation and knowledge are your best tools for transforming an SAP audit from a potential minefield into a routine checkpoint.
FAQs
What is SAP license audit preparation? It involves reviewing and verifying your SAP software usage to ensure compliance with your license agreements. This process helps identify and address potential non-compliance issues before an official audit.
Why is it important to review my SAP license agreement? Reviewing your SAP license agreement helps you understand your obligations and responsibilities. It ensures that you know the terms and conditions you must comply with, which is crucial for avoiding penalties for non-compliance.
How do I review my SAP software usage? Examine the types of SAP software you use, the number of users, and the frequency of usage. Document these details to get a clear picture of your current usage, which you can then compare with your license agreement.
After reviewing my SAP software usage, what should I do? Compare your documented software usage to the terms of your SAP license agreement. This comparison will help you identify discrepancies or areas where your usage may not align with your licensing terms.
Why is a thorough compliance check necessary? It identifies potential issues with your SAP software usage. It is a proactive step toward ensuring that you adhere to your license terms, helping you avoid penalties during an official audit.
What if my SAP software usage exceeds the terms of my license agreement? You must update your SAP license agreement if your usage exceeds the terms of your license agreement. This adjustment ensures that your usage remains compliant and helps prevent any issues during an audit.
How can I keep accurate records of my SAP software usage? Maintain detailed documentation of the types of SAP software you use, the number of users, and the frequency of your usage. Update these records regularly to reflect any changes in your usage patterns.
How often should I review my SAP software usage? Review your software usage regularly, ideally every quarter or semiannually. Frequent reviews help ensure you remain compliant with your license terms and quickly address discrepancies.
Why is it important to stay updated with SAP licensing changes? SAP licensing terms and conditions are subject to change. Staying informed about these changes ensures that your usage remains compliant with the latest terms, avoiding potential non-compliance issues.
Where can I find updates on SAP licensing terms? Regularly check SAP’s official communications, website, and licensing documents. These sources will provide the latest updates and changes to SAP’s licensing terms and conditions.
How can I prepare for an SAP license audit? Review your license agreement, document your software usage, conduct compliance checks, and update your records as necessary. These steps help ensure you are ready for an audit.
What are the benefits of conducting internal audits? Internal audits help you identify and address potential compliance issues before they are discovered during an official audit. They allow you to correct discrepancies and ensure that your software usage aligns with your license terms.
Who should be involved in the preparation of the SAP license audit? Include team members who understand your SAP usage, IT personnel, and legal advisors. Their combined expertise will help ensure thorough preparation and compliance.
What role do SAP license consultants play in audit preparation? SAP license consultants provide specialized knowledge and guidance. They can help you navigate complex licensing terms, identify compliance issues, and ensure thorough and accurate preparation.
