SAP License Compliance: Best Practices for SAP Engines and Package Licenses
Executive Summary:
SAP “engine” or package licenses refer to modular software components (like SAP HANA, SAP Payroll, SAP Warehouse Management, etc.) that are licensed based on specific metrics (users, employees, transactions, hardware size, etc.).
This article guides CIOs, ITAM, and SAP admins on maintaining SAP license compliance with these metric-based licenses.
We explain engine licenses, illustrate common metrics and pitfalls (e.g., exceeding licensed counts), and provide best practices for tracking usage, optimizing license deployment, and avoiding audit surprises related to engines/packages.
Effective management of these specialized licenses ensures you get the most value from SAP while avoiding compliance issues.
Read SAP License Compliance: Best Practices for Cloud and Hybrid Environments.
What Are SAP Engine/Package Licenses?
Beyond standard user licenses, SAP software includes many add-on products or modules, often called engines or packages.
Unlike named user licenses (which are per individual), engines are licensed by a measurable unit – essentially a usage metric.
Examples include:
- SAP HANA Database licensed by memory size (e.g., 256 GB of HANA memory licensed).
- The SAP Payroll module is licensed for several employees to be processed.
- SAP Warehouse Management is licensed by the number of warehouses managed or the throughput of transactions.
- Revenue, number of customers, or other business metrics might license Industry Solutions (e.g., IS-Retail, IS-Utilities).
- SAP Procurement (SRM) or others might be based on the number of documents or spend value.
These licenses are typically one-time purchases with an allowance (the metric amount) and then monitored for usage. Compliance means your actual usage of that metric stays at or below what you’ve licensed. If you use more (e.g., you have 1,200 employees on SAP Payroll but are only licensed for 1,000), you are under-licensed for that engine and need to rectify it. Engines are often some of the most expensive SAP components, so maintaining compliance is critical to avoid a costly true-up.
Tracking and Measuring Your Usage
Measuring engine metrics can be challenging – it’s not always as straightforward as counting users. Best practices for tracking include:
- Leverage SAP Tools: Some engines have specific SAP transactions or reports to measure usage. For instance, SAP provides measurement programs for certain modules during system measurement (LAW/SLAW processes). You can check the HANA studio or cockpit for HANA to see memory usage. For employee counts (for HR/Payroll engines), pulling a report of active employee records in the system or payroll runs gives the number. Identify the tool or method for each metric you have.
- Assign Metric Owners: For each metric, assign a responsible owner in the organization. For example, HR should own tracking of employee counts for HR-related licenses, the IT infrastructure team for database size metrics, finance for revenue-related metrics, etc. These owners should know the licensing limits and report current usage periodically. This decentralizes monitoring to subject matter experts who understand the data.
- Regular Internal Checks: Include engine metrics in quarterly or biannual internal license audits. Don’t skip them because SAP’s user measurement tools sometimes focus on user licenses. Manually collect the data if needed. For example, ask HR for a count of active employees versus your license cap every quarter, or run a transaction count if you have something like “number of orders” licensed. Keeping a simple spreadsheet of “licensed metric vs actual usage” updated quarterly for all engines gives great visibility.
- Plan for Growth: If your business metric is growing (often a good thing for the business), anticipate the licensing impact. For instance, if you project adding 200 employees next year and you’re near your Payroll user limit, you either need to budget for more licenses or discuss alternatives with SAP ahead of time. Growth can trigger non-compliance if not planned for.
Common Metrics and Potential Pitfalls
Different engines have different quirks. Here are some common ones and how to avoid pitfalls:
- Employee Count-Based Licenses: These apply to modules like SAP HR/PY (Payroll), SAP SuccessFactors Employee Central (if on-prem, though SF is a cloud subscription for employees too). Pitfall: Companies may forget to include contractors or part-time workers if the metric counts them, or they may not realize that every unique employee with a record counts, even if inactive in the system (depending on the contract). Best Practice: Clarify whether the metric is “maximum active employees processed per year” or “current employees,” etc., and always keep HR data tidy (remove truly terminated employees from counts if allowed). Conduct periodic true-downs by archiving old records if your contract permits, excluding alumni after some time.
- SAP HANA Memory: HANA licenses often cap the database’s memory across instances. Pitfall: Systems tend to grow – new modules, more data, etc., can cause memory usage to exceed what’s licensed. HANA will technically still run, but you’ll be out of compliance. Best Practice: Monitor HANA memory usage closely. If you’re at 90% of licensed capacity (e.g., 230GB used out of 256GB licensed), that’s a red flag – talk to SAP about an additional license or see if you can archive data to lower usage. SAP also offers HANA runtime vs full use licenses; ensure you’re compliant with the type (runtime is cheaper but only for SAP apps usage, not custom dev).
- Transactional/Throughput Metrics: Some engines count the number of documents (orders, invoices) or throughput (e.g., SAP PI might count the number of messages per CPU). Pitfall: Usage spikes can occur (end-of-quarter transactions surging, for example), pushing you over the licensed amount unexpectedly. Best Practice: Set internal alerts or thresholds. If a metric like “documents per year” is licensed and you have an exceptional business event (like a promotional spike in orders), keep track monthly so as not to exceed annual limits. If you see a risk of exceeding, you might negotiate a one-time extension or purchase additional volume from SAP proactively rather than after the fact.
- Revenue or Financial Metrics: Some industry solutions are licensed based on company revenue or specific sales volume. Pitfall: You may owe more if your company grows revenue beyond the licensed band. These are tricky because they’re somewhat external to the system. Best Practice: Know the revenue bands in your contract. For example, you licensed SAP for Utilities assuming $500M annual revenue; if your revenue exceeds $600M, check if that breaches a tier requiring a license uplift. It’s like insurance – you must inform SAP if you move into a higher bracket. Work with finance to be aware of growth relative to those bands.
Optimizing and Staying Compliant
Staying compliant with engine licenses isn’t just defensive – you can optimize to potentially save money or delay purchases:
- License Recycling (Engines): Similar to user license recycling, see if any metric usage can be reduced. For instance, can you retire some processes if you have an engine for a module you’re not fully utilizing? Or if a part of your business that drove a metric is divested, ensure you adjust the license (you might reduce maintenance or negotiate a lower metric band in a renewal if your usage legitimately drops).
- Data Management: Good data hygiene helps with metrics like database size or the number of data objects. Archiving old transactions, purging obsolete records, and housekeeping can keep usage within limits. For example, if an engine counts active products in a catalog and you discontinue some products, remove them from the system if they count towards your license.
- Negotiation of Buffers: In some cases, you can negotiate a cushion. SAP might allow 10% overuse on an engine metric without immediate breach to be trued up at renewal. Or they might structure a license as tiered (you pay more when you cross a tier). Try to include such flexibility in contracts. E.g., license 1,000 employees but allow a temporary spike to 1,100 with notice. Not always granted, but if your usage fluctuates, it’s worth discussing.
- Combine with Audits: As part of audit prep, treat engine usage like any other item to have evidence ready. It creates confidence to show auditors that you regularly measure and have documentation (screenshots of usage reports, etc.). Also, if you exceeded and already bought extra licenses before the audit, have that paperwork. It’s better that you discovered and addressed it than SAP.
- Third-Party Alternatives: In some situations, extremely expensive engines might have third-party alternatives or might be candidates for moving to a different platform. For instance, if a particular engine’s metric is hard to control and costs millions, consider whether a non-SAP solution could replace that functionality more cheaply (considering integration costs). This is a strategic decision, but part of optimization—sometimes negotiating with SAP is easier if they know you have alternatives.
Preparing for Audits Involving Engines
When SAP audits you, they will ask for the usage of your engines and packages.
Be ready by:
- Documenting Metric Definitions: Have a clear document for each engine metric in plain language – “We are licensed for X (metric) and currently using Y.” Also, note how you measured Y. If SAP’s audit scripts measure differently, you want to reconcile quickly. For example, SAP might run its measurement for an engine; compare it to your internal count to ensure alignment.
- Avoiding Last-Minute Scramble: If you know an audit is coming (or annually, regardless), do a special check on all engines. If any metric is over the limit, address it immediately – either reduce usage (if possible, like disable some users or clean data) or reach out to SAP to procure additional capacity. It’s far better to buy additional licenses voluntarily than to be caught. SAP might be more amenable to giving a reasonable price if you come forward versus during audit when you have little leverage.
- Using the LAW Report Wisely: The License Administration Workbench (LAW) combines systems for user counting, but for engines, sometimes LAW will include some data or at least list engines in scope. Make sure all your engines in use are known to SAP (you can’t hide them so that usage will show). Proactively declare them in the audit submission with current usage stats. Full transparency can actually help negotiations, because you demonstrate control and honesty, possibly avoiding punitive penalties.
Recommendations
- Maintain a Metrics Inventory: List all your SAP engine/package licenses along with their metrics (e.g., “SAP CRM Marketing—licensed for 2 million business partner records”) and the current usage of that metric. Update this inventory regularly.
- Assign Ownership: Designate specific owners in business or IT for each metric who will track usage (HR for employee counts, DBA for HANA memory, etc.). This ensures accountability and regular monitoring.
- Quarterly Metric Audits: Don’t wait for SAP’s audit – check your engine usage at least quarterly. Use system reports or manual methods to get the numbers and compare against entitlements so you have an early warning of any issue.
- Set Alert Thresholds: Define each metric’s internal thresholds (e.g., 85% of licensed capacity). If usage exceeds that, trigger an internal alert or review. It’s a sign to either optimize or start the process of acquiring more licenses before going over 100%.
- Clarify Contract Terms: Ensure you understand exactly how each engine’s usage is defined in your contract. Some metrics have nuances (peak vs. average, specific exclusions, etc.). If anything is unclear, get clarification from SAP in writing—it will help avoid disputes later.
- Optimize Before Buying More: If you’re nearing a limit, see if there are optimization steps to slow growth. Clean up data, archive, and restrict unnecessary usage. Only invest in more licenses when you truly need to—and when you do, negotiate for volume discounts if you’re significantly increasing the metric.
- Keep Evidence of Compliance: Save reports or screenshots that show usage levels at key points (year-end, audit time). This creates an evidence trail that you were compliant at those times. In case of any disagreement with SAP’s measurements, you have your records to discuss.
- Engage SAP Early if Overuse Looms: Don’t hide an overuse; engage SAP proactively. Sometimes, SAP may provide a short-term license to cover overage until a formal purchase is made, or they may guide you on measuring correctly. Early engagement can also lead to better commercial terms than dealing with it under audit pressure.
- Review Engine Use vs Need: Periodically review if you still need all the engine licenses you own. If some module isn’t delivering value or usage has dropped (e.g., you stopped using SAP CRM but still have licenses), consider consolidating or terminating maintenance for that component to save costs and complexity.
- Stay Educated: SAP introduces new metrics and changes old ones (especially with S/4HANA, where some engines became part of the base, while others changed metrics). Stay updated through SAP notes, user groups, or licensing webinars so you can manage engines with current knowledge.
FAQ
What is an SAP “engine” license exactly?
It’s essentially a license for a specific SAP product or module measured by something other than a named user. SAP calls them package licenses or engines. Instead of buying per user, you buy a quantity of a metric. For example, SAP Material Management (MM) might be part of the base, but say SAP Extended Warehouse Management might be an engine licensed per warehouse or per transaction. If you license five warehouses, you pay for that, and using a 6th warehouse would mean you’re out of compliance.
How do I find out which engines my company is licensed for?
Check your SAP license contract/order forms – they will list products and metrics. Engines often have names like “SAP XYZ Package: up to N <units>”. Also, when you run SAP’s measurement (USMM), it asks about certain engines/modules and might list what you have. Additionally, your SAP Entitlement System (available through the SAP Support Portal for your company) may show your licensed products. Internally, your procurement or IT asset records should have this as well. Having a clear list is important because engines might not be obvious just by looking in the SAP GUI.
Does SAP’s audit tool automatically measure engine usage?
Not for all. SAP’s LAW and USMM focus primarily on user counts and a few technical metrics. Some engines require manual measurement or separate scripts. For instance, LAW might prompt you to enter how many employees you have for an HR engine, rather than pulling it itself. Some newer measurement tools (for S/4HANA) are improving in capturing the usage of different components. However, you should not rely on SAP’s default audit program to catch everything – you might be asked to provide usage evidence. So be prepared to run your queries or provide engine metrics data during an audit.
What if my usage briefly exceeds the licensed metric and then goes down?
This can happen (e.g., seasonal peak). Technically, if you exceeded the licensed amount at any point, you were out of compliance during that time. SAP auditors might still flag that. However, if you can show it was a temporary spike and is now back within limits, SAP might not demand a full new license – they might ask you to cover that peak if it’s recurring. It’s best to discuss with SAP; sometimes contracts allow brief peaks (not often, but if you negotiated it). If not, be cautious – a brief exceedance could still be cited. To be safe, try to license for the peak or manage operations to avoid crossing the line (for example, cap certain activities if possible).
Can I partially use an engine and pay less?
Generally, no, you pay for metric blocks. For instance, if the smallest license for a module is up to 1,000 employees and 200 employees, you still have to buy that 1,000-employee license (you can’t buy 20% of it). Some metrics have tiers, so you buy the tier that covers your size. The good news is that if you use much less, you have headroom to grow without more cost. But if you use much more, you must jump to the next tier. SAP doesn’t pay per-use for engines in traditional licensing (cloud products are different). It’s usually chunked licensing.
What happens if I’m out of compliance on an engine during an audit?
SAP will likely require you to purchase additional licenses to cover the excess usage, often immediately. They may calculate how many units you were over and present a quote for that many, plus back maintenance (if you’ve been over for a year, they might add 22% of the license cost for that year as maintenance). In worst cases, if you’re dramatically over, penalties or a requirement to stop using the software could be in play, but usually it’s resolved by buying what’s missing. You might lose any volume discount leverage since it’s under audit conditions, meaning you could pay list price. That’s why catching it yourself and negotiating a normal purchase is better.
Are engine licenses affected by moving to S/4HANA?
Yes. With S/4HANA, SAP changed some licensing. Some engines became part of the S/4 bundle (for example, certain formerly separate components are included if you license S/4HANA Enterprise). Others remain separate or have new metrics. If you transition to S/4, you’ll likely go through a contract conversion. At that time, carefully map your old engine licenses to the new scheme. You might get credit for unused engines or have to re-license certain things. For example, the classic SAP APO modules might convert to IBP or other new solutions with different metrics. Always review the S/4HANA contract to see how your current engines are accounted for. During migration, ensure you don’t inadvertently run old and new engines beyond the allowances given by SAP.
Can I temporarily license extra engine capacity for a project?
SAP typically sells perpetual engine licenses, not short-term ones. However, you could try to negotiate a temporary license if you have a one-time project spike (for example, a 3-month extra workload). This isn’t standard, but if appropriate, SAP might offer a short-term license or cloud-based extension. Alternatively, if the engine in question can be used in a cloud form, you could consider a short-term subscription to cover the gap. But in general, plan engine capacity as a long-term need. Suppose a temporary spike is part of your operations (like seasonal each year). In that case, it might make sense to license for the peak and just accept the underuse in off-season, or find a flexible solution like cloud to handle that variability.
How do I negotiate engine licenses effectively?
Several tips: bundle purchases if you can (if you need additional capacity for multiple engines or a new engine, negotiate them together for better discounts), use benchmark data (if you know typical discount rates from user groups, aim for that), and highlight future growth (assure SAP that you might need more later to get a better deal now). Also, keep an eye on whether SAP might de-emphasize an engine (some older engines SAP is keen to replace with newer products – that could give you leverage as they might discount the old one more, or push you to a new one with incentives). And always negotiate maintenance – if you buy a big engine late in your support year, see if you can align maintenance payments to avoid paying a full year for only a few months of use.
Can we cancel or reduce an engine license if our usage drops?
Perpetual licenses once bought are yours – you can’t usually “return” them for money back. You can terminate the maintenance on those licenses if you truly don’t use them, which stops ongoing fees (but then you lose support/updates and the right to upgrade that component). If your usage drops permanently, you might choose to keep the license as a safety net but drop maintenance to save costs (with the risk that if you needed to reinstate it later, there’s a hefty fee). Another approach: in a contract renegotiation (like moving to S/4HANA or adopting some cloud deal), you can use the unused licenses as bargaining chips – SAP might give you credit for them as part of a wider deal (though they won’t refund you outright, they might offset costs in a new agreement).
Read about our SAP License Optimization Service.
