To save money on your SAP license renewal:
- Audit Current Usage: Identify and eliminate unused or underutilized licenses.
- Optimize License Types: Switch to more cost-effective license options based on actual needs.
- Negotiate Terms: Use your customer history to negotiate better rates.
- Consult Experts: Seek advice from SAP licensing professionals for tailored solutions.
- Regular Monitoring: Continuously assess and adjust license usage post-renewal.
Strategic Approaches to SAP License Renewal Cost Savings
Renewing SAP licenses can be challenging, but organizations can save substantial amounts of money while optimizing their license usage with a strategic approach.
Below, we’ll explore various methods and strategies for helping businesses effectively manage SAP license renewals, reduce costs, and enhance compliance.
Early Planning and Assessment
Starting Early: Starting the renewal process at least six months in advance provides crucial leverage for negotiations and cost optimization. Early planning allows you to gather the necessary information, align all stakeholders, and develop a strategy that ensures the best possible outcomes.
- Comprehensive Assessment: Thoroughly assessing your current SAP environment forms the foundation for identifying savings opportunities. Understanding which licenses are being used effectively and underutilized will help you make data-driven decisions during the negotiation.
License Usage Audit
A thorough audit of current license usage reveals opportunities for optimization. This includes identifying underutilized licenses, redundant accounts, and opportunities for license reclassification. The SAP License Administration Workbench (LAW) is a powerful tool for generating detailed usage reports, which can help you make informed decisions.
- Identify Underutilized Licenses: Many organizations end up with licenses that are not used to their full capacity. For example, employees may have been assigned a Professional License when a Limited User License would be sufficient for their needs. Regular audits help identify such scenarios and correct them.
- Redundant Accounts: Duplicate or redundant accounts contribute significantly to unnecessary license consumption. Identifying and consolidating these accounts through an effective joiners, movers, and leavers process helps eliminate this waste.
Example: A small business may discover several temporary employees who no longer work for the company but still have active licenses. Instead of buying additional licenses, the licenses can be reassigned to new hires.
Usage Pattern Analysis
Document detailed usage patterns across departments to support data-driven decisions about license adjustments. This analysis helps identify where professional licenses can be downgraded to limited-use licenses for substantial savings.
- License Downgrades: By understanding the day-to-day requirements of different roles, you can identify where full professional licenses can be downgraded to lower-cost options. For example, administrative staff may not need advanced capabilities offered by a Professional License, allowing for downgrading to a more affordable license.
Example: If a department mainly uses SAP to run standard reports and access read-only data, a Limited License could replace an expensive Professional License.
Optimization Strategies
1. User License Management
License Reclassification: Review and reclassify licenses based on actual usage patterns. Many organizations over-assign high-tier licenses when lower-cost options would suffice. Consider:
- Downgrading Unused Professional Licenses: Shift licenses to appropriate user tiers based on real usage.
- Seasonal Adjustments: For businesses with seasonal workforce needs, consider downgrading or temporarily deactivating licenses during off-peak periods.
- Converting Full Licenses to Read-Only Access: Where employees only require limited data viewing capabilities, converting their licenses to read-only can reduce costs.
User Account Consolidation: Identify and merge duplicate user accounts to eliminate unnecessary license consumption. Implement a robust joiners, movers, and leavers process to ensure immediate deactivation of licenses when employees leave the organization.
Example: A retail chain with high staff turnover can regularly audit its SAP user accounts, remove former employees, and reallocate licenses to new hires.
2. Support and Maintenance Optimization
Maintenance Cost Reduction: SAP maintenance fees typically range from 17% to 22% of the maintenance base. Consider these strategies:
- Third-Party Maintenance Providers: Evaluate third-party maintenance options, which can sometimes offer similar support services at a reduced rate.
- Maintenance Agreement Discounts: Negotiating a discount or a cap on maintenance cost increases can lead to significant savings.
- Review Maintenance Base Calculations: Ensure that the maintenance base (the basis of your maintenance fees) accurately reflects current usage and does not include decommissioned or unused licenses.
Negotiation Tactics
1. Contract Terms
Volume Discounts: Consolidate license purchases to leverage volume pricing advantages. Bundling services and licenses together often result in better pricing structures, especially when planning future SAP implementations.
Example: An organization planning to roll out SAP to multiple departments could negotiate volume discounts for purchasing multiple licenses simultaneously.
Flexibility Provisions: Negotiate for terms that accommodate business changes:
- Scalable Licensing Based on Usage: Include clauses allowing licenses to be added or removed based on business needs.
- Price Increase Caps: Ensure there are caps on annual price increases, particularly for support and maintenance fees.
- Monthly Renewal Options: Consider negotiating monthly renewal options for greater flexibility if applicable.
2. Strategic Timing
Renewal Window: The renewal period presents the best opportunity for negotiating favorable terms. Prepare comprehensive usage data and business cases to support your position during these discussions.
Multi-Year Agreements: Consider longer-term agreements if they offer significant cost advantages, but ensure they include flexibility clauses for changing business needs.
Example: A company that expects significant growth over the next few years might negotiate a multi-year agreement with built-in scalability, ensuring future licenses are cost-effective.
Compliance and Risk Management
Indirect Access
Carefully Manage Indirect Access Scenarios: Indirect access involves scenarios where third-party applications interface with SAP systems. Proper licensing coverage is critical to avoid compliance issues and unexpected costs.
Example: If an e-commerce platform integrates with SAP to pull customer data, it may require additional licensing. Identifying these use cases in advance can help ensure compliance.
Documentation and Monitoring
Regular Audits: Implement consistent internal auditing processes to maintain compliance and identify optimization opportunities. Use SAP’s built-in tools and third-party solutions to monitor license usage effectively.
Usage Tracking: Deploy license management tools to track real-time usage across all SAP modules. This data supports ongoing optimization and provides leverage during renewal negotiations.
Cost Reduction Implementation
Immediate Actions
- License Cleanup: Remove inactive users, consolidate duplicate accounts, and decommission unused systems. This immediate action can reduce maintenance costs significantly.
- Example: A manufacturing firm could save by auditing all existing accounts and immediately removing accounts belonging to past employees or long-unused test environments.
- Role Optimization: Review and adjust user roles to align with business needs. This prevents over-licensing and reduces unnecessary costs.
- Example: Finance employees who no longer need access to specific modules could adjust their roles and licenses to reflect their current responsibilities.
Long-term Strategy
Growth Planning: Align your licensing strategy with long-term business objectives. Consider future needs while negotiating current terms to avoid costly adjustments later.
Technology Evolution: Stay informed about SAP’s licensing policy changes and new offering models. This knowledge helps optimize licensing decisions and avoid unnecessary costs.
Example: A company transitioning from on-premises to cloud-based SAP services should consider hybrid licensing models to ensure a seamless shift without over-licensing during the transition period.
Key Takeaways for Cost Savings:
- Start Early: Initiate renewal planning at least six months in advance.
- Conduct Regular Audits: Regularly audit your SAP environment to identify unused or underutilized licenses.
- Negotiate Contract Flexibility: Ensure contracts allow adjustments in response to changing business needs.
- Optimize User Roles: Match licenses to actual user requirements to avoid paying for unnecessary features.
- Engage Experts: Involve SAP licensing experts, especially for complex licensing environments or significant negotiations.
By adhering to these strategies, businesses can maximize the value they derive from their SAP investments while minimizing the costs and risks associated with license renewals.
FAQ: SAP License Renewal: How to Save Costs
What is the best time to start planning SAP license renewal?
Start planning at least six months before renewal to leverage better negotiation terms and understand current license needs.
Why is auditing current license usage important for cost savings?
Auditing helps identify underutilized or redundant licenses, enabling reclassification or removal, thus reducing unnecessary spending.
Can volume discounts help in saving on SAP renewals?
Consolidating license purchases and negotiating volume discounts can lead to better pricing structures and cost savings.
How can third-party maintenance providers help save costs?
Third-party maintenance providers often offer similar support services at a lower cost than SAP’s official maintenance services.
Should I reclassify licenses based on usage patterns?
Reviewing and reclassifying licenses based on actual use helps ensure you aren’t overpaying for underused features.
How does early planning impact SAP license renewals?
Early planning allows for analyzing license usage comprehensively, aligning business needs, and negotiating more favorable terms.
Is it beneficial to opt for multi-year agreements during renewal?
Multi-year agreements can offer cost advantages, but ensure they include flexibility clauses for adjusting to changing business needs.
Can downgrading unused professional licenses reduce costs?
Yes, downgrading professional licenses that are not fully utilized to a lower-tier license can save significant renewal costs.
What role does documentation play during SAP license renewal?
Comprehensive documentation helps justify your needs during negotiations and supports compliance during SAP audits.
Are there ways to negotiate flexible contract terms with SAP?
You can negotiate scalability clauses, price increase caps, and monthly renewal options to suit your dynamic business environment.
How can understanding indirect access save costs during renewal?
You can avoid costly compliance issues by correctly managing indirect access licenses and ensuring you’re not over-licensing for third-party use.
Is it advisable to bundle services and licenses together?
Yes, bundling can often result in better pricing structures, particularly if you plan to expand SAP implementations.
Should internal audits be part of the renewal process?
Regular internal audits help identify potential areas for license optimization, supporting better decision-making during renewals.
Can negotiating price increase caps reduce renewal costs?
Yes, negotiating price increase caps helps manage costs over time and prevents unexpected maintenance or licensing fee jumps.
Why is understanding SAP licensing models important?
It helps you avoid overpaying by ensuring you purchase the right types of licenses for your business needs.
How can seasonal adjustments help in saving costs?
For businesses with seasonal workforce changes, licenses can be temporarily downgraded during off-peak times, reducing unnecessary costs.
What’s the benefit of tracking usage with SAP License Administration Workbench (LAW)?
LAW provides detailed insights into real-time license usage, which supports identifying optimization opportunities during renewals.
Can engaging with SAP licensing experts save money?
Yes, experts can identify cost-saving opportunities that might be overlooked and can assist with negotiating better renewal terms.
What is the role of negotiation timing during renewals?
Approaching negotiations with comprehensive usage data during renewal periods provides leverage to secure favorable terms.
Should businesses consider adjusting contracts based on growth?
Yes, aligning licensing agreements with business growth helps ensure that you don’t pay for more than you need, keeping renewal costs controlled.
