Top 20 SAP Licensing Optimization Tips for CIOs and CTOs
SAP licensing is complex and costly, but CIOs and CTOs can optimize it.
This guide provides 20 concrete tips to reduce SAP license costs and risks, including right-sizing licenses, eliminating shelfware, managing indirect usage, and negotiating more favorable contract terms.
1. Your SAP License Portfolio
Take inventory of all SAP licenses you own, including user types and package (engine) licenses. Each license type – e.g., Professional, Limited/Functional, or Employee Self-Service – has different capabilities and costs.
Make sure you know who has what. For example, don’t give a high-cost Professional license to someone who only needs basic self-service functions.
2. Right-Size User License Assignments
Match each user with the appropriate license type based on their job role. Don’t give everyone a “Professional” license by default.
Analyze actual usage and downgrade users who only need limited access. For example, a company cut its SAP licensing costs by ~28% by switching hundreds of infrequent users from Professional to cheaper license tiers.
3. Eliminate Shelfware with Usage Monitoring
Track how each license is used. Identify unused or underused licenses (“shelfware”) by running SAP usage reports or SAM tools.
If certain named users haven’t logged in for months or you’re paying for a module nobody uses, reclaim those licenses or drop that software to stop wasting money on support fees.
4. Recycle Licenses Regularly
Make license management a continuous process. When employees leave or change roles, promptly reassign or remove their SAP access rather than letting licenses go idle.
Conduct internal license audits periodically (e.g., quarterly) to ensure entitlements keep pace with organizational changes. This proactive recycling prevents over-buying new licenses when old ones can be freed.
5. Manage Indirect Access Proactively
Catalog all third-party systems and interfaces that connect to SAP. Even if users aren’t logging in, external apps (such as CRM and web portals) that read or write SAP data require proper licensing.
Unlicensed indirect use is a common audit pitfall that can result in substantial fees. Close these gaps by assigning required licenses or moving to SAP’s Digital Access model (document-based licensing).
6. Consider SAP’s Digital Access Model
SAP’s new method for licensing indirect usage involves counting documents (such as orders or invoices) instead of requiring user licenses for external systems. Evaluate if switching to Digital Access would reduce your costs.
SAP offers an assessment tool to help measure document counts. Companies with high integration volumes often find this model simplifies compliance and sometimes lowers fees.
7. Optimize SAP Engine/Package Licenses
Beyond users, SAP sells licenses for specific modules (engines) based on key metrics, including revenue, employee count, or database size. Review each one’s usage.
Ensure you aren’t exceeding any licensed metrics (to avoid audit penalties) and not paying for far more capacity than you use. For instance, if you licensed SAP HANA for 2 TB of data but use only 1 TB, consider downsizing or negotiating a better fit at renewal.
8. Use SAP’s License Management Tools
Take advantage of SAP’s built-in license analysis tools (USMM and LAW). Run them regularly to see your compliance position across all systems.
These tools help consolidate user counts and simulate license requirements, allowing you to identify and rectify any discrepancies before an official SAP audit. Ensure your SAP admin team is trained to utilize them effectively.
9. Consider Third-Party License Tools
Specialized SAM tools (e.g., Snow Optimizer, Voquz, Flexera) can provide in-depth analysis of SAP usage and identify potential savings. They automatically detect inactive users, duplicate accounts, or misclassified licenses.
If your SAP spend is significant, using such a tool or hiring an independent license optimization expert can uncover opportunities that internal checks might miss, often saving more money than the cost of the analysis.
10. Reclassify Licenses When Roles Change
Periodically review if users’ license types still match their current responsibilities. Employees often switch roles or projects.
A developer who now works in a read-only capacity may be downgraded from a Developer license to a less expensive user type.
Adjusting (downgrading or upgrading) license levels when roles change ensures you’re not overpaying for access people no longer need.
Read SAP Named User Licensing Optimization: Right-Sizing Users to Reduce Costs.
11. Involve Stakeholders Beyond IT
SAP licensing shouldn’t be managed by IT in isolation. License reviews should include procurement, finance, and business unit leaders.
This cross-functional approach ensures better decisions–for example, finance can validate budget impact, and procurement might highlight existing unused licenses that could be reallocated.
Broad visibility prevents IT from over-purchasing and makes license use more efficient across the organization.
12. Get Independent Advice (Don’t Only Trust SAP)
SAP’s sales guidance may not always align with your cost interests. For example, an account manager might suggest more licenses or expensive categories that aren’t truly needed.
Always verify claims with your internal usage data or consult independent licensing experts for accurate information. A neutral third-party perspective ensures you buy only what you need, not just what SAP wants to sell.
13. Plan for Growth (and Contraction)
Align your SAP license strategy with your business plans if you expect to add 200 users next year or launch a new SAP module; factor that into your negotiations early. Bundling future needs upfront might secure better pricing.
Likewise, if you foresee downsizing or divestitures, avoid overcommitting to licenses you might not need later. Planning prevents surprise costs and excess capacity.
14. Cut Unnecessary Licenses and Support Costs
Audit your SAP footprint to identify products or user licenses that aren’t in use. If you’re paying annual maintenance on a module nobody uses, consider removing it from your agreement to save costs.
Similarly, consider negotiating a reduction or trade-in for excess user licenses instead of paying support for shelfware. Also, seek to cap maintenance fee increases in your contracts so support costs don’t balloon year over year.
15. Negotiate Proactively at Renewals
Treat SAP contract renewals or expansions as a major sourcing exercise. Research market pricing and aim for significant discounts – SAP licenses often have room for 30% or more off the list price if you negotiate effectively.
Bundle your requirements (user growth, new modules) into one negotiation to leverage volume. Plan your negotiation around SAP’s sales cycles (e.g., end of quarter/year) when reps are keener to close deals, which can win you better terms.
16. Secure Multi-Year Protections
Long-term agreements can work in your favor if structured correctly. Negotiate price locks or caps for future purchases – for example, ensure that any additional licenses you add later receive the same discount as the initial deal.
Limit maintenance escalation by capping annual fee increases. Also seek flexibility clauses (like the option to drop or swap a certain number of licenses after a year or two) so you’re not rigidly stuck if your needs change.
17. Align Contract Renewal Dates
If your company has separate SAP contracts (e.g., from different divisions or past acquisitions), consider co-terminating them.
Consolidating agreements so they renew at the same time increases your negotiating leverage (a larger combined deal tends to get bigger discounts) and simplifies administration.
It’s easier to manage one renewal process than multiple scattered ones, and you won’t get caught off guard by out-of-cycle renewals.
18. Leverage S/4HANA or Cloud Transitions
Major changes, such as migrating to S/4HANA or SAP’s RISE cloud, are golden opportunities to reset your licensing. SAP often offers incentives or credits to facilitate a move, but it negotiates hard to make the conversion cost-neutral or even cheaper. Only convert the necessary licenses (drop the shelfware during the migration).
The new contract aims to provide simplified and optimized license bundles that better align with your current usage. This way, the transition modernizes your software and your cost structure.
19. Evaluate Third-Party Support or Alternatives
Some companies use third-party support providers for SAP to cut costs, which can significantly reduce annual maintenance fees (though you’ll give up direct SAP support and updates).
This approach can make sense for stable legacy systems where new updates aren’t needed. Similarly, consider whether you truly need an expensive SAP module for every function—a cheaper standalone tool or cloud service might cover a need without adding to your SAP license count.
20. Leverage Competitive Pressure
SAP isn’t the only game in town. When negotiating, gather quotes or proposals from competitors like Oracle or Microsoft.
Even if you don’t intend to switch, showing SAP that you have viable alternatives puts pressure on them to offer better discounts and terms.
Many CIOs find that SAP becomes far more flexible on price when they know the customer is seriously evaluating other solutions.
Recommendations
- Establish Ongoing License Reviews: Set up a regular cadence (quarterly or biannually) to review user counts, license assignments, and usage, so you can continuously identify and address inefficiencies.
- Use Data Before Spending: Any purchase of additional SAP licenses should be based on actual usage data and clear business justification, not just assumptions or requests.
- Clean Up Before Audits/Renewals: Before an SAP audit or contract renewal, do an internal scrub of your licenses (remove inactive users, resolve indirect access gaps, etc.) to negotiate from a position of strength.
- Negotiate in Advance: Don’t wait until a contract is about to expire or an urgent need arises—start talks early when you have time to evaluate options (including other vendors) and walk away if needed.
- Educate Your Team: Train IT and procurement staff on the basics of SAP licensing and compliance. When everyone is aware of the costs and rules, they’ll make more license-conscious decisions daily.
- Document and Govern: Keep records of license allocations, reclassifications, and communications with SAP. Good governance and documentation sustain optimization efforts and provide evidence if questions arise.
Read Optimizing SAP Named User Licenses: Cost Savings and Compliance Strategies.
FAQ
Q: How often does SAP audit customers, and what can we do to prepare?
A: SAP can audit you annually (many firms see audits roughly every 2-3 years). Prepare by running your measurements (LAW/USMM) beforehand to fix any issues before SAP comes. Keep clear records of your licenses and usage – being proactive and organized makes audits uneventful.
Q: What is indirect access in SAP licensing, and why is it important?
A: Indirect access is when third-party systems or external users interact with SAP data without a direct SAP login (for example, a web store querying SAP inventory). It still needs an SAP license. If you ignore it, an audit can bring hefty fees, so identify and license all such integrations appropriately.
Q: How can I effectively track SAP license usage?
A: Run SAP’s license audit tools (USMM and LAW) regularly to see what you’re using. Review user login reports to identify inactive accounts or those with low activity. Consider using a third-party monitoring tool in large environments to automatically flag anomalies and ensure your license count accurately reflects actual usage.
Q: We have many unused SAP licenses – can we get rid of them and save money?
A: You can’t return licenses for cash, but you can drop the maintenance on unused licenses at renewal if you negotiate it. Highlight any shelfware during contract talks – SAP may let you swap unused licenses for other products or future credits, or stop charging support fees for them.
Q: Can we negotiate SAP maintenance fees, or are they fixed?
A: Yes, they’re negotiable. Ensure the maintenance percentage (typically 22%) is applied to your discounted license price, not list price. Try to cap the annual maintenance increase (e.g., a 0-3% yearly cap). As part of a deal, big customers often secure a few years with no increase or a fixed low rate.
Q: What’s the difference between Professional, Limited, and Employee user licenses?
A: Professional users have full access (and the highest cost). Limited Professional/Functional users have restricted access to specific domains (mid-tier cost). Employee Self-Service users can only perform basic self-service tasks (at the lowest cost). Use Professional licenses sparingly (for power users who truly need everything), and assign Limited or ESS licenses to others to save money.
Q: What should I do if SAP says I’m out of compliance on licenses?
A: Stay calm and get details. Often, the issue can be resolved by purchasing the necessary licenses or adjusting your licensing model. Negotiate rather than just pay a bill. For example, if you need to purchase additional licenses, consider incorporating them into a new deal or renewal at a discount instead of a one-off penalty buy.
Q: Are there tools to help optimize SAP licensing?
A: Absolutely. Several third-party tools can continuously analyze your SAP usage and suggest optimizations (e.g., flagging unused accounts or mismatched license types). Engaging such tools or a specialized consultant can reveal savings opportunities that internal teams might overlook, especially in complex SAP landscapes.
Q: When is the best time to negotiate with SAP for better terms?
A: Start early (well before renewal). SAP is usually most flexible at quarter-end or year-end when they need sales. Additionally, if you have a significant project (such as an S/4 upgrade) on the horizon, align your negotiation with it – SAP tends to offer more concessions when large deals are at stake.
Q: Should we consider RISE with SAP, and how does it affect licensing?
A: RISE with SAP converts your licenses into a cloud subscription (including hosting and support). It simplifies licensing (indirect use is included) but is not automatically cheaper. Always compare the multi-year cost of RISE vs. your current model. If you go for RISE, negotiate the package to only pay for the capacity and users you need.
Read about our SAP License Optimization Service.
