SAP

SAP Licensing – Compliance and Optimization in 2024

Understanding SAP Licensing: A Comprehensive Guide

SAP License Compliance involves ensuring the correct use and licensing of SAP software according to the terms agreed upon with SAP.

This includes:

  • Understanding License Types: Knowing the different types of SAP licenses, including Named-User and Package Licenses.
  • License Deployment: Ensuring licenses are deployed correctly, whether on-premises or in the cloud.
  • Managing Indirect/Digital Access: Addressing licensing needs for SAP software used by third-party applications.
  • Regular Audits and Reporting: Conduct regular audits and accurate reporting to SAP to maintain compliance.

Explaining SAP Licensing

sap licensing

SAP, which stands for Systems, Applications, and Products, is a global leader in enterprise software solutions. Businesses of all sizes use their software across various industries to improve operational efficiency and business processes.

SAP Licensing is how businesses obtain the right to use SAP software. This involves understanding the different types of licenses available, how they are priced, and how they can be deployed within the business.

The Complexity of SAP Licensing

The complexity of SAP Licensing is often attributed to its flexibility and the variety of options available. SAP offers a range of licenses to cater to different business needs and usage scenarios.

These licenses can be categorized into two main types: Package Licenses and Named User Licenses.

Package Licenses relate to the specific software functionality that a business needs. They are modular and can be combined in various ways to meet a business’s particular needs.

On the other hand, Named User Licenses are associated with the software users. Each user within a company must have a Named User License.

SAP Licensing Complexity

  • Variety of Options: Numerous license types, pricing models, and deployment methods.
  • License Types and Pricing: It is essential to understand different license categories and their cost implications.
  • Compliance and Cost Management: Regular license usage tracking is crucial to maintain compliance and control costs.
  • Indirect and Digital Access: Managing licenses for third-party application usage (Indirect Access) and accessing digital content through SAP software (Digital Access) adds complexity.
  • Navigating the Complexity: With proper understanding and resources, businesses can effectively manage and optimize their SAP licensing.

The SAP Licensing Model

sap license

The SAP Licensing Model is a flexible and modular system that allows businesses to choose and pay for only the necessary functionality.

This section provides a detailed overview of the SAP Licensing Model, including its essential components and structure.

Critical Components of the SAP Licensing Model

The SAP Licensing Model has two main components: Package Licenses and Named User Licenses.

Package Licenses relate to the specific software functionality that a business needs. They are modular and can be combined in various ways to meet a business’s particular needs. For example, a company may need a package license for SAP’s financial accounting module, another for its sales and distribution module, and so on.

Named User Licenses are associated with the individuals who are using the software. Each user within a business must have a Named User License. SAP offers a variety of Named User Licenses, each designed for specific roles within an organization. For example, there are Named User Licenses for developers, professionals, limited professionals, employees, etc.

Modular Structure of Software Licenses

The modular structure of SAP Software Licenses allows businesses to choose and pay for only the functionality they need. This structure provides flexibility and scalability for businesses of all sizes.

Each module or package license corresponds to a specific business function or process, such as financial accounting, human resources, or supply chain management.

For example, a small business may only need a basic package license for financial accounting and a few Named User Licenses for its employees.

As the business grows and its needs become more complex, it can add more package licenses for additional functionality and more Named User Licenses for other users.

This modular structure allows businesses to scale their SAP software usage as they grow without paying for unnecessary functionality or licenses.

Types of SAP Named-User Licenses

SAP Named-User Licenses

SAP offers various Named User Licenses, each designed for specific roles within an organization. Understanding these different types of licenses is crucial for managing SAP Licensing costs and ensuring compliance.

Developer

A Developer Named User License is designed for individuals involved in software development activities.

This includes tasks such as coding, testing, and debugging. Developers often need Access to a wide range of SAP software functionality, making this license one of the most comprehensive.

Professional

A Professional Named User License is designed for individuals who perform operational-related and system administration roles.

This includes configuring and managing the SAP system, performing business processes, and generating reports. Professionals often need access to a wide range of SAP software functionalities, making this license one of the most comprehensive.

Limited Professional

A Limited Professional Named User License is designed for individuals with limited operational roles. This includes tasks such as data entry, viewing reports, and performing specific business processes.

Limited Professionals have Access to a subset of SAP software functionality, making this type of license less comprehensive than the Professional Named User License.

Employee

An Employee Named User License is designed for individuals who perform basic tasks such as viewing reports and entering data.

Employees can access a limited range of SAP software functionality, making this license type less comprehensive than the Professional and Limited Professional Named User Licenses.

Employee Self-Service (ESS)

An Employee Self-Service (ESS) Named User License is designed for individuals who perform self-service tasks such as viewing their data, submitting time-off requests, and accessing payroll information.

ESS users have Access to a minimal range of SAP software functionality, making this license one of the least comprehensive.

Worker User

A Worker User Named User License is designed for individuals who perform specific operational tasks such as data entry and report viewing.

Worker Users have Access to a limited range of SAP software functionality, making this type of license less comprehensive than the Professional and Limited Professional Named User Licenses.

Logistics User

A Logistics User Named User License is designed for individuals who perform logistics and supply chain management tasks.

This includes managing inventory, processing orders, and planning deliveries. Logistics Users have Access to a specific range of SAP software functions related to logistics and supply chain management.

Management Self-Service User (MSS)

A Management Self-Service User (MSS) Named User License is designed for managers who perform self-service tasks such as approving time-off requests, viewing team data, and generating reports. MSS users can Access a specific range of SAP software functions related to management tasks.

Project User

An SAP Project user is named with limited usage rights, including project management and collaboration rights.

Read Only

A Read Only Named User License is designed for individuals who only need to view data and reports. Read Only users have Access to a minimal range of SAP software functionality, making this license one of the least comprehensive.

Service User

A Service User Named User License is designed for individuals who perform specific service tasks such as processing service requests, managing service contracts, and tracking service performance.

Service Users have Access to various SAP software functions related to service tasks.

How to Deploy SAP

How to Deploy SAP software

SAP can be deployed in three main ways: On-Premises Deployment, Hosted Private Cloud Deployment, and Public Cloud Deployment.

Each deployment method has advantages and considerations, and the choice of deployment method will depend on a business’s specific needs and circumstances.

On-Premises Deployment

On-premises deployment involves installing and running SAP software on servers within a business’s facilities.

This deployment method gives companies complete control over their SAP system, including the hardware, software, and data. However, it also requires firms to have the IT infrastructure and expertise to manage and maintain the system.

Indirect Access occurs when third-party applications or systems interact with SAP software. This can lead to additional licensing costs, as these interactions are considered usage under SAP’s licensing model.

For example, if a business uses a third-party application to extract data from its SAP system for reporting purposes, this would be considered indirect Access and could incur additional licensing costs.

Hosted Private Cloud Deployment

Hosted Private Cloud Deployment involves running SAP software on servers located in a private cloud, which is hosted and managed by a third-party provider.

This deployment method provides businesses with the benefits of cloud computing, such as scalability and cost efficiency, while maintaining high control and security over their SAP system.

Public Cloud Deployment

Public Cloud Deployment involves running SAP software on servers in a public cloud, which is shared with other businesses and managed by a third-party provider.

This deployment method provides businesses with the benefits of cloud computing, such as scalability and cost efficiency, but with less control and security over their SAP system compared to a private cloud deployment.

SAP License Models

SAP License Models

SAP offers three main license models: Perpetual Licensing Method, Subscription Licensing Method, and Consumption-Based Licensing Method.

Each model has its benefits and is suited to different types of businesses and usage scenarios.

Perpetual Licensing Method

The Perpetual Licensing Method involves indefinitely paying a one-time fee to use the SAP software.

This license model is typically used by businesses that want to invest long-term in SAP software and have the necessary IT infrastructure and expertise to manage and maintain the system.

Subscription Licensing Method

The Subscription Licensing Method involves paying a recurring fee to use the SAP software for a specific period.

This license model is typically used by businesses that want to minimize upfront costs and have the flexibility to scale their SAP software usage up or down as their needs change.

Consumption-Based Licensing Method

The Consumption-Based Licensing Method involves paying a fee based on the actual usage of the SAP software.

This license model is typically used by businesses that want to align their SAP software costs with their actual usage and have unpredictable or fluctuating usage patterns.

Other Cost Items in SAP Licensing

In addition to the basic license costs, SAP licensing includes other cost items. These include Engine usage, Standard packages, Special packages, Indirect Access, and Digital Access. Each of these items can significantly impact the total cost of SAP Licensing.

Engine Usage

Engine usage refers to additional software components, or “engines,” that provide specific functionality and are charged separately from the basic licensing fees. Examples of engines include:

  • The SAP HANA database engine.
  • The SAP NetWeaver application server engine.
  • The SAP Business Warehouse data warehousing engine.

Standard Packages

Standard packages are pre-configured bundles of software functionality that are designed to meet the needs of specific industries or business processes.

These packages are charged separately from the basic licensing fees and can significantly enhance a business’s SAP system.

Special Packages

Special packages are custom-configured bundles of software functionality designed to meet a business’s unique needs. These packages are charged separately from the basic licensing fees and can add significant value to a business’s SAP system.

SAP Indirect Use and Digital Access Licenses

SAP Indirect Use

Understanding Indirect Access and Digital Access is crucial for managing SAP Licensing costs and ensuring compliance.

Indirect Access refers to using SAP software by third-party applications, while Digital Access refers to using SAP software to access digital content.

Explaining Indirect Access

Digital Access refers to using SAP software to access digital content. This can include accessing, creating, or updating digital documents or records. Like Indirect Access, Digital Access can also lead to additional licensing costs.

For example, if a business uses SAP software to access digital documents stored in a third-party document management system, this would be considered digital Access and could incur additional licensing costs.

How to Measure SAP Digital Access

Measuring SAP Digital Access can be a complex task. It involves tracking the number of digital documents or records accessed, created, or updated using SAP software.

This information is crucial for managing Digital Access licensing costs and ensuring compliance.

HANA Database Licenses

sap HANA Database Licenses

HANA Database Licenses provide Access to SAP’s in-memory database platform, SAP HANA. This platform offers high-performance data processing capabilities for transactional and analytical workloads.

SAP HANA can be licensed in several ways, primarily focusing on the scale of your operations and the specific functionalities you need.

The two main licensing models are:

a. SAP HANA Runtime License:

This model suits customers using SAP HANA as the underlying database for SAP applications. Pricing is typically based on the value of the SAP application licenses, offering a cost-effective way to utilize SAP HANA’s capabilities.

b. SAP HANA Full-Use License:

The full-use license is ideal for businesses seeking to use SAP HANA’s features beyond supporting SAP applications. It allows the deployment of custom applications and the use of advanced features. This model is priced based on the memory allocated to your SAP HANA instance.

2. Choosing the Right License Type

To choose the right license type, consider the following factors:

  • Scope of Use: Decide if you’ll use SAP HANA solely for SAP applications or for a wider range of applications.
  • Database Size: Estimate the size of the data you plan to manage. SAP HANA’s pricing tiers are based on the size of the in-memory database.
  • Budget: Balance your operational needs with your budget. Consider both upfront costs and long-term value.

3. Licensing Options

  • Perpetual Licensing: A one-time fee that grants perpetual use rights and an annual maintenance fee.
  • Subscription Licensing: A pay-as-you-go approach is ideal for businesses seeking flexibility and lower upfront costs.

HANA Database Licenses are charged separately from the basic licensing fees and can significantly enhance a business’s SAP system.

FAQs

Why is SAP licensing considered complex?

SAP licensing is considered complex due to the variety of products and license types offered by SAP, including more than 3,000 products, 24 user license types, and 100 engine metrics.

Companies may struggle to align their license inventory with their actual licensing needs, leading to over-licensing and excessive spending on SAP applications.

What are the three pillars of SAP licensing?

The three pillars of SAP licensing are product selection, deployment options, and license models.

What are named-user licenses?

Named-user licenses are assigned to individual users and comprise approximately 40-70% of the total costs in an SAP contract. There are various categories of named-user licenses with different levels of authorization and features, with the most expensive being the Developer and Professional licenses.

What are the deployment options for SAP software?

The deployment options for SAP software include on-premises, hosted, and cloud-based deployments.

What is indirect access in SAP licensing?

Indirect access occurs when SAP data is accessed, created, or modified from outside without an SAP user license. Indirect use is often not negotiated and can result in additional payments during an SAP audit.

What is digital access in SAP licensing?

Digital access is an optional licensing method for indirect usage. If triggered by external (non-SAP) applications, it requires the creation of 9 pre-defined document types to be licensed. It is not based on the number of users and does not require a chargeable license for data updates, information exchange, or data deletions in SAP.

How can companies measure SAP digital access?

Companies can measure SAP digital access through the Digital Access Estimation Report (SAP Note) or the SAP Passport program.

What type of modifications can we do with SAP Software?

What is allowed is defined in SAP terms and conditions; follow the limitations to avoid licensing issues regarding SAP modifications.

How do I manage the SAP license renewal?

There are steps you should take. Please read our guide on SAP license renewal strategy.

SAP License Compliance Service

Overview Redress Compliance offers a comprehensive SAP License Compliance Service designed to help organizations navigate the complexities of SAP licensing.

Our service ensures your company complies with SAP’s licensing terms and conditions while optimizing your SAP software investment.

Key Features

  1. Detailed License Analysis: We conduct an in-depth analysis of your existing SAP licenses against actual usage to identify any discrepancies or areas of non-compliance.
  2. Contract Review: Our experts meticulously review your SAP license agreements to ensure a clear understanding of terms, conditions, and obligations.
  3. Usage and User Role Audit: We thoroughly audit user roles and software utilization, ensuring alignment with the licensed entitlements.
  4. Indirect Access Evaluation: Our service includes assessing potential indirect or digital access scenarios that could impact licensing requirements.
  5. Compliance Reporting: We provide detailed reports highlighting compliance status, risk areas, and optimization recommendations.
  6. Strategic Advice for Optimization: Beyond compliance, we offer strategic insights on optimizing your SAP license portfolio for cost savings and efficiency.
  7. Expert Consultation: Access to our team of SAP licensing experts for any queries or specific challenges related to SAP licensing.

Contact Redress Compliance

Author

  • Fredrik Filipsson

    Fredrik Filipsson brings two decades of Oracle license management experience, including a nine-year tenure at Oracle and 11 years in Oracle license consulting. His expertise extends across leading IT corporations like IBM, enriching his profile with a broad spectrum of software and cloud projects. Filipsson's proficiency encompasses IBM, SAP, Microsoft, and Salesforce platforms, alongside significant involvement in Microsoft Copilot and AI initiatives, enhancing organizational efficiency.