SAP licensing

Oracle SAP Licensing Management

SAP licensing can be complex and controlling software costs can be challenging due to the complexity of SAP’s product offerings, which include more than 3,000 products and 24 user license types, as well as 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. SAP’s system measurement tools do not assist in this process, as they only show license consumption and are not designed to optimize license selection or save costs.

To effectively manage SAP licenses and control software costs, it is important to understand the three pillars of SAP licensing: product selection, deployment options, and license models. A thorough understanding of these elements is crucial for understanding your effective license position, avoiding unnecessary software spending and ongoing maintenance costs, and eliminating shelfware while maintaining license compliance.

At Redress Compliance, we are experts in this field and have compiled important information about SAP and the licensing process to help companies overcome these challenges.

How does SAP licensing work?

SAP software licensing is defined by three aspects: products, deployment, and license model
Named-user licenses make up approximately 40-70% of the total costs in an SAP contract and are assigned to individual users.

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. In addition to named-user licenses, SAP customers may also pay for engine usage, standard packages, and special packages.

Deployment options include on-premises, hosted, and cloud-based deployments. All-in-one contracts, such as HEC (HANA Enterprise Cloud) and HANA Enterprise Cloud, include support, application management, and hosting with SAP.

SAP Named-User Licenses

SAP licensing
  • Developer: used for developing custom features using development tools
  • Professional: used for overall operational management and system administration
  • Limited Professional: used for limited operational functionality or well-defined functionality that must be validated by SAP
  • Employee: used for accessing reports and information for personal use, including documentation related to their work area
  • Employee Self-Service (ESS): used for self-service tasks such as time and attendance recording in HR
  • Worker User: used for tasks such as confirming production orders, entering production information, submitting purchase requisitions, and more
  • Logistics User: used for transportation management and warehousing
  • Management Self-Service User (MSS): used for tasks such as requesting administrative changes with HCM processes, creating requisitions and evaluating candidates, and more
  • Read Only: used for viewing data only
  • Service User: used for system-to-system communication

Deployment Options

  • On-premises: SAP software is installed and run on the customer’s own hardware
  • Hosted: SAP software is installed and runs on a third-party’s hardware and is accessed remotely by the customer
  • Cloud-based: SAP software is accessed through the internet and runs on a cloud provider’s hardware

License Models

  • Perpetual: the customer pays a one-time fee and can use the software indefinitely
  • Term: the customer pays a fee for a set period of time and can use the software during that period
  • Subscription: the customer pays a recurring fee and can use the software for as long as the subscription is active

Other Cost Items

  • Engine usage: fees based on usage of industry or line of business solutions
  • Standard packages: fees for pre-packaged solutions such as contract mappings and payrolls
  • Special packages: customized solutions with an agreed-upon payment plan with SAP
  • Indirect Access: fees for accessing SAP systems indirectly through another system or application
  • Digital Access: fees for accessing SAP systems through the internet or other digital media

ERP Core License

Required to access SAP’s basic functionalities, such as accounting, sales management, service management, production planning, project control, and operational procurement. Examples include SAP S/4HANA Enterprise Management for ERP customers.

Engine and Package Licenses (Industry Solutions, Line of Business Solutions):

Additional modules that can be purchased in addition to named-user licenses
Subject to various metrics, with 100 different metrics listed in the current price list
Metrics used by SAP may include the number of employees, orders, revenue, spend volume, barrels of oil per year, processors, cores, and storage volume.

SAP Indirect Use and Digital Access Licenses

  • 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.
  • SAP published a definition of Digital Access in 2018 to establish compliance around the indirect use
  • Digital Access is an optional licensing method for indirect usage, which requires the creation of 9 pre-defined document types to be licensed if triggered by external (non-SAP) applications.
  • Digital Access is not based on the number of users and does not require a chargeable license for activities such as data updates, information exchange, or data deletions in the SAP.
  • When switching to Digital Access, it may be possible to exchange named-user licenses for required document packages.

How to measure SAP digital access

There are two ways to measure digital access consumption:

  • Digital Access Estimation Report (SAP Note)
  • SAP Passport (Program)

Recently, SAP has introduced a program that automatically counts these documents. The SAP Passport program must be installed in the relevant SAP system and will then track all documents created externally and triggered in SAP.

Installation of the SAP Passport program is not mandatory for SAP customers. Some companies may prefer to continue using old contracts, and the counting results may vary between SAP releases and may not always be accurate.

Overview of SAP Passport

The new measurement method introduced by SAP in 2019 improved over several updates in 2020

  • Requires specific versions and upgrades of SAP
  • Improves the accuracy of digital access measurement and can exclude SAP-to-SAP communications from document counts
  • Creates dedicated tables for an efficient measurement process
  • Results are listed in the USMM log and validated in the LAW log

Alternatives to SAP Passport:

Earlier SAP note (SAP-Note 2644139 for ECC and 2644172 for S/4HANA) installs digital access estimation report.
Report counts all potential digital access documents, regardless of origin.
Clients must conduct a use case analysis to understand originators and exclude cases that do not require digital Access licensing.

HANA Database Licenses:

  • Required for S/4 installations, only SAP’s HANA database is allowed (no third-party options like SQL-Server, Oracle, or IBM)
  • Clients may use the HANA runtime version, licensed as a percentage of total license value, or HANA full use (also called HANA enterprise), priced based on the used storage volume.
  • The decision between versions depends on factors such as intended use (supporting SAP applications vs. developing additional applications on HANA), level of integration with other databases or data lakes, special functionality needs, and disaster recovery plans.

Need expert help with SAP licenses?

Our SAP license optimization service offers the following to help companies comply with SAP’s software usage and licensing guidelines:

  • Analysis of current SAP landscape to identify areas of over-utilization or under-utilization of licenses
  • Recommendations for optimizing license usage and adjustments to the SAP system to ensure compliance
  • Assistance with the implementation of changes and ongoing support to maintain compliance
  • Regular check-ins to consider any changes in business processes or system usage and make necessary adjustments
  • Help to avoid potential fines or penalties by ensuring compliance with SAP’s licensing guidelines.