SAP Licensing Guide for ITAM Practitioners — The Complete Enterprise Reference

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~20–22%annual support fee on perpetual licence value — a recurring cost that compounds year on year

Named Usersevery individual accessing SAP requires a licence — Professional, Functional, ESS, Developer, or Project

9 Document TypesSAP's Digital Access model counts creation of nine key business document types for indirect use

FUEFull Usage Equivalents — SAP's points-based system for S/4HANA and RISE user licensing

Licence Fundamentals: Perpetual vs Subscription
SAP Licence Types and Metrics
S/4HANA Licensing: New Models and Migration
RISE with SAP: Bundled Subscription
Indirect Access and Digital Access
SAP Cloud Services
Non-Production, DR, and the 10-Day Rule
Common Compliance Pitfalls
Preparing for SAP Audits
Licence Optimisation Strategies
Recommendations for ITAM Practitioners
5-Step Action Checklist
Frequently Asked Questions

1. Licence Fundamentals: Perpetual vs Subscription

Factor	Perpetual Licensing	Subscription Licensing
Cost model	Large upfront licence fee (CapEx) plus ~20–22% annual support	Recurring monthly/annual fees (OpEx) — no perpetual ownership
Ownership	Customer owns licence entitlements indefinitely. Software usable even if support is dropped (in last-supported state)	Access ends when subscription ends. No perpetual use rights unless negotiated
What's included	Software licence only. Support, infrastructure, and hosting are separate	Often bundles software, support, hosting, and management (e.g., RISE with SAP)
Flexibility	Can accumulate shelfware, but licences can be reallocated internally	Scaling up is straightforward; scaling down may require waiting until renewal
Long-term cost	Front-loaded. Support fees continue but the licence itself doesn't expire	Cumulative cost may exceed perpetual over 5+ years. Must evaluate TCO carefully
Examples	Traditional SAP ECC, on-premise S/4HANA	RISE with SAP, SuccessFactors, Ariba, Concur, Fieldglass, S/4HANA Cloud

ITAM essential: Regardless of model, all SAP entitlements are defined in formal ordering documents. Maintain copies of all SAP licence agreements, order forms, and SAP Software Use Rights documentation. Verify that metrics and rights in the contract match your understanding — and track purchase history, including any special amendments, migration credits, or discount arrangements.

2. SAP Licence Types and Metrics

SAP's licensing types divide into Named User licences and Package (Engine) licences, each with specific metrics:

Named User Licences

Every individual accessing SAP requires a Named User licence. Licences are assigned by user type based on the level of access:

User Type	Access Level	Typical User Profile
Professional	Full operational access across all SAP modules	Finance specialists, supply chain managers, power users performing broad transactions
Limited Professional / Functional	Access restricted to specific functional areas	Users performing limited or specific functions — e.g., HR only, procurement only
Employee / ESS	Basic self-service tasks only	Employees doing time entry, expense submission, viewing HR data
Developer	Development tools (ABAP workbench) plus professional access	ABAP developers, configurators — more expensive, limited to those needing programming access
Project	Temporary access for project-based work	External consultants, implementation team members on fixed-term engagements

Package (Engine) Licences

In addition to users, SAP sells licences for specific modules or "engines" measured by business metrics. Read the full guide on SAP Package/Engine Licences.

Metric Type	Example
Employee/capacity-based	SAP Payroll licensed per employee processed; SRM per number of vendors
Transaction/order-based	Sales order line items per year; service tickets recorded annually
Revenue/spend-based	Retail industry engine by revenue; Ariba Network by procurement spend volume
Hardware-based	SAP HANA database licensed in increments of 64GB memory

"The number one SAP licensing mistake we see is user misclassification. Organisations assign everyone as a Professional user 'just to be safe' — wasting millions in over-licensing — or they default to the cheapest category and accumulate massive compliance gaps that surface during an audit. The right approach is maintaining a clear, documented mapping of job roles to SAP user licence types, reviewing it quarterly, and adjusting proactively. We've seen organisations cut SAP licensing costs by 25–30% simply by right-sizing user classifications based on actual transaction patterns."

— Fredrik Filipsson, Co-Founder, Redress Compliance

3. S/4HANA Licensing: New Models and Migration

SAP S/4HANA introduced updated licensing that ITAM practitioners must navigate carefully. The migration from ECC to S/4HANA is not just a technical upgrade — it's a licensing transformation.

S/4HANA User Categories

S/4HANA Category	Access Level	ECC Equivalent
Professional Use	Broad usage across S/4HANA Enterprise Management suite	Professional User
Functional Use	Full access to specific functional areas (sales, procurement, finance) but not all areas	Limited Professional (approximate)
Productivity Use	Basic tasks, self-service, approvals, data inquiry — no end-to-end transactions	Employee Self-Service (approximate)
Developer Use	Development tools in S/4HANA	Developer User

Full Usage Equivalents (FUE)

Many S/4HANA contracts use FUEs — a points-based system where each user type is a fraction of a "full" user. For example: 1 Professional = 1.0 FUE, 1 Functional = 0.5 FUE, 1 Productivity = 0.1 FUE. SAP sells S/4HANA licensing in blocks of FUEs rather than fixed counts, giving flexibility in how you mix user types within the pool.

Greenfield vs Brownfield

Approach	Licensing Implication
Greenfield (new implementation)	Negotiate a fresh S/4HANA contract. No automatic credit for past ECC investment — but competitive bidding and trade-in discussions can yield discounts
Brownfield (in-place conversion)	Engage in SAP's licence conversion programme. ECC entitlements mapped to S/4HANA equivalents — often with an uplift fee. ITAM must work closely with SAP on the conversion agreement

⚠️ Dual-system risk: Running ECC and S/4HANA simultaneously during migration can temporarily double usage. Ensure your licences cover both environments, or negotiate temporary licences for the transition period. S/4HANA also requires the HANA database — verify whether your contract includes HANA runtime licences or whether that's an additional engine to purchase.

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4. RISE with SAP: Bundled Subscription

RISE with SAP bundles SAP's software and infrastructure into a single subscription contract. It is typically a 3–5 year commitment covering S/4HANA Cloud (Public or Private Edition), infrastructure and technical management, SAP BTP credits, and support.

RISE Component	What's Included	ITAM Implication
S/4HANA Cloud	Public Cloud (multi-tenant SaaS) or Private Cloud Edition (single-tenant). Software licences embedded in subscription via FUE count	No separate named user licensing to track — but must monitor FUE consumption closely. Exceeding contracted FUEs triggers expansion or true-up
Infrastructure	Hyperscaler hosting (Azure, AWS, GCP) or SAP data centre. Technical services included (backup, updates, monitoring)	No separate hosting contract needed — but you lose control over the environment. SAP manages OS, Basis, and upgrade schedule
SAP BTP	Starter package of Business Technology Platform credits for extensions, integrations, and custom development	Monitor BTP credit consumption — overages incur additional charges. Forecast usage carefully
Support	Enterprise Support included in subscription. No separate maintenance fees	Simplifies cost structure — but verify SLA terms for uptime and cloud-specific service levels

"RISE with SAP fundamentally changes the licensing game. You stop counting individual users and engines on-premises and commit to a subscription scope instead. This simplifies day-to-day compliance — but it shifts the risk to contract negotiation. If you over-provision, you're locked into paying for unused capacity for the entire 3–5 year term. If you under-provision, expansion costs are rarely favourable. The critical moment is before you sign — model your FUE requirements accurately, negotiate price protections for growth, and most importantly, negotiate an exit strategy. What happens at the end of the RISE term if you don't renew? Without an explicit conversion clause, you could lose access to everything."

— Fredrik Filipsson, Co-Founder, Redress Compliance

5. Indirect Access and Digital Access Licensing

Indirect access — when external systems or users interact with SAP without logging in directly — is one of the trickiest SAP licensing areas. In 2018, SAP introduced the Digital Access model to address it.

How Digital Access Works

Instead of licensing indirect interactions by user, SAP's Digital Access model licences by documents created. SAP identified nine key document types representing business outcomes (Sales Orders, Invoices, Purchase Orders, Deliveries, etc.). When an external system creates one of these document types in SAP, it consumes a licence count. Customers purchase blocks of documents (often in packs of 1,000).

Aspect	Detail
What's counted	Creation of nine key business document types by external/unlicensed sources
What's not counted	Reading/querying data, updates/deletes to existing documents, documents created by properly licensed named users
Purchasing model	Blocks of documents (e.g., 100,000 documents/year). Exceeding the count triggers true-up
Hybrid approach	Digital Access covers indirect scenarios only — you still maintain named user licensing for direct users

⚠️ The indirect access trap: Connecting new systems to SAP is never "free." An IT department builds a mobile app that creates service requests in SAP, or integrates a CRM that writes sales orders — without licensing those interactions. During an audit, SAP identifies thousands of documents created by unlicensed sources. Always involve ITAM in the design phase of any new SAP integration. Read the full guide: Top 10 Pitfalls in SAP Digital Access.

6. SAP Cloud Services

Service	Licensing Model	Compliance Considerations
SuccessFactors	Per employee/user per year. Modules (Employee Central, Recruiting, Performance, Learning) can be purchased individually or bundled	SAP tracks active users automatically. Growth beyond purchased count = non-compliance at renewal. Coordinate with HR to track headcount vs licence count
Ariba	Ariba Network: transactional metrics (annual spend volume or document count). Applications: per named user or enterprise spend	Usage spikes if procurement spend increases. Monitor document counts and spend thresholds. Verify that Ariba-to-ERP integration doesn't trigger separate indirect access issues
Concur	Per active employee user per year for Expense and Travel. Invoice processing may be per document	Ensure ex-employees are removed promptly. Monitor if new divisions or contractors start using Concur — they need licence coverage
Fieldglass	Per active external worker managed in the system. May include per-internal-user components	Unexpected contractor increases can exceed licensed count. Reconcile worker numbers periodically

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7. Non-Production Systems, DR, and the 10-Day Rule

Environment	Licensing Rule	ITAM Guidance
Development / Test / QA	No separate "dev licence" needed. A named user's licence covers all SAP systems under the organisation's scope (dev, test, and production)	Every individual using SAP — even in test only — must be a licensed named user. External consultants in test environments need licences. Keep user master records clean
Disaster Recovery (cold standby)	If DR system is completely idle (data replicated, no active users), separate licences are not required	When DR is activated (failover or drill), your existing user licences cover usage. Don't run prod and DR in parallel (active-active) without additional licensing
DR test (10-day rule)	Annual DR tests running prod and DR simultaneously for limited periods are generally accepted	Document test dates and duration. If challenged, you can demonstrate temporary parallel use was for DR testing purposes only
High Availability	Failover node in hot standby — no extra licence if only one node serves users at a time	HANA active/active read-enabled replicas may require licensing both nodes. Clarify with SAP if managing HANA HA environments
Training / Sandbox	Allowed — but users accessing them must be licensed named users	Avoid generic shared accounts for training. Assign proper temporary named users and deactivate after the training period

8. Common Compliance Pitfalls

Pitfall	Why It Happens	Consequence
Named user misclassification	Users assigned to cheaper licence types than their actual transactions warrant. Default "one size fits all" approach without analysis	Audit finding requiring upgrade to higher licence type with back-support fees — often the single largest SAP audit exposure
Generic or shared accounts	Single login used by multiple users (e.g., warehouse shift account). Assumes technical interface accounts are free	Violation of SAP's named user requirement. Each person needs their own licence. Technical accounts still consume licences
Inactive users not retired	Employees leave or change roles but SAP accounts remain active. No HR-to-IT deprovisioning process	SAP audit counts all active named users. Maintaining unused accounts wastes licence allocation and inflates compliance position
Engine overuse / untracked metrics	SAP doesn't enforce caps in software — engines work on the honour system. No internal monitoring for transaction counts or capacity metrics	Audit discovers usage exceeding purchased quantities. Remediation at SAP's pricing, not yours
Indirect access not addressed	IT connects new systems to SAP without assessing licensing impact. Business units assume integrations are free	Thousands of unlicensed documents created by external systems. Audit finding with potentially millions in back-compliance fees
Cloud module headcount drift	SuccessFactors/Concur user count grows as company hires, but licence count isn't adjusted	Out of compliance at renewal — SAP invoices for excess. True-up costs at less favourable rates than proactive purchasing

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9. Preparing for SAP Audits

SAP conducts licence audits (typically via SAP's Licence Audit and Compliance team) using the LAW (Licence Administration Workbench) measurement tool. ITAM practitioners should:

Preparation Step	Detail
Run USMM/LAW regularly	SAP's System Measurement (USMM) and LAW tools consolidate user and engine data across your landscape. Run these proactively at least annually to understand your compliance position before SAP asks
Reconcile users vs entitlements	Compare the LAW output against your contractual entitlements. Identify any gaps — users in higher categories than purchased, engine metrics exceeding contracted quantities
Clean inactive accounts	Lock or delete users who haven't logged in within 90 days. SAP's audit tools can exclude locked users — but only if properly marked before the measurement
Document all interfaces	Inventory every non-SAP system that reads from or writes to SAP. Determine which interfaces create documents. This is the basis for Digital Access compliance
Prepare your position	If gaps exist, develop a remediation plan before the audit. Proactively approaching SAP to resolve issues is always more favourable than being caught
Engage expert support	For significant audits, engage independent SAP audit defence advisory. Audit results are often the start of a negotiation — not a final invoice

10. Licence Optimisation Strategies

Strategy	Detail
Right-size user classifications	Analyse actual transaction patterns and downgrade users who don't need Professional access. Organisations typically cut 25–30% by moving infrequent users to cheaper tiers
Eliminate shelfware	Identify unused or underused licences via SAP usage reports. Reclaim licences from inactive users. Stop paying ~22% annual support on modules nobody uses — consider formal decommission
Implement continuous lifecycle management	When employees leave or change roles, promptly reassign or remove SAP access. Conduct quarterly reviews to keep entitlements aligned with actual organisational structure
Optimise Digital Access	For organisations with significant indirect usage, model whether the document-based model is cheaper than adding named users. Use SAP's estimation tools to forecast document volumes accurately
Leverage renewal and migration events	Support renewals, S/4HANA migrations, and RISE evaluations are all negotiation opportunities. Use competitive alternatives (even conceptual ones) to maintain leverage
Negotiate contract protections	Price caps on annual increases, FUE rate locks, exit-to-perpetual clauses in RISE, true-down provisions in cloud subscriptions, and clear data portability terms
Monitor cloud service usage	For SuccessFactors, Ariba, Concur — track actual usage against contracted volumes monthly. Proactive adjustment at renewal is always cheaper than surprise true-ups

"SAP licensing optimisation isn't a one-time event — it's a continuous discipline. The organisations that save the most are those that treat SAP licensing as an ongoing programme: quarterly user reviews, monthly interface monitoring, annual self-audits, and strategic preparation 12+ months before any contract renewal or migration event. The difference between a reactive organisation and a proactive one can easily be seven figures per year in SAP licensing costs."

— Fredrik Filipsson, Co-Founder, Redress Compliance

11. Recommendations for ITAM Practitioners

Recommendation	Detail
Maintain a complete licence register	Document every SAP entitlement — perpetual licences, subscriptions, user types, engine metrics, cloud services. Include contract terms, renewal dates, and amendment history
Map roles to licence types	Create a governance matrix mapping job roles to required SAP licence types. Distribute to SAP security teams so role assignments automatically align with licence entitlements
Run quarterly self-audits	Use USMM/LAW tools to measure your compliance position quarterly. Identify and remediate gaps proactively — not during an SAP audit
Inventory all interfaces	Catalogue every third-party system connecting to SAP. Assess licensing impact for each. Require ITAM sign-off before any new SAP integration goes live
Plan S/4HANA migration licensing early	Licensing is a critical path item for S/4HANA migration. Assess user mapping, FUE sizing, HANA database licensing, and engine conversions at least 12 months before migration
Evaluate RISE independently	Before committing to RISE with SAP, model 5–10 year TCO against on-premise and hybrid alternatives. Negotiate exit clauses, price protections, and conversion rights
Coordinate with HR on user lifecycle	Automate user provisioning and deprovisioning linked to HR systems. Every joiner, mover, and leaver should trigger a licence review
Engage stakeholders on cost	Communicate SAP licensing costs to finance and business leaders. When executives understand that idle modules cost ~22% annually in support, they're more willing to decommission
Benchmark and negotiate	For significant purchases or renewals, use independent negotiation advisory. SAP's initial pricing is rarely the best available. Get competitive benchmarks before signing

12. 5-Step Action Checklist

Inventory all SAP entitlements and deployments — Compile a complete register of perpetual licences, subscriptions, cloud services, user types, engine metrics, and contract terms. Reconcile against actual SAP system installations and user counts.
Run a compliance self-assessment — Execute USMM/LAW measurement across all SAP systems. Compare output against entitlements. Identify misclassified users, exceeded engine metrics, unlicensed interfaces, and cloud service overages.
Remediate gaps and right-size — Downgrade over-licensed users, remove inactive accounts, address indirect access exposure, and reclaim shelfware. Quantify the savings and the residual compliance risk for executive reporting.
Establish ongoing governance — Implement quarterly self-audits, automated user lifecycle management, ITAM sign-off for new integrations, and role-to-licence-type governance. Make SAP licence management a continuous programme, not an annual exercise.
Prepare for the next commercial event — Whether it's a support renewal, S/4HANA migration, RISE evaluation, or audit response — start preparation 12+ months in advance. Model scenarios, develop negotiation positions, and engage independent advisory for material transactions.

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13. Frequently Asked Questions

What's the difference between Professional and Functional user licences?

Professional users have full operational access across all SAP modules — the broadest and most expensive licence type. Functional users have full access within specific functional areas (e.g., sales, procurement, finance) but not across all areas. Many users classified as Professional actually only work in one functional domain and could be downgraded to Functional — this is one of the highest-value optimisation opportunities.

Do we need to licence users in development and test systems separately?

No separate "dev licence" is required. A named user's licence covers all SAP systems under the organisation's scope — development, test, QA, and production. However, every individual using SAP in any environment must be a licensed named user. External consultants in test environments, training participants, and temporary project staff all need licence coverage.

What is SAP Digital Access and when do we need it?

Digital Access is SAP's model for licensing indirect access — when external systems create business documents in SAP without a human user logging in directly. If you have third-party systems (CRM, e-commerce, EDI, mobile apps) that write data to SAP, you likely need Digital Access licensing. The model counts nine key document types created by unlicensed sources.

What happens to our ECC licences when we migrate to S/4HANA?

ECC licences don't automatically convert to S/4HANA. SAP offers licence conversion programmes that map ECC entitlements to S/4HANA equivalents — typically with an uplift fee for new functionality. For RISE with SAP, existing perpetual licences can often be suspended (hibernated) during the subscription term, with the possibility of reactivation if you exit RISE. The conversion terms must be negotiated explicitly. Read more: SAP Licence Migrations.

Is RISE with SAP always more expensive than on-premise?

Not necessarily — it depends on your starting point. RISE bundles software, infrastructure, and support into one fee, which can be more economical if you currently spend heavily on data centre operations and Basis administration. However, over a 5+ year horizon, cumulative subscription costs often exceed what perpetual licensing with self-managed infrastructure would cost. Model both scenarios carefully before committing, and negotiate price protections for the contract term.

How should we handle SAP licensing during M&A activity?

Mergers and acquisitions require careful SAP licence due diligence. Identify all SAP entitlements in the target company, verify user classifications, check for compliance gaps, and assess whether licences can be transferred or need to be renegotiated. SAP's transfer policies require formal notification and may involve fees. Start the licensing assessment during due diligence — not after the deal closes.

Can we reduce SAP support costs?

SAP's standard support runs ~20–22% annually on the licence value. You can reduce this by: (1) formally decommissioning unused modules to remove them from the support base, (2) negotiating caps on annual support increases, (3) evaluating third-party support providers for stable, non-strategic SAP products, or (4) consolidating licences to eliminate shelfware. Any reduction requires careful planning — dropping SAP support means losing access to patches and upgrades for those products.

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Fredrik Filipsson

Co-Founder @ Redress Compliance

20+ years in enterprise software licensing. Former IBM, SAP, and Oracle. 11 years as an independent consultant advising hundreds of Fortune 500 companies on Oracle, Microsoft, SAP, IBM, Salesforce, and ServiceNow licensing, contract negotiations, and cost optimisation.

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