SAP LICENSING INTRODUCTION

SAP License compliance and cost reduction through continuous optimization

With more than 3,000 products, 24 user license types and 100 engine metrics, SAP
software licensing is highly complex. As a result, many companies struggle to reconcile
their license inventory with their actual licensing need. This often results in over-
licensing and excessive spending on SAP applications. SAP's system measurement tools
are not helpful in this, as they only show license consumption and are not purposed for
optimizing the license selection or saving costs.

SAP SOFTWARE LICENSING BASICS

Your SAP Software Licensing is defined by 3 aspects: Products, Deployment and License
Model.

In addition to the named deployment options, clients can contract an all-in-one contract
that includes support, application management and hosting with SAP: HEC or HANA
Enterprise Cloud.

CHOICE OF PRODUCTS

License types, and other cost items

If your company wants to optimize SAP cost management, you must first understand,
which are the priorities to investigate. In addition to the so-called named-user licenses,
SAP customers also pay for engine usage (industry or line of business solutions),
standard packages (such as contract mappings, payrolls used, etc.) or even for special
packages that include a form of payment agreed with SAP. The information below
covers these details as well as indirect and digital access licensing.

SAP Named User Licenses

Named-user licenses account for approximately 40 to 70 percent of all costs agreed in

the SAP contract. Every SAP user must have a named user license. However, there are
various categories that differ greatly in their scope of authorization and offer the user
different functions. Table 1 provides an overview of frequently used license types and
their scope of authorization.

Generally, the more features, the more expensive the license. The most expensive
categories are the Developer and the Professional license. If no license has been
assigned to a user, then the Professional license, i.e., one of the most expensive
categories, is automatically set as the default during license measurement.

A special feature is the license type Limited Professional User. In the past, this license
was regulated by the purchased quantity or by an agreed percentage. A common ratio
was 85 percent Professional to 15 percent Limited Professional. If there was no such
clause in the contract, then a ratio of 50 to 50 applied. However, since SAP now offers
many new license types that cover very extensive functionalities and are less expensive
than Limited Professional licenses, it is very worthwhile to purchase alternative
licensetypes, that accurately reflect your organisational usage requirements.

Note: Customers who have the Limited Professional license type in their portfolio were
able to define the functional scope of this user type until January 2016 and have thus
retained the right to purchase additional licenses. This license is no longer available for
new customers, hence the need for alternative license types.

User licence types and their usage definition

• Developer -> Development of custom features using the development tools.

• Professional -> Overall operational management and system administration
 • Limited Professional -> Limited operational functionality or well-defined functionality
that must be validated by SAP
• Employee -> Use reports and information for own use. This includes documentation
related to his work area
• Employee Self-Service (ESS) -> Self-services e.g. in HR for time and attendance
recording
• Worker User -> Including, but not limited to, entering production order confirmations,
entering product or production information, such as quality inspection results or
plant/process/machine data, entering production problems and associated service
requests, submitting purchase requisitions for tooling, production equipment spare parts,
etc., confirming maintenance messages, entering service requests.
• Logistics User -> Transportation management; warehousing
• Management Self Service User (MSS) -> Including, but not limited to, requesting
administrative changes with Human Capital Management (HCM) processes and forms,
creating requisitions and assessing candidates, performing talent assessments and
employee evaluations, scheduling and approving compensation, viewing budget
summaries, organizing project management tasks, (vii) performing scheduling tasks,
approving travel requests and expenses, and performing Manager’s HR and procurement
tasks for his/her direct reports or Manager’s division/department.

ERP Core License

To make use of SAP’s basic functionalities, your company must acquire an SAP ERP
license, for example: SAP S/4HANA Enterprise Management for ERP customers.

This license allows you to work with the SAP ERP core, including modules such as
accounting, sales management, service management, production planning, project
control, operational procurement, etc.

For some of those modules you can acquire extended functionality with a LoB solution.
This way, you could extend the basic functions of the included finance module with the
line of business solution S4 Central Finance, which provides a much wider scope of
functions.

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

For many SAP applications, companies can purchase an engine or package license. Such
modules can be purchased in addition to the named-user licenses and are subject to
various metrics, concretely 100 different metrics in the actual price list of 2021. The cost
of license consumption is based on a parameter that is specific for the engine or
package. Some of the metrics used by SAP are “number of employees”, “number of
orders”, “yearly revenue”, “yearly spend volume”, “barrels of oil per year”, “processors”,
“cores”, “storage volume in GB”, etc.

Indirect Use and Digital Access Licenses

Indirect Access occurs when humans, or any device or systems indirectly use the ERP
system via a non-SAP intermediary software between the users and the SAP ERP system,
such as a non-SAP front-end, a custom- solution, or a third-party application. Indirect
Access is primarily licensed based on Users. Indirect order-to-cash and procure-to-pay
scenarios are licensed based on number of Sales Orders and Purchase Orders
respectively. Some indirect access scenarios do not require licenses such as Indirect
Static Read

Companies frequently access data from an SAP system indirectly, i.e., via third-party
applications or web stores. As a rule, if SAP data is accessed, created, or modified from
outside without an SAP user license, this is indirect use in most cases. Even if the
imported SAP data is then used exclusively in the third-party application, it is necessary
to check in each individual case, how this use is agreed with SAP. In the past, there has
not been a clear rule; instead, individual regulations have often been agreed upon,
which have been laid down in the individual SAP contracts. Often, however, indirect use
is not negotiated at all and is simply carried out. Such activities can result in serious
additional payments during an SAP audit.

However, it is not at all easy to identify all third-party systems and determine whether
there is indirect use of the SAP systems. The SAP tools for license measurement are not
capable of such a complete analysis.

To make this situation transparent, SAP published a corresponding definition on Digital

Access in 2018. Customers can follow this definition since then and thus establish SAP
compliance around indirect use, or they can remain with their old contract already
negotiated with SAP. New customers in the S/4HANA area do not have this option and
must use the SAP Digital Access metrics.

Digital Access is an optional licensing mehtod for indirect usage

Creation of 9 pre-defined document types must licensed, if they are triggered by
external (non-SAP) applications. With this licensing model, all further activities such as
data updates, information exchange or data deletions in SAP become free of charge.

SAP Digital Access is not based in the quantity of users. This means that anyone who
creates such documents, whether externally or in SAP with third-party applications, does
not need a license for which there is a charge. When switching to SAP Digital Access, it
is therefore possible to exchange named-user licenses for required document packages.

How are these documents measured now?

There are two possibilities to estimate digital access consumption:

• Digital Access Estimation Repot (SAP Note)

• SAP Passport (Program)

Recently, SAP has organized an automatic counting of these documents by means of a

program. This program must be installed in the relevant SAP system and from that
moment on "SAP-Passport" counts all documents that are created externally triggered
in SAP.

SAP customers are not forced to install this Passport program. Once it is not mandatory
to accept SAP Digital Access, there may be old contracts that the company wants to
continue to use, in addition, the counting results from SAP release to SAP release are
different and sometimes incorrect.
SAP Passport

SAP Passport is a fairly new measurement method, introduced by SAP in 2019 and
matured over several updates during 2020. To use SAP passport, you need specific
versions and upgrades of SAP.

Passport improves the accuracy of your digital access measurement and can exclude
SAP to SAP communications from the total document counts. Once passport is installed,
the system creates dedicated tables for digital access measurement, so the
measurement process also works more efficiently. After 12 months, you will obtain the
first relevant, passport based digital access measurement.

If SAP Passport is used, the results of the USMM measurement are listed in the USMM
log and validated in the LAW log.

The alternative way to count such documents is an earlier SAP note that must also be
installed (SAP-Note 2644139 for ECC and 2644172 for S/4HANA). This note installs the
digital access estimation report – estimation, not measurement. The report is inaccurate
to a certain extent, as it counts all potential digital access documents, regardless of
whether they were created internally in SAP, processed with internal batch processing,
or originated externally by non-SAP-applications. Once the estimation report is
executed, the client must lead a use case analysis to understand, which are the
originators for the counted documents and exclude those cases, that do not apply for
digital access licensing.

HANA DATABASE LICENSES

In S/4 installations, clients must use SAP’s own HANA database – third party databases,
such as SQL-Server, Oracle or IBM are no longer an option.

Most clients use the less expensive HANA runtime version, licensed as a percentage of
the total value of licenses. HANA full use, also called HANA enterprise, offers a lot more
functionality and is priced based on the used storage volume, an option that mostly is
more costly.

Whether a client needs one or the other version, depends very much on questions as:
 • Will HANA only be used to support SAP applications, or will the client develop
additional applications on HANA?
• What level of integration with other databases or data lakes is needed?
• Is special functionality, such as geodata or parallel processing needed?
• Does the client need to set up disaster recovery?

Middleware Licenses

Almost no company does not have or integrate SAP with additional standard or
proprietary applications that were purchased, or self developed over the years.

Even if SAP gets to be the central, strategic core application of the company, other
applications may have to obtain from or provide data to SAP, and in occasions
traditional file import and export processes are insufficient for large amounts of data or
unattended communication processes.

When planning your SAP application architecture, such integrations need to be added
to the equation, since they may require advanced functions such as data
transformations, process monitoring, error tolerance, unattended processing. When
such functions add to the requirements, the probability of increased costs and
interdependencies to additional modules may appear.

Typical modules that fall in this category are:

• SAP Data Services

• SAP Process Orchestrator
• SAP Netweaver OpenHub
• SAP Netweaver Foundation for Third Party Applications

SAP DEPLOYMENT OPTIONS

SAP ECC (ERP Center Core) can be deployed in a client data center or, of course, in
outsourced data centers. With S/4HANA, the number of deployment options have
increased, offering the client numerous alternatives – which is good, of course, but at
the same time makes the decision process more complex, both from a technical point of
view as regarding pricing comparison.

Start 2021, the options for deployment of S/4HANA look as described in the following
diagram:
When choosing a deployment option, you need to consider following aspects in your
decision process:

• Which software version do we need: full functionality or the simpler public cloud
version?
• Can we live with packaged software or do we make use of extense customizing?
• Do we want to subscribe licenses (pure OPEX) or do we wish to pay CAPEX and have a
perpetual license?
• Do we prefer an all-in-one contract modus with SAP managing everything or would we
rather control and determine the single components?
• Do we need custom service levels, or can we live with SAP’s standard service levels?

LICENSING MODELS
So far, we have seen in the market following models for contracting licenses with SAP:

Perpetual licenses / CAPEX + 22% OPEX: The company can use the SAP software
indefinitely but undertakes to conclude an annual maintenance and support contract.
The cost of this corresponds to around 22 percent of the license costs.
Subscription licenses / OPEX only: Payment is made periodically and covers the costs
of maintenance and support at the same time. This offer applies primarily to cloud-
based SAP applications.

Consumption based licensing. You pay for the number of documents used, your yearly
revenue, you’re your yearly procurement volume, etc. In this category you find SAP
products like Concur, Ariba, Fieldglass, etc.

Unlimited Licensing / UDD: For a specific set of products or for all your contract, you
agree with SAP in a purchase price and a yearly maintenance model. The contract allows
you to deploy any quantity of SAP software (mostly limited to selected on-premise
products) for a limited period.

Single metric: the client agrees with SAP on using a specific set of products and is
allowed to install any needed quantity of them. The price of the licenses is based on a
single metric like revenue or number of users, for example. As revenue or number of
users grow, so do SAP costs proportionally.

SAP SYSTEM MEASUREMENT

All SAP contracts include a yearly audit right, that allows SAP to check, whether a client
is appropriately licensed. This audit right is executed by SAP in two different ways:

• Yearly system measurement, required almost every year upon SAP inquiry
• Enhanced license audit, executed approximately every 3 years

The yearly system measurement is executed by the client with the SLAW tool (SAP
license audit workbench), which is included in the standard ERP.

The enhanced license audit is conducted on site at the client’s offices and led by SAP’s
GLAC team (global license and compliance). The auditors interview the client, execute
SLAW, and discuss the licensed level and actual usage level with the client. At the end,
the auditors produce an SAP audit report that must be approved by the client with his
signature.

Reliable information about the SAP license portfolio in the company can then only be
obtained with relevant investment of time and personnel, and all SAP agreements made
with the company must be adhered to. In small companies with a small number of SAP
systems and users, the required information can still be gathered with the help of Excel
tables or the company's own knowledge of the user base. But with several hundred
users, this is no longer an option. In complex SAP landscapes, there is simply no precise
overview of the current license inventory.

There are different procedures depending on the SAP product purchased. For ERP
applications that are installed on the customer's premises and account for the largest
share of SAP applications in the company, the measurement is performed annually. It is
to be performed by the customer himself, for which he must use the tools provided by
SAP. Transaction USMM is used for data collection, while License Administration
Workbench (SLAW) is used for subsequent data consolidation and reporting of the
results to SAP.

It is worthwhile for companies and other organizations to introduce professional license

management. After all, every investment in SAP licenses inevitably entails maintenance
fees. Unnecessary license purchases should therefore be avoided at all costs.

In addition to automated measurement, however, there are also manual analysis

procedures for other products in the form of self-reporting or questionnaires. This is the
case, for example, for CRM, Business Objects, or HANA. For cloud solutions, SAP
performs the measurement itself.

SAP also conducts formal audits if a license violation is suspected. SAP always focuses
on different points. In most cases, some irregularities have been noticed or SAP
recognizes that the company has no discernible transparency regarding SAP licenses.

With the help of SAP license management tools, the audit preparation process can be
conducted much more efficiently. The company is licensed in such a way that SAP
compliance prevails, has optimally designed license costs, thus does not pay too much,
and permanently has possible requirements transparently available. This means that SAP
can be approached proactively, the best discounts can be achieved, and the clear SAP
licensing situation means that SAP has no basis for discussions about the audit findings.

System Measurement Guidelines

Rights and authorizations depend on the SAP products and license types that the
company uses and the time of purchase. It is vital that an SAP user is licensed in such a
way that his or her license covers his or her real activities in SAP, or even falls short of
this. If they fall short, then his would then be overlicensing. And an opportunity to
optimize costs.

Of careful consideration for many SAP Clients is the new USMM 2.0. SAP promotes
licensing according to authorizations and has supplied a system in USMM 2.0 especially
for this purpose, in which the guidelines for licensing according to authorizations can be
stored. If a company uses this system, the licenses are assigned accordingly and directly
during the measurement with the USMM. For this reason, a company will probably
achieve a state of permanent overlicensing, because actual usage is no longer base of
the review, and excessive allowance of authorizations will inevitably lead to higher costs.

For effective license management, knowledge of the types, costs and risks is therefore
just as essential as knowledge of current SAP guidelines. Since these are constantly
changing, it is advantageous to always be up to date. In the past, some of the guidelines
have been relaxed, giving companies more leeway to optimize their license inventory.

We can certainly help customers identify what leeway they can make use of in the
following ways.

SAP customers...

... can trade in licenses.

... receive partial credits when returning licenses. Unused package licenses can be
credited when purchasing new products.

... receive incentives to switch to cloud solutions.

Underlicensing and overlicensing

Most companies often lack processes or ways to determine exactly how many licenses
they have and how many are needed in the first place. In complex SAP landscapes, there
is almost always a gap between license inventory and license requirements. The
following two manifestations occur:

Underlicensing = license inventory < licenses requirement.

Frequency: rare
Underlicensing occurs when there are more SAP users than licenses purchased, or
functions are used that are not covered by the user's license. Indirect use or SAP Digital
Access is currently very much in the focus of SAP. This is because data is frequently
accessed from or delivered to SAP systems via third-party applications. But also an
incorrect use of industry solutions, such as SAP Patient Management (IS-H), often leads
to claims from SAP, because insufficiently defined or documented licensing metrics and
rules are occasionally cause for discussions between the client and SAP.

Overlicensing = license inventory > license demand

Frequency: very often

Overlicensing is much more common than underlicensing. It is characterized by the fact

that more licenses were purchased by the company than were necessary. Often, to be
on the safe side, the significantly more expensive license types were purchased, even
though their functionality is not fully utilized. In addition, if a user has not been assigned
a license at all, then the expensive Professional User category is automatically applied
when measuring. Although customers are not in breach of the SAP contract when they
over-license, this results in unnecessary expenses in yearly maintenance.

SAP contract when they over-license, this results in unnecessary expenses in yearly
maintenance. Relevant savings potential is detected, when a client assigns his users
inneceserily unnecessarily the most expensive license types.

The use of alternative types of licenses also offers potential savings. However, since
many companies often do not know which license types are suitable for them, they
always fall back on the expensive Professional license.

Caution: overlicensing can also be risky if the existing licenses are incorrectly assigned.
This is the case, for example, if a user uses the functions of a professional user but only
has an employee license, or conversely, a user with an expensive professional license
only uses employee functions. The latter is of no interest to SAP. But if the audit finds
users whose usage exceeds the scope of their license, SAP will insist on additional
payment. As a result, a company may have to buy additional licenses despite
overlicensing. This sounds paradoxical at first but is not uncommon.

You might now think that overlicensing means that it no longer makes sense to
optimize SAP licenses. However, this is not true. Often new licenses are purchased every
year and this without knowing the exact need. With the help of a proper license
management tool, surpluses become visible, especially in the expensive license area, the
company is put in a position to buy the cheapest licenses when there is a need and, if
necessary, expensive licenses can be exchanged for cheaper licenses.

Causes of overlicensing

At first glance, underlicensing appears to be more threatening than overlicensing, as it

has an almost 100 percent probability of resulting in a penalty payment. Money that was
not budgeted for in this way. However, most companies are already spending too much
money on licenses without knowing it. The phenomenon of overlicensing can be traced
back to the following two causes:

1) Too many and/or too expensive named-user licenses.

1. Too many named-user licenses have been purchased without knowing exactly how many
licenses are needed per category.
2. Licenses are assigned manually without precise information on the actual usage behavior
of the user.
3. The different license categories are defined by SAP in such a way that there is a lack of
clarity within the company as to how which license types can be used.
4. The assignment of the license type in the user master data has been omitted. As a result,
the expensive Professional category is automatically set as the default during license
measurement.
5. An expensive license type was assigned to a user, but the user does not take full
advantage of its functions and authorizations. A lower and therefore cheaper license type
would be sufficient.
6. A user has several licenses, because he has several user accounts in SAP, to each of
which a license is assigned.
7. Licenses for former employees or employees who no longer work with SAP have not
been deactivated.
8. Employees only use third-party software that accesses SAP and the company already
licenses SAP Digital Access. In this case, these employees do not need an SAP license, as
the documents generated are licensed here.

2) Too little information about the consumption of the engine licenses or the
metric to the packages.

1. It is not precisely defined which of the numerous parameters are used by SAP to
determine costs.
2. The actual consumption can only be determined at the time of the system measurement.
Proactive management and optimization is only possible with a high manual effort or
with SAP license optimization software. samQ supports your company both centrally and
automatically to ensure the most transparent license usage.
License measurement ≠ License optimization

SAP license measurement is primarily a quantitative evaluation that compares the

current status with the target status from the license agreement. The SAP tools USMM,
for data collection, and the License Administration Workbench (LAW), for data
consolidation, are used for this purpose.

However, conclusions about the actual use of SAP programs or the use of certain
functions are not transparent, since the data collection only determines the total
number of all user accounts per named user category that have been manually assigned
by the client. Duplicate user accounts are also not adequately detected and manual
corrections are not supported.

LAW consolidation is always under discussion because it does not consider all
consolidation cases. For this reason, one should know quite precisely before LAW
consolidation what result is to be expected. Otherwise, it often happens that licenses are
purchased that would actually not have been necessary, and it is not uncommon for
duplicate licensing as a result.

The measurement of engine and package licenses is also not very transparent and
meaningful. For example, SAP does not inform its customers about license consumption,
but only about the measured parameters. However, it is often unclear what significance
these have for determining consumption. In addition, there can be unpleasant surprises
if you have measured with an outdated USMM version and are then requested by SAP
to measure again. Often, one then receives different measurement results, which can
result in additional payments. Therefore, SAP customers should ensure that they always
have the latest SAP Notes installed in the individual systems, which SAP requires for
these SAP releases.

License measurement is therefore purely a compliance check on the part of SAP. The
data collected does not contain any information regarding the usage behavior of the
users and is therefore not a basis for license optimization. SAP customers need a
different solution. They need a solution that analyzes how users make use of the SAP
systems. First-class tools examine the license inventory not only quantitatively, but also
qualitatively. They collect meaningful information that is evaluated and prepared in a
comprehensible and usable form.
EFFECTIVE LICENSE MANAGEMENT

Manually addressing the causes of over- or under-licensing is hardly feasible. It would

cost considerable personnel resources, time and ultimately money. Complex SAP
landscapes lack a precise overview, which cannot be obtained without the help of a
suitable license management tool. This tool must be able to determine and, if necessary,
optimize the license inventory with regard to both named user and engine and package
licenses.

Optimization of named user licenses

In order to optimize named-user licenses and avoid surprises during engine

measurement, the license management tool must be able to collect and centrally
consolidate the usage data of the individual SAP users and engine values. The following
questions need to be answered:

• Which engines and packages are used and in which SAP systems are they relevant for
billing?
• Which functions are used? Which actions are executed?
• How many licenses are assigned to the user?
• Is access to the SAP systems direct, indirect or both?
• For some special licenses, it may also count how often the SAP system was used.

SAP expects their clients to independently license their employees according to their
real activities across all billing-relevant systems and that this licensing will be accurate
for audit purposes.

The figure below shows the transparent evaluation from samQ of SAP user licenses
according to the SAP functionality used. This usage data is evaluated with the help of a
transaction database. This database defines which licenses are required for each
transaction executed in SAP. This enables the tool to determine the optimal license type
for each SAP user. However, this evaluation of the transactions must not happen only
once, but must be executed again and again, otherwise only a snapshot is created. Since
both the work environment (e.g., using a new SAP program) and the user's tasks are
constantly changing, this must dynamically adjust the license inventory. The tool must
be able to identify new transactions and evaluate them in terms of the correct license
type. Likewise, the program must be able to recognize when a user is not using the full
scope of his SAP license or is violating the license terms. In any case, the tool must be
able to assign the appropriate license type to each SAP user automatically, without
manual intervention, and change it if necessary.
If this is the case, then everything in the "Assignment too low" column would be "0" as
shown in the figure.

In addition to the usage data, the tool must also be able to process the information and,
in some cases, individual regulations from the license agreements. These include
authorizations and usage rights. It must be possible to store the contract data in
Customizing to form a framework for the effective management of named-user licenses.

The goal is to permanently minimize or completely eliminate compliance risks. On the

one hand, this is done by comparing authorization, entitlement and usage rights with
the usage data collected. This ensures that each user has the correct license type. On the
other hand, it is equally important that the license management solution helps to
uncover possible indirect usage or SAP Digital Access in SAP and, if necessary, also
offers suggestions on how to deal with these findings. This is the only way to prevent
these users from causing unbudgeted or simply excessive costs during SAP license
measurement.

In the end, the SAP Applications department must be enabled to...

... automatically assign the optimal license type to a user.

... identify licenses that are not needed and use them elsewhere.

... identify duplicate users and clean up duplicates.

... optimize licensing for indirect use or SAP Digital Access.

If there are any ratio clauses in the SAP contract, the solution should also explicitly show
in its report the optimal number of licenses per license type compared to the number
stipulated in the contract. This is particularly helpful when it comes to renegotiating
contracts with SAP. In some cases, customers can overturn the ratio clause if they can
prove that the actual demand does not correspond to the current ratio.
Optimization of engine and package licenses

The optimization or at least the summary of engines and packages from the various SAP
systems must also be enabled by the tool. Here, the optimization does not consist in
identifying what is used, but in the central consolidation of where which consumptions
are and from which systems the data is relevant. The solution must recognize all engines
and packages on all SAP systems and consider the respective licensing rules and
parameters. Based on this, reports are created that serve as the basis for consumption
calculations. Since engines and packages are often on multiple systems, the tool must
be able to count parameters across systems. All information should be collected in one
place, thus minimizing the effort required for consolidation.

Optimization of digital access

As described before, the actually provided methods to measure indirect usage and
digital access are not sufficiently accurate and need further investigation and analysis
after the technical document counting.

In order to properly understand your need for indirect usage licensing, you should lead
an evaluation process consisting of the following steps:

• Estimation of digital access documents – with or without passport

• Investigation of the connections causing these documents
• Assignment of external applications to technical users
• Evaluation of the single use cases
• Subtracting documents from internal batch processing
• Subtracting subsequent documents
• Factorizing Material and Financial documents
• Comparing digital access costs with indirect usage model
• Preparing documentation for the SAP audit

CONCLUSION

SAP software licensing is as complex as the variety and diversity of products offered by
SAP.
In result, many companies struggle to reconcile their license inventory with their actual
licensing needs. Very often, this results in over-licensing and excessive spending on SAP
applications.

To manage and optimize your licensing costs, SAP's system measurement tools are not
useful, as they only count license consumption and license assignment. They are not
useful for optimizing the license inventory or discovering the correct license
assignments.

A suitable solution for license optimization must be transaction-based. This means that
the tool must collect and evaluate reliable data on the usage behavior of users and
automatically optimize the license portfolio accordingly. This reduces relevantly the
phenomenon of overlicensing and thus overpayment.

Likewise, companies can prevent expensive additional payments in the event of

underlicensing in good time. SAP customers who can determine and document exactly
what is used in the company and to what extent also have a significantly better
negotiating position vis-à-vis SAP.

SAP does not have a standard true-up process. It is in the responsibility of the client to
proactively manage his software compliance and approach SAP before the yearly
measurement to purchase needed licenses and correct eventual compliance issues.
Once SAP conducts an audit, it is already too late to negotiate from a power position. A
negative audit result is seen as a situation of non-compliance and SAP will eventually try
to mitigate the findings at license prices without discount or even require back
maintenance.

If you want to be in the power position and lead strategic SAP software purchases, we
recommend you to:

• Analyze and optimize your license situation on a quarterly basis

• Solve your compliance issues proactively before the audit
• Negotiate with SAP yearly or, if inevitable, every 6 months – never more often
• Don’t pay maintenance for licenses out of use: either exchange or cancel them
• Plan strategic purchases, such as S/4HANA or SuccessFactors with time and adequate
preparation and demand planning
• Involve licensing experts the same way you contract experts in any other technical area,
where you need their help regularly, but not daily