Looking back at SapphireNow in May 2019, SAP’s global annual information sharing event, it was very upbeat with some great announcements. These were mostly concerned, of course, with new functionality such as S/4HANA, C/4HANA, Customer Experience, RPA and SAP Cloud Services.
As the SAP Licence subject matter experts, we have been researching and analysing many of these in detail with regard to SAP Contracts and SAP Licensing factors, which specifically affect major Change Projects and your future SAP roadmap, Architecture and planning, that are of a contractual or Licence Governance nature.
The 5 main risk issues relating to SAP Contract and SAP Licensing factors are:
Indirect Use or the new alternative/option of Digital Access needs to be weighed up both in the short term and the future.
Existing Contracts need to be brought up-to-date to be fit-for-purpose for any modern business.
The ongoing Oracle DB run-time Licence issue (on-premise bought via SAP) needs to be assessed
The transition or migration to either SAP or third-party cloud needs detailed impact analysis on Licensing
How to align Licence risk & cost to SAP future road-map & Enterprise & Solution Architecture
Why are these so important?
They are so important because they will have the greatest impact in terms of Risk and Cost to your business over the following years. They carry the highest levels of “unpredictability” as to when the risks will materialise and just how much they could cost. CFO’s tell us that predicting cost ahead of time so planning and budgeting can be in place and accurate, is vital for today’s publicly quoted companies.
Watch SAP CEO Bill McDermott’s Keynote speech at Sapphire 2019
Indirect Use versus Digital Access
Digital Transformation Announcement The key announcement at SapphireNow 2018 on Licencing and Contracts was the new Digital Access Licensing Model presented as the optional alternative to “Indirect Use” Licensing. At SapphireNow 2019 SAP launched a deal for customers wishing to move to the new Licensing model DAAP – Digital Access Adoption Program. DAAP is where Indirect Use or Access to SAP Core software, ECC or S/4HANA will be licenced as any of 9 Document types, defined as ‘Documents by SAP’. Since our return from SAPPHIRE, we have studied the program and licencing impact. This is great news for SAP customers as SAP have challenged many of you over many years about “Indirect use”, which is allowing third-party systems (Non-SAP) to access and update SAP systems, such as suppliers and customers. Now you have an alternative choice to licensing Indirect Use as Named Users. Why a new licencing model? In the past most SAP customer’s contracts included a phrase which lay dormant for many years, which SAP started to invoke from 2014. SAP demanded customers licence third party access to their SAP systems as Named Users, a big and very expensive surprise. They also won several high profile court cases such as against Diageo. More recently SAP recognised that these disputes were affecting their customer experience and longer term relationships and revenue streams. Consequently, SAP introduced Digital Transformation in 2018 by providing an alternative to Named User Licensing for such “Indirect Use”. This was termed “Digital Access Licensing”. In 2019 SAP launched the Digital Access Adoption Program (DAAP) to address this issue. It is positioned as an alternative to remaining contracted with Indirect Use. N.B. However, the issue of “Indirect Use” has not gone away and remains in all but a few customer contracts! Digital Access Licensing Model The rules for Digital Access are no less complex than Indirect Use they are just different and are a shift away from Named User Licensing to Transaction based, in for form of Documents. These SAP “Documents” have their own specific contractual definitions, of which there are 9 types. SAP have stated that they will not introduce more! The 9 documents are: Sales, Purchase, Invoice, Service Management, Quality Management, Manufacturing, Time Recording, Finance and Materials, the last two counting as only a fifth of a licenced unit. The Licence you buy is for the total number of Documents consumed per year which is shared by all the above documents based on their definitions, each of which are different. The challenge will be to separate the documents that are created by SAP Direct Access or SAP.
Systems from Documents created externally or by third-party applications, in order to both be contractually compliant and to manage licence consumption. N.B. So you need to be aware that you will have to assess your anticipated total annual volume and buy sufficient Licenced number of documents. You will then need to track this, at the very least monthly to ensure you remain compliant and be ready for your annual audit. SAP Digital Access Adoption Programme – DAAP SAP are offering a deal called the Digital Access Adoption Program (DAAP), available until May 2020. It offers a discount against conversion from current T’s & C’s to the new model. This will have a huge impact on your licencing costs for the future so you need to very carefully assess which Licensing Model is most favourable, not just now but aligned with your future solutions Architecture and Roadmap, which will include Third Party Applications. You will need to forensically analyse and compare both “Use Cases” from both a contractual and operational view point and carefully assess the risk and impact of such a change. This is of course an onerous task, but based on our extensive experience is essential. Do you have the knowledge, skills, resources and time to do this? We have studied the program and the licencing impact. This is another set of complex alternatives to licensing more users to cover Indirect Use. It is hard to understand, assess, implement and measure. Will this be better for your business? Would you know how to assess the risks and financial impact for now or more importantly the future? N.B. You need to start working on this now to take advantage of the offer ready for May 2020. The SAP customer choice? So, if you have an unresolved Indirect Access Licence Compliance situation you now have to make a choice between:
Whether to remain on their current contract clause and to license “Indirect Use” as Named Users (if you haven’t already done this).
Change to the new Digital Access Licence Model and all that it brings!
Do nothing and expose your company to risk.
Time to act The decision whether to stay with Indirect Access or transition to Digital Access via DAAP is individual to every organisation. If you do not want to be exposed to risk, the decision cannot be delayed. Azurious has helped many global organisations with this and other licencing and governance issues. We will be happy to come and talk you through the easiest and most direct way that you can mitigate your organisation’s exposure to risk. This is the first of many blogs by Azurious which will open your eyes to how you can mitigate risk through SAP Licence, Compliance and Governance.