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SAP licenses: how companies are reducing their costs

Learn how companies can take better control of license management and reduce licensing costs as part of their SAP S/4HANA transformation

25. July 2022Helge Vater

Sustainable license management

Which trends are of particular importance to SAP customers today? Our expert blog features a series of articles that provide answers to these questions. This article outlines the current challenges presented by license management and explains how companies can manage their SAP licenses more efficiently. This way, you can avoid underlicensing or overlicensing and the associated legal consequences, as well as reduce licensing costs in the long term.

Simple, standard tools are no longer enough

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SAP license management has become increasingly complex in recent years. In the past, role- and rights-based licensing models prevailed. This means that if a thousand employees are using the SAP system, the company also needs a thousand licenses. Now, the license matrix is made up of a wide range of parameters. There are several pricing tiers and a digital licensing model that bases fees on the number of transactions made. It is also still possible to license SAP systems on a per-user basis.

It is virtually impossible to handle the increasing complexity with standard tools. License managers who often worked with Excel in the past are now coming up against its limitations. Large companies in particular have to manage thousands of SAP users and use a variety of SAP components – some of them in the cloud and with varying licensing parameters. The solution: T-Systems' experts provide an impartial view of your licensing situation in connection with professional license management software.

SAP licenses fully under control

When running SAP, it is not only important to pay attention to the technical parameters, but also to ensure transparency when it comes to licenses. T-Systems uses Proof of Value (PoV) to ascertain whether a customer is able to optimize its SAP license management in order to save on license fees. In the process, up to five of the customer's SAP systems are initially examined to check for incorrect licensing. T-Systems experts then check the actual number of SAP users, identify any duplicates, and update authorizations and user roles: Does the employee still work for the company? How often and how intensively do they work with the SAP system? What kind of license is needed – is read-only access sufficient?

T-Systems automates all manual license management activities with the help of "Snow Optimizer for SAP Software" from its partner Snow. The tool's set of rules is adapted to the respective customer's needs. How much customers might be able to save by optimizing their licenses depends on their initial situation. Past projects have shown that, on average, savings of up to 40 percent are possible.

SAP audit as a chance for renegotiation

This approach creates several advantages for the license manager: automated processes simplify and accelerate license management. No longer will they have to worry about technical details; now they can view detailed reports and check whether all SAP systems are licensed correctly at a glance.

By identifying and helping to avoid excess licensing, T-Systems experts help the purchasing department to cut costs. This creates room for reallocating parts of the budget: rather than investing in unnecessary licenses, purchasers can now invest in the company's digital and S/4HANA transformation.

So, when is the right time to correct the licensing situation? Ideally, three to six months before the annual negotiations with SAP or with the auditor. An SAP S/4HANA transformation is also a good time to rethink the company's licensing strategy and reorganize licenses. After all, in the course of the transition, many customers will either sign a new contract with SAP or change their licensing model.

What is a digital licensing model?

When introducing SAP S/4HANA, the customer should not only consider the technical implementation – such as whether to use the brownfield or greenfield approach – but also consider their future licensing model. Do they want to continue with their user-based model or switch licenses and move to a digital licensing model?

The digital licensing model counts the transactions in the SAP system and calculates the license fee based on that. This makes it a usage-based model. It makes no difference whether a transaction is executed by an employee, a machine on the Internet of Things, or an interface. For instance, API-based transactions are used in the retail sector when end customers order a product via telemarketing, online shops, or newsletter links.

Which is more beneficial for the customer – a user-based or digital licensing model? Or a mix of both?

T-Systems calculates which setup is most favorable for the customer as part of the consulting process. The implications of the digital licensing model for their business model will be outlined. An important point: the switch to the digital licensing model should be carefully considered, as once a company has decided to do so, it cannot usually go back.

Why license optimization pays off

Companies that have optimized their SAP licenses can be confident when it comes to license audits by SAP and auditors. They are able to prove that they are properly licensed and adhere to all compliance requirements at all times. During negotiations with SAP, which usually take place as part of the license audits in the fourth quarter, they can be confident and impress with their knowledge about all the SAP licenses used in the company.

A high level of expertise is required to manage the increasingly complex SAP landscape. But, as is the case in many IT sectors, there is a shortage of skilled workers in the SAP market. Experienced SAP licensing experts are hard to find. Automated license management makes it possible for T-Systems' SAP customers to manage up to 30,000 licenses with just one license manager.

About the author

Helge Vater

Offering Manager for SAP Transformation and Technology, T-Systems International GmbH

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