SAP announces new "transparent approach to indirect licensing"

The German software giant has announced its most comprehensive response to the indirect access issue with a new licensing approach


The German software giant has been grappling with the issue of 'indirect access' publicly since CEO Bill McDermott took to the stage at SAP Sapphire in Orlando nearly a year ago, announcing a new pricing approach and promising to engage with stakeholders to iron out the issue for customers.

Now, the vendor has announced a new "transparent approach to indirect licensing" which encompasses a new sales, audit and pricing model. (Article continues after video)


SAP has started out by giving its own, definitive definition of the two types of data access: "Direct/Human Access occurs when people log on to use the SAP Digital Core by way of an interface delivered with or as a part of the SAP software," the vendor clarified.

"Indirect/Digital Access occurs when devices, bots, automated systems, etc. directly access the Digital Core. It also occurs when humans, or any device or systems indirectly use the Digital Core via a non-SAP intermediary software, such as a non-SAP front-end, a custom-solution, or a third-party application," such as a SaaS solution like Salesforce.

Read next: SAP indirect access explained

The new pricing model itself has been described as "a first of its kind for the enterprise software industry" by SAP.

A SAP press statement reads: "Historically, for most use cases, customers primarily had the option to pay for the SAP ERP application based on the number of users. As more systems began to access SAP software systems, this created a challenge for customers, who asked for an alternative pricing approach."

The new model therefore combines both what the vendor calls "the digital core" - which is data stored in its in-memory S/4HANA system, either on premise or in the cloud - as well as the SAP ERP application.

Read next: What's the difference between SAP HANA, S/4HANA and HANA Cloud Platform

Adaire Fox-Martin, member of the executive board of SAP SE, global customer operations said in a statement: "SAP has been built on a legacy of trust, empathy and transparency with our customers. As the industry and customer requirements change, our legacy does not.

"Therefore, after thoroughly reviewing our processes and practices around Indirect Access – and based on extensive feedback from all stakeholders – we are rolling out a new and modern engagement model with our sales personnel that delivers industry-leading clarity.”

New pricing model

Existing customers can now choose to remain on the current model or move to a new document-based pricing model.

This document-based model is an evolution of what Hala Zeine, SVP and chief business development officer at SAP, announced at Sapphire last year. Read next: SAP responds to Diageo indirect licensing case with "modern pricing" approach

Here the company announced a new "outcome-based approach" instead of charging for individual users or other parties accessing SAP ERP via a third party system or interface for the two most common indirect access scenarios: order-to-cash and procure-to-pay. In addition it announced that indirect static read would be free of charge.

At the time Zeine admitted that these were simply first steps and that they "did not address every indirect access scenario, such as IoT devices, bots, or intelligent systems."

"This new model is designed to address every conceivable indirect access scenario for the digital age. It was designed to provide customers the business certainty and predictability on their license commitment," an accompanying blog post from Christian Klein and Hala Zeine says.

The new model centres on nine document types that "represent system records of the most valued business outcomes from the ERP system."

"Use of the ERP system through indirect digital access will be licensed based on the initial creation of these documents, and the document license value is based on the total number of documents created," the post continues.

SAP counts and charges for the creation of documents triggered via indirect digital access. Then "all other operations, post-creation, on the document are included in the onetime create action cost," and, most importantly, "all read, updates, and delete actions on the document via indirect access do not incur a charge."

This means "no more counting users or trying to define what constitutes a user via indirect access. It doesn't matter how many users are accessing the ERP system via a third-party application."

User group response

Rob van der Marck, licensing charter lead at SUGEN - the global SAP User Group Executive Network - said of the announcement: "This model promises to clarify the rules for licensing indirect usage and bring a new level of transparency and simplicity to SAP licensing.

"For customers looking to adopt new technology from SAP, predictability and transparency is key. Both the SUGEN team and SAP should be proud of the work they have done on the new model to hopefully deliver greater licensing transparency in the future."

Read next: SAP responds to Diageo indirect licensing case with “modern pricing” approach

SUGEN also responded to the announcement with a fair degree of scepticism. "Customers who believed they were compliant have rightly been concerned after the high-profile legal action SAP took against Diageo and InBev," said SUGEN chairman Gianmaria Perancin.

"SAP is moving in the right direction to make it easier to do business with it. However, expecting customers to talk to and trust account managers in an environment where SAP has admitted to having lost customer trust is asking a lot.

"If SAP publicly provided reassurances that customers won't be asked to pay more for use cases and implementations that were undertaken in good faith, this would go a long way to encourage customers to engage with SAP proactively."

Philip Adams, SUGEN core leadership team member added: "Without these reassurances customers will find themselves in a state of paralysis, unable to move forward as they do not yet know what the new licensing model will mean for them.

"Over the coming months we will be surveying customer organisations to see if their licensing positions are clearer, and what this means for their future plans and investments with SAP."

Internal reorganisation

SAP is also reorganising its business to separate its license sales departments from auditing departments.

"Customers and SAP have sometimes struggled to reconcile older commercial agreements with the requirements and outputs of modern digital activity levels," the vendor admitted in a statement. "Combined with ongoing discussions regarding the procurement of new software, this can sometimes cause frustration."

Now those two conversations can occur separately for customers. This means that sales teams will no longer be able to approve or cancel licensing audits, which has historically given them leverage in negotiations.

Read next: SAP launches Licensing Transparency Centre

SAP also plans to introduce features "that will enable customers to measure their own usage and licence consumption in a self-service manner."

SAP will begin rolling out this new licensing, sales and audit policies this month and the vendor is opening up 'conversion offerings' to "help customers who choose to move from current pricing to the new model."

Advice for existing customers from Sonya Swann, head of global pricing, corporate business development at SAP, is: "To reach out to their account executives who will be able to advise on the best way going forward in a specific situation. There are no charges for this."

Expect to hear more on this topic when Computerworld UK attends SAP Sapphire again in June.

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