SAP Licensing and Indirect Use: Is the DAAP Right for You?

SAP’s licensing policies regarding “Indirect Use” have long been a sticking point for customers, and with the cloud becoming mainstream, the pricing environment for SAP has become increasingly unclear. With Indirect Use, SAP functionality is accessed via non-SAP applications, and these transactions may be created without any human contact through workflows and other processes. This has led IT teams to ask themselves many questions including whether, “bots” are considered “users” that must be licensed, or are they just a workflow that doesn’t require separate licensing?

It’s important to have explicit knowledge of SAP’s requirements regarding what is and is not a user. Otherwise, it’s difficult to understand what your future bills will look like, or what your current state of compliance is. This mass confusion has forced SAP to reevaluate its licensing strategy, and provide an option that removes the Named User issues, and instead licenses “Indirect Use” by counting the number of “documents” that are created in SAP ERP (ECC or S/4 HANA). SAP has branded this licensing structure as “Digital Access”, and it was released in 2018.

In the future, SAP may move to a licensing strategy that always accounts for Indirect Use. But today, they’re trying to encourage users to adopt the Digital Access indirect pricing structure using the Digital Access Adoption Program (DAAP). If a customer volunteers to take up this program and begin using the Digital Access licensing structure until May 2020, they will receive a significant discount on their licensing plan. With that deadline fast approaching, it’s time for businesses to start making a decision.

However, don’t jump at this opportunity just yet – it’s important to take a measured approach to any alternative licensing structure, even if the discounts are tantalizing. Let’s look at some facts that will help your business make the right decision.

SAP has instated a process that organizations must undergo before they can take advantage of any discounts. First, SAP will obtain an estimate of your consumption, then you may pick a discount option that best suits your needs. Businesses have two choices for SAP-sanctioned measurements:

• Estimation of Document Count – With this option, customers can run an SAP Note in their SAP systems to obtain an indication of the number of documents being created. It is not necessarily a straightforward process and is prone to miscalculations without intimate knowledge of your SAP systems. SAP’s Global License Audit and Compliance (GLAC) team has offered to help organizations get a rough estimate of how many documents are being created by current use.
• SAP Passport Tool – Using a tool that’s cross-checked by SAP’s audit team, SAP will estimate how many documents you have in current use. Unfortunately, this is only available for users with their most recent Enterprise Resource Planning (ERP) Central Component (ECC) in place. This tool will count documents created since the start of installation and estimate how often your organization creates documents with SAP.

While SAP is by no means a fly-by-night company, organizations should be wary of the estimates provided by SAP. Having them count your documents and accepting their estimate without question creates a “fox guarding the henhouse” scenario. Those estimates may or may not tip in your favor – and this can affect your licensing outlook in the long term. For best results, companies should immediately reach out to an impartial third party and have them conduct an analysis that will allow you to definitively understand the alternatives and implications of adopting this model.

Once a company has a measurement that they are satisfied with, they can choose the discount option that is most appropriate for their business. This will potentially help offset fees in the short-term – but be aware that you will need to pay full price for additional future document requirements. There are essentially two methods that businesses can choose from:

• The 15% Growth Method – This discount requires that a customer licenses 115% of their current estimated document count, but they will only be charged for the additional 15%. This may suit organizations who have a growing non-SAP cloud environment, or an environment that will implement AI-enabled workflows in the near future. Keep in mind that if you scale back your document creation after accepting this method, you cannot reduce the 15% charge.
• The 90% Discount Method – This discount requires that a user licenses 100% of the documents that SAP estimated, but they will only pay 10% of that estimated expense for the duration of the contract. However, their estimated use cannot increase while they are enjoying this discount. This is good for status-quo organizations who won’t be migrating to a non-SAP cloud application or using AI-enabled processes for a few more years.

Of course, either method might still be a less attractive option than simply staying on your existing licensing model.

SAP has always had difficulty obtaining accurate measurements from customers’ non-SAP applications, so one answer to this question is that it certainly provides a more transparent model that customers will arguably find easier to understand. And let’s be frank, it also provides SAP with an easier way to monetize this sometimes contentious licensing rule.

However, the short answer is the cloud. SAP is noting that automation and Artificial Intelligence (AI) are becoming central to many businesses, and AI-run workflows created a strange limbo within their legacy licensing structure. Right now, SAP has no clear guidance on how to estimate costs for this technology.

With the Digital Access pricing structure, SAP will be able to account for these new workflows as well as any use of SAP coming from non-SAP applications - whether by human interaction or, as is increasingly the case, IoT, bots, AI etc.

This means that businesses need to evaluate their current software environment and SAP output before they even consider taking advantage of the Digital Access Adoption Program. Instead of choosing between the two options presented by SAP, consumers need to consider three options – with the last option being non-participation in the DAAP and Digital Access license model.

For some businesses, the DAAP is not an advantageous choice. While their costs may fall in the short term, they could end up paying more once their business moves into the digital world. So, before determining whether you should take advantage of the DAAP, you should assess your current software environment, your cloud and digitalization roadmaps, future demand, and the current output of your SAP deployment. This is a lot to ask in just a few weeks – and organizations may not be able to take this on without third-party assistance.

SAP’s Digital Access pricing structure will undoubtedly make licensing much more transparent in the future, making it easier for organizations to estimate their costs. However, it may not be immediately apparent which discount option is best for your business – or, if any option presented by the DAAP is preferable to the status quo. With the deadline approaching in May 2020, the window of time to make this choice is closing.

SAP experts at SoftwareONE can help you make this decision fast. We understand how crucial SAP is to your business, and can provide end-to-end services around licensing, cost optimization, and audit support – making us the perfect partners for your DAAP decision making.