Much of the digital business innovation taking place today involves reaching beyond the transactional systems at the core of a business to create new user experiences. Unfortunately, some SAP customers have discovered that creating a new user experience front end to an SAP back end can land them in hot water, if SAP decides that constitutes "indirect access" usage requiring additional licenses.
In April, SAP introduced a new pricing model for access via integrations or Internet of Things devices that clears up some of the confusion — but still leaves SAP customers with decisions to make about whether to renegotiate their contracts to incorporate those new terms.
You can watch this on-demand webinar that Rimini Street hosted to discuss all of this in cooperation with VOQUZ IT Services. VOQUZ is a solution provider that offers tools and services for optimizing your SAP license usage.
Among the best things we can report about the latest news from SAP is that they are pledging not to charge back maintenance for customers who negotiate in good faith to come into compliance with its indirect access licensing requirements, whether or not they move to the new pricing model based on the volume of transactional "documents" rather than the number of users.
SAP has indicated that it introduced separation between its license sales and auditing processes, in response to concerns from customers who felt audits were used as a tool to compel the purchase of licenses or products. This looks like an attempt to mollify users who have complained that audits and indirect access have been used to sell additional products, for example favoring SAP's own Hybris over competing ecommerce software that integrates with SAP.
How all this will work in practice remains to be seen. What apparently remains true is that SAP expects to be paid for all access to its software, direct or indirect, making a clear understanding of these issues essential. When considering the new pricing model, customers will have to judge whether negotiating a new contract that incorporates those terms is worthwhile — and critically evaluate any other addendums SAP may tack on at the same time. SAP says customers have the option of sticking with the current pricing model, if they think it's more favorable.
One of the main points we hope to drive home in the webinar is that indirect access complexities can't be allowed to become an obstacle to innovation. Rather than running scared, it's better to be prepared. Create your own inventory of application interfaces and a defensible rationale for what you are and are not obligated to pay.
When indirect access rears its head, often the root cause is a collision between old contracts that have been renewed repeatedly since the early days of client-server computing and the new realities of digital business. "You get a clash of old language and new requirements," says Sebastian Schoofs, SAP Indirect Access and License Audit specialist at VOQUZ and our webinar guest. Companies whose relationship with SAP was based on purchasing named user licenses for SAP applications may get in trouble when trying to extend the system with mobile apps, self-service tools, or automated bots created by their own coders or by third party developers.
What the customer considers an enhancement, SAP has been treating as an attempt to cheat it out of the license revenue it would be entitled to if the same function was provided through an SAP user interface. Customers tend to feel more like they have stumbled over an invisible tripwire when indirect access issues arise. From their point of view, they extended their SAP system to be more useful and useable — and are being punished for it.
While every contract is a little different, "indirect access" is often poorly defined if it is defined at all. It is important to be aware of the pitfalls in negotiations and the consideration of a narrow definition. Typically, there is a statement that all access to SAP, "direct or indirect," must be licensed.
Ambiguity in contracts allows SAP to "set a high-water mark" for the most a customer could be expected to pay, under the most aggressive interpretation of usage metrics, and then "begin horse trading," Schoofs says. If you approach your interaction with SAP as a negotiation, you will have a better chance of making a favorable trade, he says. For example, you may be paying for licenses that are sitting unused or paying for a more expensive category of license than necessary for certain workers — in which case you ought to be able to bargain away licenses you don't need.
As a commercial software vendor, SAP has a legitimate interest in being compensated for the use of its products. You can't license it for use by 100 call center workers and provide it to 1,000 without paying for additional licenses. The question is how usage of the system should be priced if, for example, instead of providing an SAP desktop user interface to call center workers, you create a self-service application that allows end customers to complete the same tasks that previously required them to interact with the call center.
If the application accomplishes what used to require the labor of 100 workers, should the company still be liable for the equivalent of 100 licenses? Or, if the application is now accessed by 10,000 end user customers, should each of them be covered by a named user license? SAP won at least the first round of a court case against the British beverage company Diageo, partly on the grounds that users of a self-service app that bypassed call center workers ought to be covered by named user licenses — although the judge indicated those occasional users ought to be covered by a less expensive licenses than employees. Diageo had created this application, as well as an iPad app for salespeople that SAP also objected to, using tools from Salesforce.com. The applications connected to middleware and a database associated with SAP. SAP was seeking £54,503,578 in license fees, £3,955,954 in interest, and back support and maintenance fees. We don't yet know what number the court will settle on, and meanwhile Diageo is appealing. In another case, settled out of court for an undisclosed amount, SAP was seeking $600 million from AB-InBev (parent company of Anheuser Busch and other breweries) for sales productivity tools that connected to SAP, allegedly in an unlicensed fashion.
These cases have generated enough unfavorable press that SAP may not be eager to take more of its customers to court. The new pricing model will charge by transaction documents (such as orders and invoices), rather than by the number of users. This is potentially a much more practical solution for addressing a scenario like self-service ordering, and it makes more sense in those cases where bots or IoT devices are initiating the transactions. It also seems like a direct response to the judge's ruling in the Diageo case that SAP's existing pricing was out of proportion to the usage in an indirect access scenario.
Still, each SAP customer with an existing contract will have to judge whether the new pricing represents a real improvement, based on their own usage. SAP's latest announcements are new enough that we are still sorting out the implications.
Watch the on-demand webinar Five Ways to Avoid a Surprise Audit: SAP Indirect Access to learn more.
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Jeremy Sayler, Director, License Advisory Services
Mr. Sayler is an enterprise software industry veteran with nearly 20 years’ experience in support delivery, software license audits, account management and project management. He is responsible for empowering Rimini Street clients to more confidently manage their software license agreements by providing guidance on vendor contract terms, license metrics, audit processes and methodology for how license usage is calculated by software vendors. Prior to joining Rimini Street, Mr. Sayler spent 8 years at Oracle Corporation serving as a license auditor for Oracle License Management Services.