SAP is inviting customers to pay for its software per record created when they access it indirectly through third-party apps and services, and not per named user as it does today.
The software vendor is also promising to build a wall between its sales and license auditing departments, so that customers don’t feel threatened during commercial negotiations.
The new deal could end licensing uncertainty for companies like Diageo, which is embroiled in a £55 million (US$78 million) lawsuit with SAP because it allowed staff and customers to indirectly access data held in an SAP system through a Salesforce.com interface.
Diageo maintained that its existing SAP license covered such indirect access, while a U.K. court has sided with SAP, which argued the license required a fee be paid for named users even if they only accessed the system indirectly.
Named-user licensing works well when the number of users is clearly limited -- to accounting department staff, for example.
Where it works less well is when the licensee doesn’t know in advance who will use the system, as might be the case for a web store or an IoT monitoring network, where pretty much anyone or anything could interact with the SAP system by placing an order or transmitting a sensor reading.
“Customers have started using our ERP system and the digital core in a very new way,” said SAP Chief Business Development Officer Hala Zeine.
“There was a bit of confusion about the pricing, the contract, and it became a point of frustration because the pricing and the contract was really built on the old way of using ERP: a human user logs into the system," Zeine said.
"In a digital transformation way you’re linking IoT systems and bots and other systems to the ERP system and asking it to do work for you."
SAP aims to resolve the confusion by offering to license indirect access based on the type and number of records created in the core SAP system. Specifically, the vendor will charge for the creation of nine types of record that it says create value for customers:
- sales document line item
- invoice document line item
- purchase document line item
- service and maintenance document
- manufacturing document
- quality management document
- time management document
- financial document line item
- material document line item
The last two will be charged at one-fifth the cost of the others because SAP considers they generate less value.
SAP already proposed some tweaks to its indirect licensing model in May 2017, allowing free read-only indirect access to data held in core ERP systems, but now it's going further.
“With this new model customers have a choice. They can remain as they are today with their existing contracts and pricing, but if they would like to modernize their pricing and move to a more predictable and transparent approach, then they we would recommend this new pricing. We will work with each customer individually.”
Document creation won’t be metered like your electricity bill: Customers will buy an annual bundle based on their estimate of how many thousands or millions of documents they expect to create indirectly.
SAP won’t say what bundles will be available, nor how much they will cost: The final price will depend on volume and customer discounts.
For now, customers will have to make some sophisticated calculations to estimate how many documents they create indirectly, although later this year SAP plans to release a tool that will report it automatically.
Gianmaria Perancin, chairman of the SAP User Group Executive Network, welcomed SAP’s move.
“They need to bring to the customers more transparency, more predictability, in order that the business cases of customers may evolve and new projects can be sustainable without any surprises.”
The indirect licensing model will allow new customers to make an informed decision about whether they can afford to connect their systems to an SAP core, but Rob van der Marck, managing director of the Dutch-speaking SAP Users Association (VNSG), is concerned about customers who started interfacing other systems to SAP decades ago using EDI.
“At that time, 20 or 30 years ago, nobody talked about indirect access. Customers had user licenses and they used EDI to get in sales orders,” said Van der Marck, who is also SUGEN’s licensing lead.
“In the new model, if you have 100,000 sales orders coming in from outside you have to pay for that, and in the past there was never a discussion about those scenarios. That is one example of our concern for existing customers who are well licensed,” he added.
UK & Ireland SAP User Group board member Philip Adams expressed frustration that the tools to help SAP users measure their current indirect-access usage were not yet available.
“It could be well into 2019 before we get that feedback from our members who have used the tools to measure their usage and understand whether the new model does what SAP intends,” said Adams, who is also a core leadership team member at SUGEN.
SAP is offering existing ERP customers three options regarding the new indirect-access licensing model: do nothing; exchange per-user for per-record licensing with a contract addendum, or (for customers licensing S/4HANA) convert to an entirely new contract with simplified licensing terms.
Whichever option they choose, SAP wants customers to see the prospect of a license audit as a threat in commercial negotiations.
It’s creating a clear separation of license audits and sales, with a single global audit team and new rules on who can nominate or hold back an audit. Its goal is a consistent application of policies across accounts, geographies and industries.
SAP’s VP Global License Auditing Services, Matthias Medert explained the change: “We felt it would be more straightforward, and it gives us a better chance to be really, really consistent around the globe. Our customers are very global and that’s why we think it’s beneficial if we also have a global team.”
SUGEN’s Perancin sees the separation as beneficial for users in other ways too.
“The separation of audit and sales will allow sales executives to be more involved in the growth of their customers,” he said, as it would prevent the counting post-audit license increases towards sales targets.