License terms explained - SAP
Rick de Laat
Systemanalyse Programmentwicklung (SAP) is a global leader in the field of business applications and enterprise AI. SAP’s software brings together different disciplines of an organization into a digital platform and replaces outdated legacy systems.
Products
SAP offers many different software products for large and small organizations. For most of these products, a license is required to use them. Depending on the product, the licensing terms may vary. The most popular SAP products are:
- SAP S/4HANA: an ERP solution for large organizations to process and analyze large amounts of data in real time using AI and machine learning.
- SAP Business One: an ERP solution for small and medium-sized organizations for (financial) administration, procurement, inventory management, sales, customer relationships, reporting, and analytics.
- SAP SuccessFactors: a cloud-based system for human capital management (HCM) that helps organizations manage personnel.
- SAP Ariba: a cloud-based procurement platform that helps organizations manage spending and suppliers.
- SAP Fieldglass: a cloud-based vendor management system for finding, engaging, and managing external workers.
- SAP Customer Experience (SAP CX): a cloud-based suite for marketing, sales, and service solutions to collect data throughout the customer journey.
License Basics
SAP Licensing Models
SAP has several licensing models, the most common being:
SAP has several licensing models, the most common being:
- Perpetual licenses: organizations pay once for a software license and an annual amount for support and maintenance (approximately 20% of the license cost depending on the type of support). This model is common for on-premise implementations such as SAP S/4HANA and SAP Business One.
- Subscription licenses: organizations pay annually or monthly for the software, support and maintenance, and sometimes also infrastructure. This model is common for SAP cloud solutions such as SAP SuccessFactors.
- Unlimited licenses: organizations may use SAP functionalities without limitation within defined parameters. This model is common for large organizations with many users and is often offered as an ELA.
- Single Metric licenses: the amount organizations pay is based on a single license metric, such as the number of users, transactions, or processed data.
- Consumption-based licenses: a pay-as-you-go model in which costs are based on actual software usage. This model is common for cloud solutions and organizations with fluctuating workloads or needs.
License Metrics
SAP licenses generally have two types of license metrics:
Named User licenses are required for everyone who has access to SAP systems. SAP offers various Named User licenses for different roles within organizations:
Package Licenses
Package licenses provide access to specific functionalities. These licenses are modular, allowing organizations to combine them based on their needs. Common package licenses include:
- Named User licenses: licenses are assigned to a specific user based on the role and access level required.
- Package (Engine) licenses: based on specific software functions or modules, such as SAP Payroll or BusinessObjects, and measured by transaction volume, data processing, number of users, or other usage metrics.
Named User licenses are required for everyone who has access to SAP systems. SAP offers various Named User licenses for different roles within organizations:
- Developer: provides access to development tools for customizing SAP applications.
- Professional: provides access to manage, administer, and operate SAP systems.
- Limited Professional: provides limited operational access to predefined functionalities approved by SAP.
- Employee: provides access to reports and data relevant to the user’s role.
- Employee Self-Service (ESS): allows employees to perform self-service tasks such as time registration and leave requests.
- Worker User: for users involved in production processes, such as submitting purchase orders or entering production data.
- Logistics User: provides access to manage transportation and storage activities.
- Management Self-Service (MSS): allows managers to monitor HR processes and create requests.
- Read-only: provides read-only access to SAP data.
- Service User: enables system-to-system communication between SAP and third-party applications.
Package Licenses
Package licenses provide access to specific functionalities. These licenses are modular, allowing organizations to combine them based on their needs. Common package licenses include:
- Financial Accounting: for financial management and reporting.
- Sales & Distribution: for order management, invoicing, and tracking customer relationships.
- Manufacturing & Supply Chain: for inventory management, production planning, and logistics.
- Spend Management: for procurement, supplier collaboration, and cost management.
Other Cost Components
In addition to Named User licenses and Package licenses, organizations must consider additional cost components that may influence total licensing costs. These are generally costs resulting from the use of extra functionalities and integrations with other systems. The most common cost components are:
- Engine usage: refers to the use of specific “engines” or modules not included in the standard base license. Usage is often charged based on the number of users or systems that have access to it.
- Indirect Access: Indirect Access means that third-party applications or custom integrations retrieve or enter data into an SAP system. This applies to any usage that does not occur directly through an SAP user interface. For example, if an external reporting tool retrieves financial data from SAP, an Indirect Access license may be required.
- Digital Access: Digital Access refers to the indirect use of SAP’s digital core via external systems. Costs are calculated based on the number of documents created in SAP by these external systems.
Implementation
When selecting the implementation method, an important decision is whether you want to manage hardware and software yourself or outsource it to a third party. SAP offers several options:
- On-premise: SAP software is installed and used on the organization’s own servers. This provides full control but requires IT resources and investments.
- Hosted Private Cloud: SAP runs on a private cloud managed by an external provider, offering benefits in security, flexibility, and required IT resources.
- Public Cloud: SAP runs in a shared cloud environment managed by SAP or a hyperscaler. This is often the most cost-effective and scalable option but provides less control.
- Own Private Cloud: SAP is implemented in the organization’s own private cloud. This offers flexibility with full control over infrastructure and management.
- Hyperscaler (AWS, Azure, Google Cloud): SAP is deployed on a public cloud infrastructure from a hyperscaler. The organization or an MSP oversees the activities.
- Control and Security: on-premise or private cloud can be a good option for organizations that must meet strict security requirements. Other organizations may benefit more from the flexibility of the public cloud.
- Budget: on-premise requires high initial investments, while cloud solutions operate on a subscription basis.
- IT Expertise: on-premise requires internal IT management and expertise, whereas cloud solutions outsource (part of) the maintenance to a provider.
- Customization: SAP solutions in a private cloud or on-premise environment, unlike those in the public cloud, offer extensive customization capabilities.
- Licenses and Contracts: organizations must choose between perpetual (CAPEX) and subscription (OPEX) licenses, and decide whether to consolidate services under SAP or manage components separately.
- Service Levels: organizations can choose between SAP’s standard service levels or a customized SLA.
Implementation
SAP S/4HANA
SAP S/4HANA is SAP’s latest ERP offering, designed to help organizations migrate from older SAP systems. It is an intelligent ERP solution that uses in-memory technology and cloud computing to process large datasets in real time using AI and machine learning.
The transition from older SAP ERP systems to SAP S/4HANA affects licensing. SAP encourages the transition from perpetual licenses to subscriptions for S/4HANA. When migrating to S/4HANA, organizations must also decide whether to convert their existing SAP system (retaining current licenses) or reimplement the system (new license agreements).
RISE with SAP
RISE with SAP is a “Business Transformation as a Service” ERP offering in the cloud, bundling software, hosting, and support into a subscription model. Organizations can choose the SaaS version of SAP S/4HANA Cloud or the flexibility of SAP S/4HANA Cloud, private edition. Hosting of the ERP runs via a hyperscaler of choice.
SAP S/4HANA is SAP’s latest ERP offering, designed to help organizations migrate from older SAP systems. It is an intelligent ERP solution that uses in-memory technology and cloud computing to process large datasets in real time using AI and machine learning.
The transition from older SAP ERP systems to SAP S/4HANA affects licensing. SAP encourages the transition from perpetual licenses to subscriptions for S/4HANA. When migrating to S/4HANA, organizations must also decide whether to convert their existing SAP system (retaining current licenses) or reimplement the system (new license agreements).
RISE with SAP
RISE with SAP is a “Business Transformation as a Service” ERP offering in the cloud, bundling software, hosting, and support into a subscription model. Organizations can choose the SaaS version of SAP S/4HANA Cloud or the flexibility of SAP S/4HANA Cloud, private edition. Hosting of the ERP runs via a hyperscaler of choice.
Would you like to learn more about the licensing terms of other software vendors as well? Read more via the links below!