July 20, 2017 | Karen Blazek | Director, Product Marketing
As an SAP customer, you have probably heard about the recent implications of SAP’s indirect access audits. Indirect access has been around for a long time, although in recent years it has emerged as a hot topic in the SAP licensing world. SAP recently won a $70 million lawsuit against beverage company, Diageo and is now going after Anheuser-Busch for a claim estimated close to $600 million.
What Is Indirect Access?
Indirect access refers to a situation in which SAP software is viewed, manipulated or used by a third-party application or custom interface. SAP customers integrating third-party offerings into SAP software may face indirect access license charges from SAP, and risk paying license fees to SAP as well as the third party. Indirect access exposure is likely to increase and become more difficult to resolve due to the rapid growth of IoT offerings, partner ecosystems, digital business platforms, and analytics solutions, which all contribute to increased system connectivity. Indirect access license audits can vary by SAP application, but based on research they seem to target CRM applications the heaviest, like Salesforce.
Definition of Indirect Access Usage
- Order to Cash: In an order-to-cash scenario different classes of individuals (e.g., employees of licensee, employees of business partners of the licensee and/or consumers), devices, automated systems, etc. use SAP software to participate in the licensee’s order-to-cash process. Orders are defined as the number of sales and service orders processed by the system annually; a metric that is more transparent and predictable compared to Named Users.
- Procure to Pay: In a procure-to-pay scenario, different classes of individuals (e.g., employees of licensee and/or employees of business partners of the licensee), devices, automated systems, etc. use SAP software to participate in the licensees procure-to-pay process. Orders in a procure-to-pay scenario means the number of purchase orders processed by the system annually; a metric that is more transparent and predictable compared to “Named Users.”
- Indirect Static Read: Indirect static read is a scenario in which information has been exported from an SAP system (other than SAP Analytics Packages) to a non-SAP system pursuant to a predefined query. Even adjusting a query is now considered indirect access by SAP’s definition.
Customers will only be charged when non-SAP applications are connected to SAP applications, but not charging indirect access fees for SAP to SAP connections.
As an SAP customer, you still won’t have standards as to the value attributable to the cost of these new licenses are or how customers will be measured. SAP has no plans to publish concrete pricing for indirect access audits, and you can expect to be charged on a case-to-case basis. SAP’s recently published white paper on Indirect Access seems to be causing ever more confusion and displeasure.
Indirect Access Audit Triggers
Most of SAP’s customers don’t hear about the risks of indirect access during the sales cycle, and are exposed only when their first audit is triggered. Before recent court decisions, our opinion was that customers own their data while SAP owns all intellectual property, e.g., data models, data structures, configuration data, and metadata for all the business applications. Now even your data seems to be in muddy waters.
Circumstances that could trigger an indirect access audit include:
- Annual SAP License Administration Workbench (LAW) Reporting: Every SAP customer is required to complete a LAW report annually. When indicators in the LAW report, such as working time, volume of work and cross component usage, suggest to SAP that indirect access may exist, this often prompts further investigation.
- Lack of New License Demand: Customers that have not purchased new licenses or SaaS subscriptions for a period of time or have not shown interest in transitioning to SAP HANA or S/4HANA may pique SAP’s interest.
- Competitive Sales Cycles: If SAP is not guaranteed to win business or a customer selects a competitive offering, SAP will try to persuade customers, due to license fees associated with interfaces to SAP, that it is more cost effective to pay SAP directly.
- Signing a New SAP Order Form: Historically, SAP customers buying new software would add a new exhibit to the originally negotiated master contract. However, SAP customers now are being asked to sign order forms, rather than exhibits, and these order forms require compliance with the standard general terms and conditions (GTC) and SUR on SAP’s website. These contracts reference use rights and indirect use. SAP’s new online terms are contractually agreed only for products on each specific order form. Signing a new order form can give SAP the opportunity to evaluate your “named” versus “use” licenses. Gartner recommends including terms on your new order1 stating that these new definitions only apply to products purchased on this specific order form.
Review Your Contract’s SAP Indirect Access Terms
Make sure you proactively review your contract clauses related to indirect usage in your actual SAP contract instead of referring to your SAP System Measurement Guide. Every year SAP customers are required to submit a License Administration Workbench (LAW) report to count the number of licenses deployed compared to those purchased. The systems measurement guide has no contractual standing and may not align with your actual signed contract. SAP is driving customers to renegotiate contract terms to add updated verbiage that accounts for indirect access terms.
The Impact on New SAP Product Licensing
These license and usage uncertainties aren’t helping SAP’s push to S/4HANA in the cloud or IoT initiatives with Leonardo. SAP is using new product licenses as a bargaining tool versus paying excessive audit fees. However, as in the S/4HANA scenario, the implementation costs of the newly exchanged software are significant, probably resulting in the product’s shelving for future use, delivering no short-term value.
Unless there is a strong business case and a need for the new licenses, SAP customers will pay incremental license fees for this additional software, concede perpetual license rights for assets previously acquired, and will not reduce their overall SAP spend. Customers aren’t moving and don’t feel like they can because of uncertain license fees that would be associated with buying new products and technologies.
SAP’s Response to Customer Uncertainty
As a reaction to customer uncertainty and dissatisfaction, during this year’s Sapphire’s Keynote, SAP’s CEO Bill Dermott tried to demonstrate “empathy” to customers and assure them he is listening to concerns. He outlined some definition around audit practices; a promise of new pricing models for procure-to-pay, and order-to cash access for SAP applications. SAP’s updated definition of Indirect Access. “The use which occurs by way of non-SAP frontend or non-SAP intermediary software.”
However, SAP will not disclose the value attributable to the cost of these new licenses, or how customers will be measured. SAP has no plans to publish concrete documentation for indirect access audits, and customers can expect to be charged on a case-by-case basis.
Third-Party Software Support Alternatives for SAP Customers
Is the high cost of support limiting your innovation? Per Gartner, only 20% of a company’s IT operating budget is available for new IT initiatives. Spinnaker Support engages independent partners to help SAP users navigate through these barriers. SAP is increasingly using audits and indirect access as tactics to optimize revenue and retain support customers. They have also modified their standard licensing agreements, which can complicate the cancellation process.
Spinnaker Support is a third-party software support provider of cost-effective, personalized support and maintenance that can provide an average savings of 62% on your annual SAP maintenance spend. Moving your SAP support to a third-party support provider like Spinnaker Support will allow you to redeploy those funds or apply them to your bottom line. Spinnaker Support has built-in separate technology guidance and advisory services that we include within the scope of our standard software support and managed services offerings to minimize these risks imposed on customers by SAP.
Contact us for guidance with your SAP ERP and find out about the benefits of third-party software support!
- Gartner “SAP Indirect Access License Fees Can Be Significant and Unexpected”, 31 July 2017, Roberto Sacco, Alexa Bona, Derek Prior, and Lori Samolsky