You’re Spending Too Much On Your SAP Licenses. Here’s Why!

There is no denying that SAP applications make it easy for large organizations in almost every industry to streamline their business processes. However, that ease doesn’t include SAP software license management, which by all accounts, is considered one of the most complex compared to other ERP vendors. This complexity results in companies buying more licenses than they need or inefficient management of their existing SAP license types, which significantly impacts the overall costs. Here’s why you end up spending more than you should on your SAP licenses (and a tool that can help you save some money).

Vague SAP License Descriptions

SAP license descriptions are not airtight, and it is mainly left to you, the customer, to decide the type and number of licenses you need. SAP licenses can be broadly categorized into three types.

• Professional License: A named user with a Professional License can perform operational tasks and has administrative privileges that allow them to make changes to the system – usually assigned to employees who are heavy users.
• Limited Professional License: This license is ideal for employees who need to perform operational roles supported by the SAP software. It is a step down from the Professional License and is also cheaper.
• Employee License: With this license, users can perform tasks solely for their own use and not on behalf of anyone else. This license costs the least.

An SAP license is always associated with a user who is called a named user. The ‘name’ in this context is not an actual user name but a unique ID linked to a license. There can only be one license associated with a named user at any given time. However, a named user can have multiple user names to access different SAP systems.

This makes it increasingly complicated to assign the appropriate license type. For example, a single user could be using an ERP system for updating inventory, a second ERP system for monthly invoice approvals, and a third one for downloading reports. Which license would be applicable in such a case? Now imagine figuring out license types for thousands of employees accessing multiple systems.

Improper User Classification

User classification is a crucial exercise for SAP software license management that directly impacts your license cost and the recurring annual support fee. Most SAP customers classify their users with one of three parameters:

• Amount of Activity: The amount of activity performed by the user can be one way to classify the user. SAP measures activity by ‘Dialogue Steps,’ which is the number of screens and keystrokes used.
• Number of Different Activities: Users can also be classified based on the number of activities or the different applications they access on a regular basis.
• Type of Activity or Activity Group: The type of activity can be used as a yardstick for license purchases. Under this classification, users are grouped together based on the type of usage. This requires customers to assess the type of activities a user needs to perform and create groups.

Though this classification process appears straightforward, several gray areas occur when put into practice. For example, when classifying users by their amount of activity, a user could be using the corporate phone directory in the SAP system 1,000 times, but that does not mean he needs a Professional License. Or let’s say an employee is accessing multiple systems but only to generate reports. Under the second classification, this user would be eligible for a Limited Professional license, whereas an Employee License would most likely suffice since the user is only viewing and downloading data.

Classifying users as mentioned above makes logical sense, but large organizations need to invest a significant amount of time and resources for using these methods. Also, employee roles keep shifting, and usage may vary significantly over a given period. This makes classification difficult and impossible to maintain manually without errors.

That’s why SAP customers rely on automated tools like Pathlock License Management to identify users based on their activities and distribute SAP licenses types accordingly. SAP software license management and auditing tools also help achieve compliance and manage SAP usage.  

Knowledge Equals Savings

SAP licenses are a huge investment for any organization. Gaining a better understanding of your overall license status, usage, and spend not only helps you manage your current licenses but also allows you to negotiate a better deal. With SAP announcing the end of support for classic SAP applications like SAP ERP, SCM, SRM, CRM, and Business Suite by 2027, all customers will eventually have to migrate to SAP S/4HANA. By auditing your current SAP usage and forecasting future license requirements, you can ensure significant savings for your company as you go through with the migration.

Pathlock License Management provides control over your SAP licensing by combining user inspection, user behavior-analysis methods, and best practices. The solution enables you to effectively utilize your licenses by offering a clear view of licensing possibilities for optimized models and savings of 50%-90% per classified license.

To learn more about SAP software license management, read our complete guide 5 Simple Ways to Reduce Your SAP License Spending.

Or contact us today for a demonstration.