Seven Ways to Gain Control of SAP Licensing and Spending

By Jeff Greenwald, Director of Enterprise Product Management, Flexera Software
Published February 11, 2010


This white paper describes seven methods through which SAP® Basis and Procurement management teams can more efficiently manage the lifecycle of their SAP Business Suite licenses and make more informed software planning and purchasing decisions.

Enterprise-Class Software Falling Through the Cracks

Given today’s recession, companies are taking a harder look at their ongoing costs. IT executives are being challenged to innovate within current budget levels, without sacrificing service quality or jeopardizing productivity.

But while there are established processes to manage just about every other IT asset, software, which represents 20% of an IT organization’s spending1, is often managed in a manual and fragmented way. Knowing what an organization is entitled to use compared with what it is actually using (which on the face of it should be simple enough) is made complex by a combination of historical procurements, changing organizational structures, complex and vague licensing types and various pricing tiers, and disconnects between procurement, legal, finance, and IT.

Some companies think they have these problems solved because they have a IT asset management system (ITAM). Although formal ITAM programs may be in place to manage the desktop in a relatively systemic way, datacenter applications, such as SAP and Oracle, cannot be managed with traditional ITAM inventory processes. Left to their own devices organization often times rely on spreadsheets and manual processes.

Left with a limited and unreliable view, teams are forced to make guesses about future license needs and risk spending precious budget dollars and time ineffectively, leaving little to drive new initiatives. To stay competitive in today’s challenging market, companies must adopt new methods for managing high-value, high-liability datacenter applications, including the SAP business platform.

More than 76,000 companies depend on SAP Business Suite applications, such as ERP and CRM, to support their core business processes throughout their organization. It represents one of their most significant software investments. Astute enterprises need a greater degree of control over SAP Business Suite application and recognize that implementing a process, best practices and technology that supports more informed allocation, planning, and purchasing decisions is critical to optimize their return on this investment.

The SAP Cost Lifecycle

According to leading analyst firms, successful companies do not look at their SAP investment as a series of separate projects; rather they view it like any other enterprise asset. By taking such a view, these organizations place their SAP expenditure alongside other long-term costs such as staff and facilities. But unlike these other long-term costs, the vast majority of costs (about 80%) are incurred by typical SAP investments after going live. In order to uncover savings opportunities, it is critical that organizations examine these costs more closely.

After going live, the majority of SAP costs can be separated into four categories:

  1. Support costs: ongoing support-related costs for both end users and systems
  2. New license costs: new enhancements, new projects and new business process capabilities to differentiate the business
  3. Upgrade costs: projects that typically come along every three to five years as organizations seek to overhaul their SAP systems with a major revamp
  4. Depreciation: a decrease in value over time

Ongoing support and maintenance costs generate the majority of unexpected costs, despite this being the area where IT departments are expected to achieve the most savings.

Managing Ongoing Support Costs

In order to initially determine the appropriate support fee, SAP customers first forecast future usage levels for their SAP license agreement. Each year thereafter, most are required to run a license measurement process, whereby an administrator measures user activity from every individual satellite system, and sends the results back to SAP to determine if additional licenses are necessary.

This is a time-consuming process for an organization with multiple satellite systems. From a financial perspective, if this process is only conducted prior to a license measurement, an organization may be surprised to find that more users have access to the system than was estimated and additional licenses must be purchased. This can be viewed as an “accidental” investment, because this expense is not budgeted for or subject to the same scrutiny as other IT purchases.

In addition, although this process answers the question, “Who has access to SAP?” it does not answer, “Who actually used it and to what extent?” SAP’s preferred method of application pricing outlines multiple user categories (developer, professional, limited professional, employee, portal and indirect users), so it can be extremely arduous to analyze each individual license with regard to the amount of time used, the kind of component or module used, and the various authorization roles. But to ensure accurate and appropriate licensing, this level of independent analysis is necessary.

Seven Ways to Gain Control of SAP Licensing

In order to achieve a more efficient approach to SAP license lifecycle management and subsequently gain greater control over SAP licensing , organizations should incorporate the following seven methods into their current process.

1. Automate and Centralize Usage Data Collection

A large majority of organizations have complex SAP architectures, with satellite offices using their own SAP systems. As a result, when preparing for an SAP license measurement, an administrator must evaluate installations from each individual satellite system and stitch multiple reports together using several spreadsheets before submitting this information to SAP.

In addition, the SAP system maintains very detailed logs of all user access statistics. Unfortunately, these statistics are so detailed, teams are left with a mass of data but a shortage of actionable information.

Organizations could save significant time and effort by implementing the technology and processes necessary to automatically interrogate each satellite system, centrally collect usage information, and prioritize it to enable efficient analysis and informed decisions. This provides the foundation for the compliance validation and optimization methods to be discussed in more detail in this paper.

2. Automate License Compliance Validation

Collecting usage data for central analysis is just the first step in ensuring SAP license compliance. License management teams must then compare that data with the SAP contract terms and determine if the software is being used in ways compliant with the agreement. But as organizations grow and change, so does the complexity of their license agreements, especially following mergers, acquisitions, or divestitures. Manual, fragmented, and resource intensive approaches to this task are soon found to be inadequate.

Third-party license management solutions enable organizations to automatically monitor software use as it relates to contractual entitlements. In addition to periodically checking the solution’s compliance dashboard, truly diligent organizations can also set up alerts to automatically inform them as limit thresholds draw near.

3. Determine Future Procurement Requirements Based on Usage Trends

When determining future software needs, many organizations base decisions on a state that exists at a single point in time, not taking into account the peaks and valleys of past usage cycles. But in order to accurately forecast future SAP needs and proactively address compliance by planning for proper coverage, insight into usage trends is essential. For example, if looking to add a new business area, the usage patterns of other similar units support a more intelligent procurement decision.

Although the SAP system maintains a very detailed log of all user access statistics, the data is regularly reorganized and historical information is purged. If a sub-set of these statistics are stored in a separate table, usage may more easily be monitored and historic data be kept as long as required.

4. Identify and Reuse Underutilized Licenses

Too often, underutilized licenses are present. By analyzing user behavior, organizations can identify users with little or no CPU consumption over a given period of time and address them appropriately.

Unfortunately, the tools within the SAP system do not provide an easy way to identify idle users and consolidate them. It can take many time-consuming and manual steps to analyze and compare user behavior for each user name and then make changes resulting from the analysis to each satellite system. In fact, many SAP Basis Teams feel that there is just too much data to justify the investment in time and effort. But in order to ensure accurate measurements and cost-effective procurement, organizations would greatly benefit from identifying and reusing idle licenses.

5. Identify and Reuse Duplicate Licenses

Likewise, some organizations do not have standard processes in place to assign a uniform set of SAP user IDs. This can result in several licenses being assigned to one person, because they are represented within the system in multiple ways. For example, Jack Dawson may be assigned two user names in the system, such as JDAWSON and JACK_DAWSON. By performing the appropriate analysis, businesses may identify duplicate user ID assignments, consolidate them and then consider whether any unused licenses could be reallocated to new users prior to making new purchases.

1 Gartner, IT Spending and Staffing Report, 2008