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Avoiding SAP indirect access woes requires good faith

Some customers are concerned that SAP will hit them for indirect access licensing fees, but they can avoid trouble if they act in good faith and better understand their contracts.

Indirect access licensing and a lawsuit against a U.K. company for SAP indirect access fees have left many users wondering if they're next on SAP's radar.

Experts agree that SAP's guidelines have not provided enough clarity on what indirect access is and what it isn't, which confuses users even further. However, before customers hit the panic button, experts note that SAP is likely to pursue court cases against only a very small number of its customers and that acting in good faith can go a long way toward avoiding problems.

Customers should be reassured that SAP has been fairly selective in targeting indirect access use cases, according to Vinnie Mirchandani, founder of Deal Architect. Those customers that use cloud software outside of SAP and those in regions or industries that aren't making revenue goals may be at risk, but only 2% to 3% of customers really need to worry -- and those are the ones that may not be acting in good faith, he said.

In other words, you might run into problems only if you're trying to skirt the indirect licensing fees.

Examine your indirect static read access

However, SAP hasn't provided much clarity on indirect static read access and what constitutes usage that requires a license, which is likely due to the complexity of the topic, according to Mirchandani.

"There are so many different products that they haven't been able to rationalize definitions yet," he said.

However, SAP's lawsuits against Diageo and Anheuser-Busch InBev have put the software company in a tight spot, Mirchandani said. SAP CEO Bill McDermott addressed indirect access at the Sapphire Now conference in 2017, and SAP published a white paper in July that attempted to explain SAP indirect access licensing concerns. But otherwise, the company has not provided much guidance on the issue. Technically, if your surrounding applications are accessing data in an SAP table, SAP can claim those surrounding application users need licenses, he said. But that can become a negotiation topic, depending on the frequency of access.

Know your SAP contracts

Aside from making sure you're not actively trying to cheat SAP out of indirect licensing fees, experts advise making sure your contract with SAP is understandable.

"You never want to have a contract that's so complicated a reasonably intelligent person scratches their head when they look at it," said Joshua Greenbaum, principal at Enterprise Applications Consulting.

Indirect access is new territory for most companies, including contract lawyers, who need to be as well-educated as the attorneys writing and negotiating SAP's contracts -- or anyone else, he noted.

Companies need to rethink how they enter into licensing agreements and who they're using to ensure their best interests are represented, according to Greenbaum.

"This is where a lot of companies get tripped up," he said. Some companies will use a third party to negotiate their software contracts because their in-house counsel doesn't have the deep expertise required.

Consider a spending freeze -- or at least announcing one

SAP does want its customers to move forward with new technology, and being required to pay extra at the end of a licensing audit may cause customers to balk, according to Greenbaum. Some vendors, including SAP's competitors, may use a hefty charge after the usage audit to coerce customers into migrating to the cloud or purchasing other products, he noted.

At a recent Americas' SAP Users' Group event Greenbaum attended, several CIOs loudly announced that they were freezing spending on SAP products until they got to the bottom of their contracts.

"That statement to someone like me in a relatively open forum does send a huge signal, and SAP is actively working on this," he said.

Only migrate to S/4HANA as a last resort

It may be vendors' endgame to get their customer base on the cloud or the latest technology, but that should be the very last option considered, according to Mirchandani, as the migration costs may outweigh the benefits of moving to S/4HANA, for example.

Additionally, SAP has purchased companies in the last five or six years -- SuccessFactors, Ariba and Hybris -- but has not added much new functionality to ERP Central Component (ECC) or the industry-specific packages, Mirchandani noted.

"People are either customizing or buying point solutions from other players," he said, adding that a CIO contact at a utility company has tried to purchase SAP solutions to augment ECC, but SAP didn't offer it.

Be prepared for more complexity

As more cloud-based software comes into play and more integration options become available, the SAP indirect access issue will just get more complex, Greenbaum said.

"Companies who have made investments in cloud properties are … living in the hybrid world," he said. "You have to start integrating and leveraging all the data you can find, and this issue of indirect usage is just going to continue to haunt us because it's only going to get bigger."

For now, knowing your SAP environment and contract terms can help you stay on the right side of SAP indirect access agreements. Acting in good faith and asking for more clarity can help, particularly as these issues continue to be hammered out between customers and SAP.

This was last published in February 2018

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How will your company approach the SAP indirect licensing issue?
As we got involved with SAP audits, mainly helping customers to understand why the vendor is claiming indirect use, we found that SAP's licensing rules are poorly laid out and over-complex. Without awareness for vendor control, 'good faith' is easily turned into 'good cash' for SAP without clear reason.
We have recently published an Audit Guideline enabling user organizations to establish robust principles for licensing audits, for any software vendor. In some cases, we were able to reduce audit claims to almost nil, as the reasoning for indirect use fell apart.
Peter Wesche, Doctor-License