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SAP indirect access issue needs clarity for users, experts say

The indirect licensing access issue is confusing to many SAP customers, and the company's efforts to explain it have not been fully successful, according to industry analysts.

The proliferation of third-party applications, APIs and cloud-based tools has brought about a new concern for SAP users: SAP indirect access.

While the company ruled out charging for third-party static read access at last year's Sapphire Now conference, the examples provided in a subsequent white paper proved to be somewhat confusing, according to experts. Even more, SAP's lawsuit against a U.K. company for indirect access fees seems to have created suspicion in the SAP community.

However, SAP isn't the only company conducting audits and charging for indirect access to ERP systems, as Oracle, Microsoft and IBM are all trying to monetize on-premises systems in a cloud-based world, according to Joshua Greenbaum, principal at Enterprise Applications Consulting.

"The big picture is that all the cloud vendors are scrambling for additional revenue," Greenbaum said.

Investors are demanding greater profitability, which can be difficult in a world that is shifting to SaaS purchased by usage rather than license. Nevertheless, the SAP indirect access licensing issue is raising customer hackles.

"Indirect licensing is part of a set of practices that are, frankly, kind of user-hostile and really intended to make the world better for vendors and nobody else," Greenbaum said.

Data ownership, system usage spur concerns, contract questions

The issue of who owns and controls data -- SAP or the licensee -- is one of the key questions surrounding the indirect access issue, and it needs to be answered, according to Greenbaum.

Indirect licensing is part of a set of practices that are, frankly, kind of user-hostile and really intended to make the world better for vendors and nobody else.
Joshua GreenbaumEnterprise Applications Consulting

"SAP is adding value to the data, but on the other hand, you're already paying SAP for the software," he said.

Another part of the equation is defining the "use" of an SAP system. According to SAP, indirect access use of SAP systems includes order-to-cash and procure-to-pay scenarios, both of which access SAP ERP data and change data in the system. Both these scenarios, plus the indirect static read access, pose more questions than answers and often create more headaches for SAP users, particularly as they try to review their software contracts.

"These practices by [software] companies regarding audits that include indirect licensing fees are confusing," Greenbaum noted.

CIOs end up in a difficult position when indirect licensing fees exceed what has been budgeted, and large sums can eat away at other projects they had planned. The contracts themselves are often confusing, having been put together by industry lawyers with much more experience than even large corporations' in-house counsel, he said.

A sales execution problem becomes a customer problem

However, the problem may lie in the SAP sales team's execution of the indirect access issue, rather than in the contracts themselves, according to Duncan Jones, vice president and principal analyst at Forrester. SAP hasn't been able to manage and identify salespeople who are using SAP indirect access as an excuse to extract money from customers or push them toward S/4 HANA, Jones said.

"The best way [to handle indirect access problems] is for account managers to discuss it with customers and come up with reasonable compromises," Jones said.

However, in a few cases, a salesperson isn't meeting a quota and sees indirect access charges as a way to force the customer to pay up or switch platforms by threatening an indirect access claim.

"The rogue behavior grew like a virus in SAP sales organizations," Jones said. Meanwhile, leadership didn't drill into how salespeople were meeting their quotas, creating a customer trust crisis. "It's all excessive sales targets, aggressive enforcement and insufficient governance as to how people make their targets."

It also didn't help that SAP brought a lawsuit against U.K. beverage company Diageo, although the judgment did bring some clarity to what constitutes indirect access. In this case, the court ruled in favor of SAP, essentially stating that, if a user accessed the mySAP ERP database via a third-party application, the user needed to be a "named user" and required a license.

"When I looked at the judgment, it wasn't totally clear," Jones said. "Some of the use cases [the judge] was describing -- of course, that was use of SAP. How could anyone think they could get away without paying user licenses?"

However, other cases were clearly not uses of SAP, and SAP lost as many arguments as it won. The cases where a judge did rule in favor of SAP were not the scenarios that are causing problems with users, he added.

Making sense of existing guidance for SAP indirect access

SAP published a white paper in July that attempted to explain SAP indirect access licensing concerns, but some of the guidance, particularly around indirect static read, can create more questions than answers, according to experts.

Best practices may better define what constitutes "use" of software, Jones said. "My guideline is: If the human being is doing something that sends data to the software and causes it to run, then sends back results to users, that is use of the underlying software, [no matter how] many layers of apps and middleware it goes through," he said.

For example, Jones continued, this could include purchasing through an e-commerce website that checks inventory and availability in the SAP system, then confirms the order. This could be considered use because SAP is required to complete the task.

Ultimately, it may require more court cases -- and a tighter rein on salespeople -- for customers to be able to decipher what is indirect use. Until then, experts advise negotiating contract terms and acting in good faith to avoid steep charges and possible litigation.

This was last published in January 2018

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How does your company plan to deal with the SAP indirect licensing issue?
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Like other SAP customers, we too are impacted by this indirect Licensing matter and some very ambiguous statements from SAP without any official document. Also some Use cases require much needed clarity. 
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