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Analyst details wrinkles in SAP licensing

SAP is quietly doing a few things on the licensing front that one Gartner analyst thinks users should be aware of.

LONDON -- A decision from SAP to enforce some lesser-known contract stipulations and one new licensing change may...

catch some customers by surprise, according to an analyst speaking at the Conference Europe.

Five negotiating tips
Gartner Inc. research director Derek Prior recommends that companies hammering out a deal with SAP:
  • Get full 100% credit for R/3 investment and for future conversion from mySAP ERP to mySAP Business Suite.
  • Minimize uplifts outside Europe in larger deals. Licensing fees can be 50% higher in the U.S. and Asia/Pacific.
  • Understand "indirect access" and find out which external systems accessing SAP require licenses.
  • Maintain the right to outsource.
  • Have the right to develop custom code.

Derek Prior, a U.K.-based research director specializing exclusively in SAP for Stamford, Conn.-based Gartner Inc., said SAP has created a new developer classification for mySAP Business Suite and that the company also plans to crack down on "indirect access" to its systems. Current contracts don't cover external systems that tap SAP software, though some users aren't aware that that's the case.

Prior said SAP plans to charge some customers when they write front-end programs that provide non-licensed employees access to R/3 data through custom interfaces. He said SAP could also begin billing when organizations extract data out of Business Warehouse into other third-party applications, such as a data warehouse.

SAP admitted it was adding the developer licensing classification, but a spokesman said it was not making any other changes.

"We're doing nothing new and we're not asking customers to pay for something that they weren't paying for before," said William Wohl, SAP vice president of public relations.

One user questioned how SAP could track data extraction. "I think it would be awfully difficult for them to enforce," said Louise Lunt, service improvement manager for Yell Ltd., the Berkshire, England, company that publishes the Yellow Pages.

Based on his conversations with SAP licensing officials and customers worldwide, Prior said SAP would likely enforce the changes on a "country-by-country basis," with certain global customers being billed. He said it is not entirely clear how SAP would determine whom to charge.

The new "developer" category for mySAP Business Suite provides access to ABAP, Java and the portal development kit. While SAP doesn't make pricing public, Gartner estimates the company will charge 50% more for a new developer license than it does for a professional license, which currently covers developers. The change would only affect new SAP licensees, Prior said.

Prior's licensing update was part of a session designed to help users get the most out of their SAP contracts. SAP declined to participate in the Conference Europe.

Prior said that companies often don't understand what their current contracts cover, especially given SAP's recent introduction of mySAP ERP and its re-branding of the mySAP Business Suite (formerly

Companies can follow three SAP licensing models: R/3 Enterprise, which includes ERP and portions of the NetWeaver technology platform; mySAP ERP, which adds full NetWeaver access along with HCM and financials; and mySAP Business Suite, which features the full package, plus modules like CRM, SRM, PLM and SCM.

While mySAP Business Suite is the company's broadest offering, it doesn't include SAP's xApps integration software, the Xchange Infrastructure for non-SAP applications or any new products SAP may roll out, Prior said.

Prior also cautioned users to spend more time looking at the fine print in their contracts before signing them. He recommended that negotiators try to eliminate what he called "onerous terms and conditions," like costs incurred when changing databases, reinstating maintenance and using software that SAP sends but which isn't licensed.

Some veteran negotiators admit that they've managed to get discounts on volume but didn't think of bargaining beyond licenses.

"I don't think we have ever flexed any of these terms," said K.R. Krishnakumar, assistant vice president of IT at Grasim Industries Ltd. in Secunderabad, India. Krishnakumar has hammered out several SAP deals dating back to 1997.

Brandon Bichler, manager of operations and IT for Tyco Electronics in Munich, Germany, is currently looking to upgrade to a new version of R/3 and said he wasn't aware that contracts contained so many potential pitfalls. "I'm going to take that into my negotiations and make sure that it is all representative and fair," Bichler said.

Prior said that many companies make the mistake of negotiating breaks on licensing fees without keeping an eye on maintenance costs. While standard SAP maintenance runs 17% annually, companies may lose sight of the fact that, over five years, the cost of maintaining software rivals the expense of licensing it. After a five-year maintenance cap runs out, it's not unusual for fees to double, Prior said.

"Be very careful when looking at maintenance fees and longer-term maintenance that you'll have to pay," he said.

SAP's Wohl said by that time many customers upgrade or discontinue maintenance.

This month, Prior and a colleague released a Gartner research advisory on these licensing issues.


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