How we supported a utilities company clean up their SAP environment prior to the audit

utilities company

The perks of being proactive

Company: organization with 10,000 employees in the utilities industry

Case: the customer proactively asked for an SAP Compliance overview

Cost avoidance: $21.8M (list license)

We often see that companies only look at their software consumption during an audit. And that’s usually the moment when they reach out to us. Under such pressure, the focus is on passing the audit without too many costs, rather than really understanding the software entitlement and deployment situation.

Fortunately, there are organizations that proactively look into their software licenses and that was also the case for one of our customers, a utilities company that had contracted us for a 3-year engagement of SAM managed services for SAP. The trigger for this initiative was that the number of employees rapidly increased every year, incorporating thousands of contractors worldwide. This organization didn’t have a solid software asset management department. Thus, controlling the license management and software consumption became a difficult if not impossible task to deal with internally.

Our solution

We started the engagement by gathering all the SAP contractual documents and performing an SAP License entitlements overview. Having a clear overview of the software programs licensed to be used as well as the different terms and conditions, metric definitions and limitations forms the basis of a solid compliance overview.

The second step was to run a deployment analysis that led to the detection of a financial exposure of $21.8M (calculated at list price).

The biggest source of non-compliance was the inefficient way user license types were managed:

  • Inactive users had SAP user license types assigned
  • Inefficient distribution of licenses: most of the users were classified under the most expensive user license type, for which a massive gap of licenses was produced while other cheaper license types were not used
  • Users were classified under the free-of-charge test license type in production environments instead of being end-dated once they no longer need access in SAP. In order to be compliant, the total number of test users in production needs to be lower than 10% of the total user population, rule that was not followed by our customer.

Other compliance issues were detected as well:

  • Exceeding the number of licenses for different engines because of the company’s growth. In this case, clean up or remediation actions are not applicable, and therefore it is necessary to increase the number of license entitlements. As an example: an increased number of orders issued by the end user represents a hard evidence that cannot be optimized, and thus additional licenses are needed
  • The use of unlicensed engines, most of which were false positive results or historical use evidence as a consequence of not maintaining the SAP systems by implementing the different SAP notes released to fix these errors. In false positive situations, remediation can be performed by implementing SAP Notes (bug fixers). However, many customers don’t do that proactively.
  • The software programs licensed under the enterprise metric “Number of employees” were also exceeded by the new, increased number of employees.

Based on our compliance overview and following the remediation and optimization instructions we provided, our customer started a 6-month clean up exercise after which we performed another screening of their installations.
Using our expertise, our customer built internal processes and procedures to ensure periodical internal checks, that will ensure they remain compliant over time, take place.

Business impact and results

The initial financial exposure was reduced to $1.6M (list price), a inevitable cost that resulted from the growth of the company – a factor that is typically ignored by most SAP customers. Our customer invested in additional licenses for those software programs that are an indicator of the healthy business growth (e.g. yearly increase of sales orders, number of employees, revenue, etc.).

By the end of the second year of the SAP SAM managed services, our customer received an audit letter from SAP. Having most of the cleanup activities already in place or soon to be implemented, we were able to focus on preparing the audit defense strategy and the cost avoidance plan.

A big part of the licenses was taken into consideration as subject to swap them for other licenses, reducing the maintenance costs. In the end, we reduced the financial exposure to under $1M (list price) during the negotiations, taking advantage of the proactiveness of our customer and by swapping licenses no longer in use.

The most important element of this 3-year engagement is that our customer is being advised and supported in creating and documenting processes for user management and SAP system management. These will ensure a consistent and efficient use of the SAP software programs for many years to come.

Having the cleanup activities in place, we were able to focus on preparing the audit defense strategy and cost avoidance plan.