How to save costs on SAP licensing

cost savings SAM

Cost saving is a constant topic on every organization’s agenda, and probably on yours too. Either you’re thinking how to avoid paying more than is needed or how to reduce the costs that you already pay towards software vendors, the goal is the same, to save money. The purpose of this article is to offer you insight into some of the most common ways to save costs with SAP licensing.

Trade surplus licenses

SAP allows its end users to exchange unused licenses for new licenses at no additional cost during a certain predefined period of time. Nevertheless, this is possible only if your agreement includes a clause that grants this (swap) right.  

Terminate licenses

If you assessed your organization’s needs and decided that certain licenses are unused and will not be used in the future either, you can consider terminating them. Once you paid for the licenses you will not get your money back, but you can save costs by not paying the corresponding maintenance and support costs.

Cancel maintenance and support

If you still need to use the software but you consider that you don’t need support, then you can substantially reduce your costs by cancelling support (the average cost of support and maintenance is 20% of the list license cost). However, you should keep in mind that SAP’s general policy is that all your license estate should be under the same level of support, so SAP only allows partial termination of support if that is included in your agreement.

Switch to a less expensive support type 

SAP provides different types of support both price wise and benefit wise. SAP Enterprise Support includes application maintenance and continuous improvement and innovation (such as new software releases and support packages), as well as collaboration with SAP experts and mission-critical support (including service-level agreements for incident handling and corrective action plan proposals). In addition, SAP Enterprise Support includes enhanced usage rights for SAP Solution Manager, for example, for business process optimization, process documentation, and custom-code management. On the other hand, the SAP Standard Support service includes, similar to the Enterprise version, application maintenance and continuous improvement and innovation, but only baseline support services.  If you are currently under Enterprise support (22% of the net license fee) but don’t really need everything it offers, you can consider switching to the less expensive Standard support (19% of the list license fee).

Choose the right Named User licenses

SAP offers different Named User licenses such as Professional User, Limited Professional User or Employee. The amount of rights granted defines the cost of the license. Many times, companies purchase or allocate an expensive license such as Professional User license to an individual who only uses it for the operational functionalities of a Limited Professional or an Employee.

Optimizing users can result in the re-classification of named users to a cheaper license type by reviewing the use of the software versus the assigned license and removing redundant user provisions that may result in the requirement for a higher license type than is necessary.

Note: SAP removed the Limited Professional user type from its Price List but customers who already had Limited Professional User licenses before August 2015 can further purchase additional licenses as per SAP’s policies.

Stay compliant

As obvious as it may seem, non-compliance is costly. If you are found non-compliant, you will not only pay for extra licenses used in addition to your existing license entitlements at list price, but also for the maintenance and/or subscription fees for the excess use for the duration of such excess or two years as a standard (back dated support) and also for any additional charges determined as a result of the audit performed by SAP. This can definitely lead to significant costs. You can avoid these costs by implementing better procurement practices and managing SAP licensing more effectively.

Assess your current status

Even though a self-audit incurs costs, these might turn out to be less than the costs that could arise after an audit from SAP. If an SAP customer identifies a license gap and approaches SAP directly to buy the licenses needed, then it is SAP’s policy to honor discounts in order to encourage SAP customers to be honest about their shortfalls, even if the non-compliance was unintentional. Also, back-dated support won’t be charged against unintentional usage as long as the customer discloses that usage to SAP as soon as practically possible.

Conclusion

The ability to cut or save costs depends a lot on the agreement your organization has with SAP. Some of the scenarios mentioned above are not possible if they were not foreseen when the agreement was signed but with expert advice, solutions can be found. A first step for existing SAP customers who are looking to cut down the costs of their licensing would be to see if they are over- or under-licensed. If you are interested in a customized assessment of your current situation and how you could save costs, reach out to us.