Get in charge of your SAP contracts
Your software license position is dictated by your contracts and your contracts will rule your relationship with your software vendor for many years. Since the indirect usage saga, SAP has the reputation of including vague policies in their contracts and making users wait for clarifications. Understanding your commercial agreements will help you use them in your favor and be prepared when SAP will show up at your doorstep for an audit.
Optimized contracts will not only come with optimized costs but will also give you the upper hand when faced with an audit or with changes in your organization. For example, having the right clause in your contract could help you deal with the excess of on premises licenses and corresponding maintenance costs by swapping those licenses with new ones. Or, you could request the termination of maintenance for only a part of your license estate, without having to trade-in or purchase additional licenses, even though SAP’s policy regarding maintenance is “all-or-nothing”.
You might want to outsource a part of your business and, since you have an excess of licenses, wrongly believe that you are allowed to give those licenses to the outsourcer to use them in your business’s interest. This is not something that SAP allows by default and should be negotiated.
The list of examples is longer, but in essence the best way to be prepared for a good relationship with SAP is to be well organized and to have a good understanding of what clauses you can include in your contracts.
To help you be prepared, whether you are just entering into an agreement with SAP or you are a long-time customer, we put together the most important clauses you should negotiate and have included in your contract.
Reconfiguration rights/license exchange option
For a certain amount of time (2-3 years usually), once per calendar year, you should have the right to change the gross pricelist of a number of the licensed Named Users and/or Software mentioned in the agreement. This clause could help you save a lot of money, especially when dealing with licenses allocated to short term projects which at the end of the project remain unused, but for which you still have to pay maintenance.
Broad usage rights
Make sure that your usage rights include parent organization, as well as subsidiaries and affiliates. Also, transfer of licenses during mergers or acquisitions should be at no additional cost.
Many large companies outsource some business processes, but most SAP contracts say nothing about the right to transfer licenses to an outsourcer. Use of the licenses should be permitted to both your employees as well as the outsourcer’s, both on your site and on the outsourcer’s, obviously, the outsourcer using the licenses in your business’s interest only.
If SAP no longer supports the licensed functionality in a product (even if renamed or bundled) and you currently pay for maintenance and support, you should get the follow-on product at no additional cost.
Partial termination of support
SAP does not allow by default partial termination of support due to an all-or-nothing policy,so this clause needs to be negotiated. The clause usually stipulates that the client may, once per calendar year, partially terminate the support in relation to certain software products included in the agreement. Though most companies try to avoid this, at some point they might be faced with reduction in staff or decrease in revenue and partial termination of support could help them cut significant costs.
In general, SAP audits are performed once per year, but they could happen even less often. Yet, you shouldn’t count on this and should always be in full control of your compliance status.
Audit rights are always included in an SAP contract, but the nuances of this clause could either ease the auditing process or make it worse. It is important to know who will perform the audit, how often, what is the notice period and the grace period for remediating any compliance issues. If SAP doesn’t perform the audit you should have the right to agree on an authorized representative to do it.
Another right that you would want to have covered in your contract is to have at least 30 days notice before the audit is conducted, though some SAP clients managed to negotiate 45, while others have only 15 days, with rights to delay it for legitimate reasons. You would also want the right to have 90 days from receipt of the audit report to correct any compliance issues, such as logon IDs for former employees or pay undisputed amounts. Also, if you pay in 90 days, you should have the right to pay the fees at the discounted price, not the list price.
Standard SAP contracts don’t specify the definition of indirect use, mostly because SAP indirect use is very complex and can take many forms.
Until last year, indirect access was licensed per Named Users but now, due to public pressures from end users, SAP announced that they want to make indirect use more clear to customers. As per the new policy, SAP charges indirect use through two scenarios – order to cash and procure to pay. In other words, in purchasing, sales and distribution scenarios end users will pay for the orders they make through the system and not for using the system. This will apply only to indirect scenarios; the direct one will still require user licenses.
If this seems understandable, just wait to see the indirect static read policy. According to SAP, Indirect static read is a scenario in which information has been exported from an SAP system (other than SAP Analytics Packages) to a non-SAP system pursuant to a predefined query that meets the following criteria:
was created by an individual licensed to use the SAP system from which the information is being exported
runs automatically on a scheduled basis, and
the use of such exported information by the non-SAP systems and/or their users does NOT result in any updates to and/or trigger any processing capabilities of the SAP System
In the whitepaper that SAP published last year some examples are given of indirect static read scenarios, but the list is not exhaustive so it’s up to you to analyze the usage of your software to uncover different scenarios of indirect usage because you can only solve indirect use scenarios on a case-by-case basis.
SAP currently focuses on audits that include analysis of indirect usage so being prepared with facts is important in minimalizing the risks.
To sum up
It is important to take time to understand your contracts as well as any specific clauses that you can customize to your organization’s needs as these terms and conditions will dictate your use of the software for many years and can lead to contractual built-in protection against future problems.
Usually, the highest concessions are more likely to be obtained before the first deal is signed, so you might want to consider adding clauses during the purchasing process.
If you need any expertise and a structured approach towards software licensing or if you have any questions, feel free to contact us and one of our specialists will help you.
Since 2015, Roxana is a Software Entitlement Specialist focused on educating clients on licensing issues with Oracle, SAP and Microsoft. In her role, she works with customers to assist them in understanding and improving their software environment by reviewing their software license agreements and provide them advice regarding legal and financial risks. With a legal background, she also helps customers identify legal weaknesses in their contracts and optimize them.