How much do you know about SAP self-declaration products?

sap metric declaration

We are starting a mini-series of articles about SAP self-declaration products, a complex topic for most of the SAP users. Although we have briefly discussed this topic in our whitepaper about “The most recurrent SAP licensing challenges”, in this article we will explore it in more detail. My goal is to explain the main metrics, how to determine the licenses needed for such products and how to avoid the most common compliance issues. However, if you’ll still have questions about the SAP’s self-declaration products after reading the article, feel free to reach out and we can set up a meeting to discuss them.

What are the self-declaration programs?

SAP software programs for which the deployment and usage data is either not detectable by SAP’s standard measurement tools or cannot be technically measured are called “self-declaration programs”. As the name states, you have to declare the deployment and usage of these programs yourself, but how do you measure such programs? Based on the contractually agreed license metric, you need to complete the self-declaration file that you received from SAP. The license metric determines how to establish the number of required licenses.

In the SAM world, we split these metrics into:

  • Enterprise metrics (e.g. revenue, employees, spent volume, etc.) for which the required number of licenses is typically based on your annual report
  • Technical metrics (e.g. Users, CPU/Cores, etc.)
  • Industry specific metrics (e.g. Barrels of oil per day for Oil & Gas industry, Cashflow for Banking sector, etc.)

Enterprise metrics

In this article I will describe the most common enterprise metrics.

Licensing by enterprise metrics is beneficial when the software programs are planned to be used by a large number of users or in case the software programs are installed on multiple servers. The enterprise metrics depend on your business’s growth. This way, you only need to obtain additional licenses when your business grows (for example, your revenue or your number of employees increased).

Revenue

Perhaps the most common self-declaration metric among the big 4 software vendors (SAP, Microsoft, Oracle and IBM), “Revenue” is usually defined as “the income that a company receives from its normal business activities as well as from dividends, royalties or other sources”.

In your contract, the metric definition might be slightly different than the generic metric definition described in the “Software Use Rights” (released every year by SAP). Therefore, when declaring the revenue during the audit, you need to make sure the number is declared according to your contractual clauses and specific mentions.

Besides the metric definition, you should identify in your contract the calculation method for additional licenses to be acquired once your revenue grows above the licensed revenue cap. The additional licenses to be acquired are called “increments” and represent a round number that reflects one growth unit (e.g. 1 increment equals $1,000,000). This way, additional increments need to be acquired to extend the licensed revenue cap.

Number of employees

The “Number of employees” metric is defined as the total number of individuals (including contract workers) “employed by the company or employed by the legal entity that is licensing the functionality of the package.” (as defined in SAP’s “Software Use Rights”).

The definition is applicable, unless otherwise specified in the contractual agreement, for the majority of SAP software programs licensed by the number of employees. In some cases, the metric can be limited to a certain entity or subsidiary of your company.

Spend volume

“Spend volume” is defined as “the total amount of a company’s annual expenditure for the procurement of all direct and indirect goods and services.” The spend volume or expense metrics are used to measure the procurement performances which are linked to a company’s wellness. Once the licensed amount of spend volume increases, similar to the revenue metric, additional increments need to be acquired to cover the growth.

Common compliance issues for enterprise metrics

Enterprise metrics are generally suitable for a large company having a growth tendency. But if these metrics are so stable, what is the compliance risk, you may think. When a company has a boost of revenue or boost of business or production for which a large population of employees is joining, the licensing costs are somehow expected and proportional.

The risk is very high when a company merges with another company or acquires new subsidiaries. In these cases, the revenue, spend volume or number of employees can be doubled and the licensee (end user) needs to cover for this growth even though the new subsidiary or company may not even be making use of the SAP programs.

In conclusion, it is always recommended to perform a measurement of your actual consumption before signing a new agreement with SAP. This way you will know if the enterprise metrics are indeed the best choice for your company and business objectives.

Stay around, we will continue the series with an article about the technical metrics. And in case you have any questions or need assistance to measure your SAP usage and determine the right metrics for your organization, don’t hesitate to contact us.

This article was published on 05-12-2019