Looking for the latest updates on the topic of indirect access and SAP licensing? Visit ASUG's Licensing Resource Center.
ASUG’s Vice President of Content, Ann Marie Gray, had a conversation with CEO Geoff Scott and board member Ron Gilson to get their perspectives on SAP’s changes to its sales, audit, and pricing model. As the CIO of Johnsonville Sausage and a long-time SAP customer, Ron helped us deconstruct the new model to raise questions about scenarios other SAP customers may face. Both Geoff and Ron worked closely with SAP to represent the voice of the customer and share the ASUG point of view through the months of discussions leading up to the model’s release.
Ann Marie: What is ASUG's perspective on the work SAP is doing to make its licensing and audit processes more transparent?
Geoff: In North America, we were hearing persistent feedback from members regarding licensing conversations they were having with SAP that were raising anxiety, concern, apprehension, and in some cases, even anger. We consolidated this feedback and raised questions to SAP about the mixing of sales conversations with licensing audits. We took the stand that we should resolve those first, before discussing the new licensing model.
Ron: Customers now have a clear set of expectations around the role of sales and the role of audit, which should provide a better customer experience. Personally, I would like to see some type of annual report on audits and audit results. If you really want transparency, that’s the way to do it. As for the new document-based licensing model, on paper, the document-based approach for indirect access makes a lot of sense and is relatively straightforward. There is a lot of detail lacking, however, especially for customers thinking of converting from the old user-based model. Unfortunately, the conversion process for current customers will require a great deal of work to understand existing terms and conditions, previously negotiated entitlements, and overall value at the time of conversion and over the long term.
Geoff: The reason for more transparency is twofold: First, to ensure that SAP customers minimize their surprise and anxiety by being better educated on licensing matters and, second, to make sure that the licensing conversations are balanced between SAP and the customer community.
Ann Marie: Ron, what would you like to see SAP do differently?
Ron: I think what I would like SAP to say is, “Look, we [SAP] were part of creating the current situation related to indirect use. We’re going to take responsibility for the role we played over the past 20-plus years. This is not an issue created solely by customers—we are all in this together.” That’s the “line in the sand” position that ASUG and the other user groups have been discussing with SAP. Existing customers have partnered with SAP for decades on the purchase, implementation, and integration of SAP technologies using industry best practices. Unfortunately, the discussion around indirect access, license entitlements, and proper licensing have only recently become top of mind.
Geoff: So, your perspective is that customers might face some uncomfortable situations that we haven’t been aware of before?
Ron: Exactly. I think every customer needs to sit down and read through the definition of indirect access. There are going to be some “oh no” moments when people realize they may have compliance gaps based on the more-refined definition of use and indirect access.
Geoff: I think it is essential that we all recognize that “use is use,” meaning that if you are using an SAP process, you must have a license for it, whether that license is of zero cost or greater.
Ann Marie: What are the most important things that customers need to know about what’s changing?
Geoff: Number one, make sure you’re comfortable with and understand the licensing definitions from SAP. If you don’t, raise your hand and ask for clarity from ASUG or SAP. I think we need to continue as a community to press SAP when we don’t understand something or consider it fair. To the customer’s benefit, contracts have always been highly customizable to individual customer needs and wants. While that is great, we also have to recognize that this brings a lot of complexity. But no matter how complex it is, you need to know what’s in your contract.
Number two, make sure you really understand what your contracts entitle you to and where you may face risk. Once you determine that risk, what do you want to do about it? You can do nothing. You can buy additional licensing to make up the difference, or you can investigate the new document-based licensing model as a potential solution.
Ron: I agree, you’ve got to know your contracts. If you haven't pulled them out, you've got to get back into them and know what your entitlements are. You need to document and map where your integrations are with non-SAP systems, as well as with business partners outside your organization. Once you fully understand your integrations, go back into your contracts and determine what the licenses entitle you to use.
Ann Marie: What are the top things that customers should do now in response to these changes? How can customers be their own best advocates?
Ron: For new customers and customers embarking on new initiatives, I would say you need to be proactive with SAP about getting its audit organization involved in the process of certifying the design, architecture, and licensing of new projects.
And all customers should know that your annual licensing review is not a full and complete audit. Even if you complete it successfully, that does not guarantee that you won’t face a future compliance issue if you are subject to an enhanced audit by SAP’s audit team. From my perspective, there are a lot of folks (myself included) who feel if they passed that annual licensing review, they’re good to go. We have learned through these discussions, however, that is not necessarily true.
If you have concerns, you need to start preparing for that potential audit. What documentation can you get together? Understand what’s been done in the past on contract terms. Understand what assumptions were made. Get that documented. Be proactive and ready for it.
Ann Marie: Does the new model put us in a good place to continue to adapt to the next big leap forward in tech, whether it’s artificial intelligence, or voice user interfaces, or something we’re not even aware of yet?
Ron: Personally, I think it’s a good first step. A licensing model that’s metrics-based, like the document-based model, sets SAP up for the future as we consider emerging technologies because they are based on hard metrics everybody can monitor. But I fully expect this licensing model to evolve over time as SAP hears feedback from customers on what’s working and what’s not.
Geoff: The Achilles’ heel of this conversation is we keep coming back to these two words: “it depends.” I personally look forward to our community being able to eradicate those words and move toward specificity. But we need to carefully balance this desire for specificity with the notion that every customer approaches their business differently, and therefore, their licensing agreements depend on their individual needs. We can’t swing too far, or we’ll only get a one-size-fits-all model. One of the advantages we’ve had as SAP customers is that we’ve had support from our account executives at SAP in constructing licensing terms that are relevant to how we do business. With clarity, we may see less customization and we have to be willing to accept that.
Ann Marie: So, what’s next? We’ve traveled to Walldorf. We’ve contributed to countless conference calls and reviewed dozens of documents. How will we make sure this conversation keeps going?
Geoff: Our ability to give customers clear guidelines and understanding through education is going to be hypercritical. We owe the ASUG community really good information with practical steps about how to respond to this topic. This also means that the community voice is more important than ever.
Ron: The fact that we’ve contributed our insight and perspective on the new licensing model is all very positive. This will lead to a better model for new customers and existing customers as they make future investments. I think those are great wins generated through some great dialogue and conversations with SAP. But I don’t think we can ignore the fact that it's not a complete solution. We haven’t seen much about how folks are going to convert from very, very old contracts to the new model and still trust that they are retaining the value of their previous investments
What’s next is that we have to stay in tune with feedback and the perceptions from customers. Tell us: What did you like? What didn’t you like? What are you still confused about? Make sure that we’re able to, through education or whatever it happens to be, address those questions quickly and clearly.
Geoff: It’s very difficult for an individual customer to feel that you have a substantial voice against a company the size of SAP. At ASUG, we know the only way to make a real change is to elevate customers’ questions and concerns and share them with SAP. What SAP has demonstrated throughout this process is their willingness to listen and make change, which means we’re making forward progress.
Ann Marie: Thank you both for your time today. It’s going to be interesting to see what happens next.
To learn more about SAP’s new licensing model and associated definitions, visit ASUG’s Licensing Resource Center. Send your questions to firstname.lastname@example.org and we’ll cover them in the resource center.