- UpperEdge
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With the first anniversary of SAP’s Digital Access Model announcement upon us, it would be fitting for SAP to provide a first anniversary gift to all its customers. And as part of SAPPHIRE 2019, SAP has announced just that — its new Digital Access Adoption Program, which incentivizes SAP customers to consider making the move to Digital Access in two steps. But before companies start practicing their two-step, we wanted to discuss our point of view on the program and associated steps given our direct experience advising companies on the topic at hand.
- April 2018 Announcement of Digital Access Model
In April 2018, SAP publicly announced how it intended to approach ERP pricing in the digital age, and more specifically discussed a new digital access model, which it touted as being transparent and predictable. As part of the announcement, SAP presented options for existing SAP ERP customers including the ability to do nothing and keep their current SAP contract in place leveraging Indirect Access or exchange Indirect Access license fees already paid toward the adoption of the new Digital Access Model.
- May 2019 Announcement of Digital Access Adoption Program
Since the announcement of the Digital Access Model in April 2018, SAP announced more than 800 customers have adopted the new Digital Access Model, including new and existing customers in all regions. Given such thin adoption, SAP has formally announced a new Digital Adoption Program (“DAAP”) in order to drive further adoption. More specifically, SAP is recommending customers take two steps in order to assess and potentially adopt the Digital Access Model.
Step 1: Customer Chooses Measurability Option
The first step SAP is recommending to current customers is choosing a measurability option, or more simply, deciding how you will work with SAP to determine how many Digital Access documents you need. The options SAP is presenting are either:
- Work with the Global License and Compliance (GLAC) to estimate the number of documents currently being used, or
- Leverage the SAP Passport tool to estimate documents currently being used.
While both options sound great on first blush, we anticipate either option will require your company to engage in negotiations with SAP’s GLAC team to arrive at the appropriate number of documents for your company. With regard to working with GLAC under the first option, we would anticipate GLAC’s approach to assessing Digital Access requirements will be a hardline consistent with its recent audit practices. Further, when SAP has had a point of view on Digital Access requirements for customers in the past, they have typically positioned a higher number than independent assessments indicate, sometimes even as much as 3x as high. Therefore, working with GLAC to estimate the number of documents currently being used is likely going to result in a negotiation.
With regard to leveraging the SAP Passport tool under the second option, we would anticipate this to require supplementation with the first option. In our experience advising SAP customers, when the SAP Passport tool has been leveraged, the tool was not found to be the most representative view of estimated documents based on independent assessments. Therefore, if you are willing to explore leveraging SAP’s Passport tool, it will likely also require working with GLAC in order to accurately estimate the number of documents currently being used.
Step 2: Customer Chooses Financial Incentive Option
The second step SAP is recommending to customers is choosing the financial incentive option that works best for their company. The options SAP presented are either:
- License at least 115% (15% growth) of your current estimated use and the license fee will only be for the licensed growth cost with the benefit of volume discount tiering, or
- License at least 100% of your current estimated use and receive a 90% discount.
While SAP is offering competitive financial incentive options, the options are only competitive if your company is better served under the Digital Access Model.
When you take into account the fact that SAP is offering conversion credits for your previous Indirect Access assessments toward your Digital Access requirements coupled with financial incentive options, it is hard to dispute what SAP is offering as anything but competitive. They are certainly putting their best foot forward from a commercial standpoint in order to make the move to the Digital Access Model attractive.
The word of caution I would have for customers eying the attractiveness of the commercial offering is that it still may not be the most cost-effective option for your company now or in the future. In some situations, customers are better served under the Indirect Access Model and leveraging a combination of users and order-based engines makes more commercial sense based on requirements than even the most competitive Digital Access Model ever will.
As SAP continues to incent customers to consider and potentially adopt Digital Access, I would recommend customers take a Step 0 before Steps 1 and 2. More specifically, customers should develop a deep understanding of SAP’s audit practices and proactively assess their Indirect and Digital Access compliance situations. Leveraging this deep understanding and self-assessment will provide your company an opportunity to decide internally whether a Digital Access migration provides a commercial advantage to your company prior to even engaging SAP in steps that will eventually become a sales cycle.
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