A Mystery Wrapped Up in an Enigma Surrounded by a Conundrum
Back in April of this year, SAP finally provided some guidance on how it planned to address Indirect Access, or as SAP refers to it, “Digital Access,” for current and future customers. Specifically, they articulated three options for existing customers: Do Nothing, License Exchange or Contract Conversion. New customers would be licensed under the new model, measured by the 9 document types defined in the SAP ERP Pricing for the Digital Age.
This approach seems simple until you look a level deeper. Once there, we’ve found there are three major questions related to Digital Access that are perplexing current and potential customers and are yet to be answered by SAP.
[For the purposes of this discussion, we’ll presume agreement with SAP’s position that non-SAP systems which activate the processing capability of SAP software require a license and that license will be addressed via Digital Access (although that presumption is still under debate in the market)].
Question #3: As an existing SAP customer, how can I easily determine my licensing demand under the new Digital Access Model?
SAP’s guidance is that you would need to count the number of documents generated annually, by type, created by third-party applications. Note that some documents (e.g., purchase documents) are counted at the line item level. You would then use historical or extrapolated data to determine what the annual number of documents are and that would determine the demand, which would be licensed as Digital Access.
Although it seems simple in principle, there are some challenges. While many businesses can count the number of purchase orders or invoices which are created in SAP, it can be a significant challenge to count line items in those documents. It seems logical that SAP, a premier technology company, would be ready with a full set of tools to aid its customers in this respect. Alas, there is precious little SAP has shared to make this exercise easy.
One example is that on August 22, SAP released “2644139 – Digital Access: Tool for SAP ERP (ECC) to determine an approximate number of licenses required in the future” (this tool can be downloaded from the SAP marketplace as Note 2644139 (for ECC) and Note 2644172 (for S/4HANA)).
As guidance, the note states:
“For each document, the report determines the number of the current database entries. This number can only provide an indication of future database entries, when the customer-specific situation is taken into account.
The note provides high-level instructions on how to execute the tool but cautions, “The report does not differentiate between documents that were created by SAP applications and documents that were created by non-SAP-applications. The number transferred for a document must be interpreted based on the current installation environment.”
In addition, it is not clear that the tool can differentiate between a new document (which must be licensed) and a document that has been modified (which does not require a license). This situation hardly inspires confidence.
Our client’s experiences have ranged from shock and horror to extreme confusion based on the data generated by the tool, the inability to easily interpret what it means, and how to determine demand in the new model. Many have joked (some not so much) that this is a prime opportunity to develop an automated demand tool of their own and sell it back to SAP.
A customer’s inability to easily determine their license demand naturally leads to the second top unanswered question.
Question #2: How is SAP going to measure Digital Access compliance?
There is even less information in the market on how SAP will audit their customers. Given the immaturity of the tool to determine a customer’s demand, this is especially troubling. Perhaps SAP has a sophisticated tool in the audit toolbox or another strategy or technology to make this easy, but if it does, SAP isn’t sharing (at least not publicly).
Again, giving SAP the benefit of the doubt that this issue is or will be solved shortly, their go forward audit process is also opaque which creates its own set of questions, such as:
- Since a customer’s use is licensed on annual demand, does this mean SAP’s customers will all now be subject to annual audits?
- What if a customer is under-utilized in a given year? Do they get money back?
- Can a customer get dispensation for a one-time business event like an acquisition which spikes the creation of documents?
- Can a customer, who is out of compliance, utilize its exchange rights and trade in underutilized software to resolve the audit?
Since it’s the early days and not quite six months since SAP made its announcement on Digital Access, SAP could be given a pass on this issue. However, some level of transparency on compliance would help alleviate SAP’s customer’s concerns given the material nature of the number one unanswered question.
Question #1: How much does Digital Access cost?
SAP does not publish a price list and there’s no expectation that will change. SAP has provided insights that show that not all documents are treated the same. “Most documents, (e.g., sales document line item) are weighted at 100% (multiplier = 1), documents of lower value and more frequently used (e.g., financial document journal entry) are weighted at 20% (multiplier = 0.2).” These document counts are then multiplied by the document unit price to get the total license cost.
SAP also has indicated that volume discounts are in play and that document unit pricing will reduce as more quantities are licensed.
Aside from those two nuggets of information, there is not much data available to potential or current SAP users to understand cost, outside of spinning up a sales cycle with your SAP sales team. It is important to know if SAP will treat the cost of an invoice document from a legacy, home-grown application the same as it treats an SAP competitor.
Also, as organizations seek to further automate and leverage IoT and AI, will those technology accelerators create documents at a rate that new Digital Access Model proves to be too heavy a tax on those efforts? Finally, will customers committed to competing, third-party platforms, like Salesforce.com, have their business case for S/4HANA cratered (and perhaps not know until it’s in production and too late) because there’s no insight into the cost of Digital Access?
Given the lack of information and uncertainty, there are two things you can do to shed some light on these matters until SAP provides more clarity and transparency on Digital Access:
1. Educate Yourself: There are not mountains of documents or petabytes of online content on SAP’s Digital Access Model. Given that, there is no reason why SAP’s customers cannot obtain, read, and become fluent in the information out there. SAP’s own documentation is a perfect place to start. SAP ERP Pricing for the Digital Age provides a foundational and basic understanding for SAP’s practices for both new and existing customers. Indirect Access Guide for SAP Installed Base Customers is also helpful for those who are looking to understand more about how existing licensing maps to their current license structure.
2. Leverage an Industry Expert in SAP Licensing Practices: SAP’s licensing is intentionally complex and opaque. Rather than waiting until Digital Access becomes a problem to seek out a third- party with deep knowledge and expertise on the subject, organizations will benefit from proactively involving an industry expert to prevent future issues.
- SAP and Indirect Use: Is SAP Taking Advantage of its Customers?
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- Defeating the SAP Project Optimism Death Star