Measuring the ERP world

SAP licenses used to be a purely budgetary challenge, but now the topic occupies legions of lawyers and technicians. Any existing SAP customer would be well advised to seek external expertise on this slippery slope. We conducted the following interview with Ayhan Aslan, Senior Manager in CIO Advisory and License Management at the auditing firm KPMG.

E-3: The topic of SAP licenses knows many construction sites: Interpretation of the price list, indirect usage, application of the surveying tools, history of license purchases, release statuses, etc. Where do you see a need for action?

Ayhan Aslan: SAP customers currently face many challenges and need to take action in SAP license management. More than ever, companies are grappling with the digital transformation and the profitable introduction of new technologies such as IoT, Industry 4.0, AI, RPM, bots, and machine learning.

The complexity is not only evident in the practical implementation, but also with regard to technical, contractual and commercial risks. As early as the vision and target architecture stage, companies should consider which future contract and licensing model is best suited for the -digital transformation.

E-3: What can be expected from SAP?

Aslan: SAP offers existing customers different models for converting their existing contracts and licenses to new technologies. The important thing here is to be able to translate your business requirements into a suitable contract. The basis for this is good preparation of the technical survey with regard to current usage and architecture, current and future requirements, transparency with regard to contract and license rights, and license inventory.

E-3: The survey is the starting point?

Aslan: On the basis of this information, a cost simulation and a definition of the licensing and negotiation strategy are carried out. In addition, companies need to make decisions regarding the licensing of indirect usage scenarios according to the old licensing model or digital access.

E-3: What does indirect use mean?

Aslan: In order for the new technologies to be integrated horizontally and vertically in the infrastructure, the expected usage rights are required. The time window for coordination with SAP is favorable due to the current offers and willingness to negotiate. The outlook and sustainability of the new Rise with SAP offering and related questions remain exciting. 

E-3: What does this mean for the existing SAP customer in preparation for a license measurement and audit?

Aslan: In principle, comprehensive preparation of a survey or audit is crucial for the subsequent financial result - starting with scope definition, drawing up the contract and license hierarchy, and deriving the resulting rights of use. Subsequently, the survey can be implemented in accordance with the licensing regulations. First of all, it must be determined what the scope of the audit/license measurement is and which contract SAP refers to in the request.

Subsequently, the hierarchy of contracts and licenses must be determined and the resulting rights of use, which are leading for surveying, must be derived. Based on these findings, the measurement can be performed more efficiently. Based on commercial license metrics, such as revenue or number of employees, the information required for processing the SAP self-declaration must be obtained from the relevant departments.

E-3: The risk of underlicensing is factually always present if the SAP existing customer does not -order- new software or go to the SAP cloud, right?

Aslan: Correct, under certain conditions, SAP customers are potentially always at risk of underlicensing the software they use. This includes, above all, the fact that issues of surveying or audit preparation are often regarded as ad hoc tasks in companies. However, in order to effectively control and mitigate risks, a structured SAP SAM governance model is required to accompany the software lifecycle process.

E-3: And the path to the cloud?

Aslan: The path to the cloud is not risk-free either. With cloud applications, it is often wrongly assumed that the risk of mislicensing no longer exists or is only present to a limited extent. In fact, however, the customer continues to bear the responsibility for ensuring the compliance of any software use in the cloud.

Furthermore, while cloud licensing leads to more flexibility, it also leads to increased demand and additional costs that need to be continuously monitored and managed.

E-3: What mistakes do existing SAP customers make time and again, and how can they be avoided?

Aslan: From an organizational point of view, as mentioned, the main lack is the planning and implementation of a holistic SAM governance model for continuous implementation and improvement of surveying processes to generate added value. Implementing such a model would often lead to proactively eliminating other sources of error.

From a technical perspective, it is often details in the measurement of systems that lead to deviating results. These include the import of current SAP notes, the missing check of LAW and USMM files with regard to user statistics and transaction analysis, multiple logons, high workloads, logon times, unused accounts, duplicates and potentials for indirect use and digital access. 

E-3: According to SAP, users are also divided into different classes.

Aslan: The classification of a Developer or Professional User for internal employees and/or external consultants presents companies with difficult issues. Many of these issues can be resolved through organizational and procedural measures in on-boarding/off-boarding in user management or through good authorization management.

Furthermore, a lack of quality assurance of the cleaned results by means of the SAP-LAW-ResultFinder or by LUI/LUP as well as, in the future, the compliance check from an authorization perspective may also play a role. When using a third-party tool, care must be taken to ensure that the tool correctly complies with the contractual circumstances and that the data quality meets the requirements for license compliance. 

E-3: The subject of SAP licenses is so complex from a business, organizational, legal and even technical point of view that it is almost impossible to manage without external advice, isn't it?

Aslan: As a technical, commercial and legal link between different departments, license management is indeed very complex and represents a major challenge for both small and large companies. Nevertheless, a Chief Licensing Officer does not seem to me to be the most sensible solution. Rather, the creation of a "License Management Office" staff position that reports directly to the CIO or CFO would be interesting.

In addition to the manufacturer SAP, the License Management Office should primarily take care of the strategic software manufacturers (vendor management). When ensuring license compliance for the large number of other software vendors, companies should decide from the perspective of available resources, skills, risk and strategic orientation whether operational license management and compliance should be managed by their own resources or by third parties - make-or-buy. 

E-3: Because there is no SAP cloud exit strategy, shouldn't existing SAP customers keep and protect their licenses in any case? Some experts claim that old SAP licenses are worth a lot because they include many services. Is that true?

Aslan: It is true that old SAP licenses still have a high value, but keeping them permanently is not recommended for several reasons. A switch to the cloud should always be part of a comprehensive and, above all, long-term cloud strategy and should not be aimed at being reversed after only a few years.

Unused licenses may be fully amortized within the company, but the continuous maintenance continues to burden the company's profitability - in addition to the newly acquired licenses. Furthermore, one must ask oneself why one should rely on old technologies if they even continue to generate costs. Possible options for avoiding double burdens would be a) to resell the licenses to third parties and b) to use SAP's own imputation rules.

The former is critical in view of future negotiations and the partnership with SAP. The latter allows existing legacy licenses to be applied on the basis of the cloud extension policy (crediting of the maintenance base in the cloud) or the on-premise extension policy (up to one hundred percent crediting).

E-3: With these threatening scenarios - how can you concretely help a
Help SAP existing customers?

Aslan: KPMG offers a SAM Professional Service that covers the complete range of tasks from the initial vision and roadmap, through demand and cost planning, measurements and license strategy, to SAP negotiations. Unique in the world is the option to conclude a license and IoT guarantee in addition to the Professional Service. This is offered exclusively by KPMG in cooperation with Munich RE and covers both internal and external risks in the event of an audit, irrespective of the manufacturer.

KPMG assumes all costs incurred in the event of a claim, including all subsequent and penalty payments. This enables companies to focus on their core competencies with complete cost and planning security. KPMG has been active in license management for more than 20 years, both from an auditor's and a consultant's perspective, and always guarantees up-to-dateness for all common software manufacturers. 

E-3: Thank you for the interview.