Curing the SAP Overpayment Syndrome Reducing SAP license spend through Software License Optimization

Transcription

1 WHITE PAPER Curing the SAP Overpayment Syndrome Reducing SAP license spend through Software License Optimization

2 Curing the SAP Overpayment Syndrome Reducing SAP license spend through Software License Optimization Executive Summary Unquestionably, SAP software licensing is complex. A recent SAP user group survey found that 95 percent of SAP users think the company s software licensing is overly complicated. Because of this complexity, most enterprises don t have an accurate handle on their SAP license requirements or their license position relative to those requirements. Consequently, they are either overusing CHECK OUT THE DEMO! WATCH NOW Have Questions or Need More Information? Contact Us Now! licenses, which increases the risk of software audits and financial penalties, or more often overbuying licenses, which leads to unnecessary software spend. Three areas account for most of the overbuying: Allocating more expensive named user license categories than people need to do their jobs Consuming more than one named user license per user due to the failure of SAP true-up tools to accurately determine which user accounts are for the same person Maintaining named user licenses for people who no longer access the SAP system The potential cost savings that can be achieved through license optimization is huge. A leading consumer packaged goods company saved $18 million on SAP software over a three-year period. A major defense contractor saved more than $1 million, just on SAP, in the first year of their revamped IT asset management program. A global manufacturer saved 3 million on SAP software. The savings going forward could potentially be even higher because SAP has altered its software licensing policies, giving customers more flexibility in optimizing license spend. Another key issue for SAP customers, known as indirect access, involves accessing SAP system data through 3rd party applications or other indirect means. The challenges of SAP licensing and the potential savings are even greater when considering indirect access. Some large enterprises have 20 or more integrations between SAP and other systems, and this can significantly expand the SAP user base as well as increase the potential of over-licensing your SAP named user licenses by double-counting users in such complex environments. 2

3 Unfortunately, SAP software license management hasn t been easy. It requires in-depth, actionable information on how the enterprise is using SAP information that answers such questions as: How many people are accessing SAP and what functionality are they using? Are they accessing SAP directly, indirectly through a third-party application, or both? What SAP packages are they using? Which users have multiple accounts? What is the current level of utilization of package licenses? SAP s License Administration Workbench (LAW) tool calculates license compliance position based on current license allocations. LAW, however, does not collect and analyze sufficient information for SAP license optimization. The LAW report indicates only what licenses the enterprise has deployed, not how the enterprise is using them or whether each SAP user has the optimal named license category to meet his or her needs. To address software license optimization, enterprises need a solution that gathers comprehensive and accurate information, analyzes it, and helps the IT staff assign the appropriate license category for each user. This paper presents an overview of SAP licensing and describes the factors at the root of the SAP overpayment syndrome. It also demonstrates how a software license optimization solution can slash overspending and lays out the requirements a solution must meet to be effective. SAP Software Licensing Overview Managing SAP licensing is no easy task. License entitlements and usage rights vary significantly depending on which SAP products and license types a company purchases and when. Understanding license types, license fees, indirect versus direct access, and auditing issues is essential to achieving effective management of SAP licenses. Moreover, SAP has changed its licensing policies in some areas. It s important to understand these changes because they bring increased flexibility to license management. License Types SAP offers two primary license types. The first, the named user license, accounts for about 60 to 75 percent of typical SAP contract value. Each user must have a named user license. Not all SAP named user licenses are the same. There are multiple entitlement categories for example, Professional, Limited Professional, Developer, and Employee based on the level of functionality authorized for use. The cost of the license increases with the level of functionality, with Developer and Professional user licenses being two of the most expensive. Professional user is the default license category assigned if no other category is specified. Additionally, some SAP license agreements specify category ratios usually the ratio of Professional to Limited Professional licenses. A typical ratio is 85 percent Professional and 15 percent Limited Professional. The second type of license is the package (aka engine) license, which is purchased in addition to named user licenses. A package license is required for each SAP business-specific application installed. The cost of a package license is based on a business metric intended to measure the business value realized by use of the package. Each package has different metrics that are used to calculate license consumption. For example, a metric used for the SAP Human Capital Management (HCM) package is the number of employees in the enterprise. Here is the formal explanation of a package license from SAP s licensing guide: Package licenses entitle you to deploy and use the precise set of SAP software functionality you need to support your company s processes and address its business requirements. The price of a package license is based on a key business metric that reflects its intended use. License Fees SAP offers two types of payment models. The first is perpetual, in which the enterprise pays a one-time fee that entitles the licensee to use the software forever. In addition, the perpetual licensee must take out an annual maintenance and support contract for upgrades and support. The annual cost of maintenance and support amounts to approximately 25 percent of the perpetual license cost. The second type of payment is subscription, which is used for SAP cloud offerings. Here, the enterprise pays a periodic license fee that usually includes maintenance and support. Indirect Access In many cases, users in an enterprise access data in the SAP system indirectly. For example, an enterprise may import data from an SAP system into a third-party application such as salesforce.com. People then access this data using salesforce.com. In some enterprises, a single user may be accessing SAP data through multiple non-sap systems. In any case, each indirect user must have an SAP named user license, but only one named user license is required for a given user, regardless of the number of third-party systems they use. If a user is accessing SAP both directly (often called a dialog user) and indirectly, that user requires only a single named user license. Identifying all of the third party systems that are being used to access SAP data can be challenging. There is also the increased potential for double-counting users. Working out the total number of users across many disparate systems, each with their own naming conventions, best practices, etc. is a massive challenge, and one for which SAP does not provide any tool support to facilitate license management. 3

4 Auditing SAP mandates customers to conduct self-audits and specifies different procedures for different products. For its onpremise Enterprise Resource Planning (ERP) software, which accounts for the majority of total SAP spending in most organizations, SAP mandates an annual self-audit that must be performed and reported using unmodified SAP-supplied tools. The enterprise must run the SAP measurement program (transaction USMM) to gather data and then run LAW to consolidate and report the data to SAP. LAW consolidates data from multiple systems and also consolidates the user accounts from these systems into a single normalized list of users. There are different SAP self-auditing procedures for other products, such as CRM, BusinessObjects, and HANA. For cloud solutions, such as SuccessFactors, SAP does its own calculations. SAP also conducts formal audits with some customers, over and above the self-audit. Formal audits take place when SAP suspects that there may be a license compliance issue with the customer. It s important to note that SAP is increasing its formal auditing activity, especially in the area of indirect usage. Gartner Inc. reports that the number of client companies reporting formal audits by SAP increased from seven percent of respondents in 2009 to 19 percent in SAP is now listed as one of the top five software vendors that perform the most software license audits. SAP s focus on indirect access during audits is a relatively new phenomenon. Changes to Licensing Policies SAP now offers license trade-in and partial retirement credits allowing enterprises to exchange unused package licenses when purchasing new SAP product offerings. In addition, SAP is incenting organizations to move to the cloud by allowing them to trade in on-premises licenses for cloud licenses. Finally, customers are now permitted to terminate unused licenses, and the maintenance costs for the remaining licenses are re-calculated based on the standard discount level of the remaining license quantity. In no case will the maintenance bill increase in this situation. The Overpayment Syndrome Because SAP licensing is so complex, many enterprises overpay substantially for their SAP licenses. Overpayment occurs as a result of overbuying named user licenses and managing package licenses reactively, based on inadequate information. Overbuying of Named User Licenses One of the major sources of overpayment for named user licenses occurs at initial purchase and is due to the nonoptimal assessment of the number of named user licenses in each category needed by the organization. Typically, the SAP license administrator manually assigns users to categories at purchase time, in many cases based on inadequate information. Not only are the SAP descriptions of named user license categories vague but also the SAP license administrator does not have sufficient information on users SAP functionality needs. Consequently, the administrator makes educated guesses in estimating the number of users in each category. In some cases, this estimate results in overuse, that is, some users access more functionality than they are licensed to use. The result is potential licensing liability at true-up time and an unbudgeted true-up expense. In most cases however, the result is overbuying. The enterprise purchases more licenses in the more expensive categories than users need for their job roles. In some cases, the enterprise may have neglected to enter a license category in the user master records for some users. For these users, the SAP measurement program automatically assigns the system default license category. For a production system, the default is Professional user, one of the most expensive categories. There are two other frequently encountered causes of overbuying: Idle users. Licenses are held by people who are no longer using the SAP system. There are a number of reasons for idle licenses, including job transfers and terminations. Duplicate users. Some employees may have more than one user account and may unnecessarily have more than one named user license. Reasons include users who have accumulated multiple user IDs by using different IDs for different enterprise systems, and users who had one license for direct access and were also allocated an unnecessary additional license for indirect access. LAW does have the ability to consolidate user accounts into a normalized set of users, but can only detect duplicates based on a single identifying field. This is often not adequate to find all duplicate users. Minimum Control of Package License Costs The metrics used to calculate license cost are confusing and may not be appropriate for the organization. What s more, the only time organizations can assess their package license consumption and costs based on these metrics is at true-up time. That s because SAP doesn t provide an accessible way for organizations to run package measurements at other times. As a result, IT typically manages package licenses reactively based on unclear information. The result is often an unpleasant surprise at true-up time. The Barriers to SAP Software License Optimization Software License Optimization provides a way to cure the SAP overpayment syndrome and achieve significant cost savings. So why haven t enterprises charged ahead with SAP software license optimization and exploited the opportunity to cut costs? The answer is that most enterprises lack the tools to accurately assess their license position and consumption, let alone to optimize their position. 4

5 License reporting tools from SAP do not provide the breadth and depth of information needed. These tools have been designed solely to help SAP determine customer license compliance. They are not designed to help customers optimize license positions. Compliance does not imply optimization. Lack of Named User License Usage Data SAP tools don t track and analyze detailed usage data. LAW reports only the total number of manually assigned active user accounts in each named user category. It does not indicate whether users are actually using SAP, nor does it indicate the functionality level utilized by users who are accessing SAP systems and/or data. Additionally, SAP tools do not provide sufficient detection of duplicate user IDs. LAW consolidates users on only a single field. Although this approach detects some users with multiple IDs, it does not detect all duplicate user IDs. And while LAW does allow manual corrections to be made, the effort is impractical for large enterprises. Finally, SAP tools do not provide sufficient data on indirect access. The LAW report does not include details about users accessing SAP data through a non-sap interface. For example, if a single SAP user account is used by a non- SAP system to extract SAP data that is consumed by 1,000 users, SAP is aware of only this one account. LAW has no way of detecting the 1,000 indirect users because they do not exist within SAP. Moreover, the tools do not identify all third-party interfaces. Lack of Transparency of Package Licenses SAP tools collect enough data to calculate package license consumption. However, the resultant license consumption is not reported to customers. They can access only the raw metrics used to calculate consumption. Most SAP packages provide a counting function that returns one or more metrics, but it s difficult to make use of the data. Each SAP package has different SAP-specified metrics. SAP package measurement functions may return a dozen or more separate metrics for a single package and it s often unclear which metrics are required to calculate package license consumption: Some metrics don t count toward license consumption and should be ignored Some metrics should be combined with a weighting factor applied to each metric Some metrics may be inaccurate Some metrics represent the current value while others represent the value at the last true-up Some SAP packages don t support the reporting mechanism Moreover, metrics can be counted only on the SAP system on which the package is installed. The customer then has to manually aggregate the data across multiple systems, a time-consuming and error-prone process. What SAP packages do i access and what transactions do I run? What s the Optimal License Type for each User? How long do I use the system? What are my authorization roles? Have I been assigned more than one license? Do I access SAP directly, indirectly, or both? Figure 1: How are people using the SAP system? 5

6 Type of usage data Data tracked Purpose Direct usage patterns (for each user) Indirect usage patterns User accounts The time the person uses SAP The SAP modules accessed and the transactions run The user s authorixation role All third-party systems that are accessing SAP (both certified and noncertified systems) The people who are using those systems The users usage patterns All active user accounts Which accounts are duplicates (using more rigorous comarison techniques than SAP tools) Identify idle users Determine level of functionality accessed by direct users Determine user s usage rights Identify who is accessing SAP indirectly Determine level of functionality accessed by indirect users Identify users with multiple accounts and multiple licenses Figure 2: Usage Data Tracking and Analysis Overcoming the Barriers Fortunately, enterprises can overcome the barriers to optimization with a Software License Optimization solution that collects broad and in-depth data on how people are actually using the SAP systems. Top solutions today provide sophisticated analytics that parse usage data, transform it into actionable information, and present the information in a meaningful way. With such a solution, IT can achieve effective management of named user licenses and package licenses. The solution helps IT tame the complexity of SAP licensing. It also empowers IT to take full advantage of SAP licensing policy changes to monetize the savings from Software License Optimization without having to wait for a contract renewal. Optimizing Named User Licenses To optimize the use of named user licenses, it s essential to gain insight into exactly how individuals are using the SAP system. Figure 1 summarizes the questions that must be answered. Figure 2 shows the usage data the solution has to track and how that data helps determine enterprise license position and consumption. It s important that the solution maintain data on SAP licensing contracts, including contract entitlements and usage rights. By performing sophisticated analysis of this usage and entitlement data, the solution transforms it into actionable information that enables the enterprise to effectively manage named user licenses. A comprehensive Software License Optimization solution minimizes the risk of noncompliance in two key ways. It compares authorization, entitlement, and usage rights with actual usage data so IT can ensure that all users have a named user license of the appropriate category. It also identifies all users who are accessing SAP indirectly, so IT can ensure that all indirect users have a named user license. The solution also enables IT to optimize the utilization of named user licenses in four ways: Assigning the optimal named user license category to users. By comparing authorization, entitlement, and usage rights with actual usage data, the solution can determine the optimal named user license category for each user based on rules. This typically reduces total cost by reducing the number of more expensive licenses and increasing the number of less expensive ones. Identifying and retiring licenses assigned to idle users. By identifying idle users, the solution enables IT to reclaim unused licenses and reassign them to other users or forestall additional license purchases. Identifying duplicate users with multiple licenses. By identifying users with multiple accounts that are consuming multiple licenses, the solution enables IT to reclaim redundant licenses and reassign them to other users or postpone license purchases. Optimizing licensing for indirect access. By identifying users with both direct and indirect access, IT can cover the indirect usage with the named user licenses that are already allocated to those users dialog user accounts. This eliminates the unnecessary allocation of multiple named user licenses to a single user. 6

7 Figure 3 presents an example of SAP named user license optimization. As shown in the diagram, the number of high cost Professional (gray area) and Limited Professional (green area) licenses have been reduced substantially in the optimized state, while the lowest cost Time Card user (CAT yellow area)) license type has increased. Additionally, if an organization has a contractual requirement to maintain license category ratios, the solution provides information that enables the organization to compare the optimal number of licenses in each category with the contracted ratio. This provides ammunition for contract renegotiation. In some cases, the information positions IT to negotiate removal of the ratio requirement entirely by demonstrating that the ratio is unreasonably different from the organization s actual license requirements and usage. Optimizing Package Licenses Package licenses are continually expanding in the SAP licensing scheme. Cloud (on-demand solutions), mobility (on-device solutions), and in-memory computing (HANA) are all key growth areas for SAP and all involve packages. So it s important that package licenses are included in the enterprise license optimization strategy. To effectively and proactively manage package licenses, enterprises need a solution that discovers all SAP package installations across all SAP systems under management and maintains the package licensing rules and metrics for the installed packages. Based on this information, the solution can present consolidated reports of metric values that encompass all SAP systems and packages. These reports provide the basis for most package license consumption calculations. In many enterprises, the SAP packages span multiple systems. A comprehensive solution permits the administrator to remotely execute counting functions on multiple systems and automatically consolidate the data into a central location. This eliminates the time and effort required to manually consolidate the data. Conclusion SAP licensing is notoriously complex. This complexity has left many organizations in the grip of the SAP overpayment syndrome. Although SAP provides tools that enable IT to determine license consumption, they don t collect and report sufficient information to guide the enterprise in optimizing SAP license spend. Today s generation of advanced Software License Optimization solutions pick up where SAP tools leave off. These solutions gather robust usage data and transform it into actionable information that enables enterprises to meet the optimization challenge. Armed with these tools, IT organizations can cure the SAP overspending syndrome. They can eliminate unbudgeted true-up costs. They can take maximum advantage of SAP s more flexible license policies, by understanding which packages are under-used and trading them for new SAP offerings. And they can mitigate the risk of noncompliance in the face of SAP s increasing scrutiny of indirect access license consumption. As a result, IT can continue to tap the power of SAP solutions while reducing costs and risk. Original State Optimized State Test, 39 CB, 143 Multi Client, 2,060 Test, 8 CB, 0 Multi Client Multi Client Professional Employee Self Service 17,412 Professional, 6,834 Limited Professional, 4,682 Employee Self Service, 10,285 4,195 2,776 CAT, 16,313 Limited Professional CAT Developer Employee Self-Service Test Developer, 0 2,211 Figure 3: Optimizing named user license category assignments 7

8 About FlexNet Manager for SAP Applications FlexNet Manager for SAP Applications is a scalable software license optimization solution that meets the requirements discussed in this paper. It provides the information and functionality necessary to overcome the barriers to SAP license optimization. The solution gathers a wealth of usage data and applies sophisticated analytics to translate this data in actionable information. It presents this information in meaningful views and reports that provide valuable insight into the enterprise s SAP license position and consumption. The administrator can run the FlexNet Manager for SAP Applications license consumption report at any time to monitor compliance and identify areas of potential savings. (The report runs much faster than the SAP measurement program.) In addition, the administrator can simulate changes without impacting production rules. That enables the administrator to explore what-if scenarios, run best-case/ worst-case scenarios, and investigate hypothetical license positions to validate results of a rule set before promoting it to production. In addition to usage data, FlexNet Manager for SAP Applications maintains accurate information on SAP licensing contracts, including contract entitlements and Figure 4: FlexNet Manager Suite Management Dashboard Showing SAP 8

9 usage rights. For example, it maintains a library of package licensing rules for hundreds of SAP packages, and can be easily configured for many other packages. FlexNet Manager for SAP Applications is accessed through a Web portal. The administrator can configure a variety of views that are personalized for different types of users. Because the solution offers high granularity of access privileges, the SAP team can share information with both SAP-experienced and non-sap-experienced people without risk. The wealth of data gathered, analyzed and presented by FlexNet Manager for SAP Applications gives customers more negotiating leverage at contract renewal time. It also enables enterprises to take full advantage of SAP licensing policy changes, so they can more quickly monetize optimization savings. About Flexera Software Flexera Software helps application producers and enterprises increase application usage and the value they derive from their software. Our next-generation software licensing, compliance and installation solutions are essential to ensure continuous licensing compliance, optimized software investments and to future-proof businesses against the risks and costs of constantly changing technology. Over 80,000 customers turn to Flexera Software as a trusted and neutral source for the knowledge and expertise we have gained as the marketplace leader in licensing, installation and compliance for over 20 years and for the automation and intelligence designed into our products. For more information, please go to: CHECK OUT THE DEMO! WATCH NOW Have Questions or Need More Information? Contact Us Now! 9

10 Flexera Software LLC (Global Headquarters): United Kingdom (Europe, Middle East Headquarters): Australia (Asia, Pacific Headquarters): Beijing, China: For more office locations visit: Copyright 2014 Flexera Software LLC. All other brand and product names mentioned herein may be the trademarks and registered trademarks of their respective owners. FMS_WP_SAPLicense_June14