Simplifying SAP Licensing – Everything you need to know

SAP licensing is notoriously complex and often difficult to understand. Many organizations find themselves in the dark about the number of licenses they own, the terms of use, and how to accurately measure usage. JNC are SAP licensing experts. In this blog post, we will break down the key components of SAP licenses to help you navigate this challenging landscape.

Understanding SAP Named Users

The SAP Named User license is the foundation of SAP’s licensing model. It is required for each user to access the SAP system. While the concept is consistent across R/3, ECC, S/4HANA, and Cloud, the application and definitions of use differ.

The license itself does not govern use making it essential to assess user activity, authorizations, and roles to determine the license assignment. This evaluation ensures that each user has the appropriate license based on their actual usage and access needs.

Pre-S/4HANA

In pre-S/4HANA systems, any user accessing the ERP system must be licensed with a user type defined in your contract. Commonly these are:

• Professional User,
• Limited Professional User,
• Employee User and
• Developer User.

However, these definitions are frequently vague and vary from contract to contract, which make it challenging to assign the right license to the right user.

S/4HANA On-Premise

For S/4HANA On-Premise, only users accessing the Digital Core need to be licensed. Users accessing a Package do not require a Named User license, which is a significant change from the pre-S/HANA license model. The licenses in this model have more detailed and rigid definitions, thus most customers will have exactly the same definitions. The four licenses available are:

• S/4HANA Enterprise Management for Professional use.
• S/4HANA Enterprise Management for Functional use.
• S/4HANA Enterprise Management for Productivity use.
• S/4HANA Developer access.

S/4HANA Cloud

In S/4HANA Cloud the concept of licensing changes. Every user still requires a license, but there is an additional calculation step to determine the number of licenses needed. This is known as the Full Use Equivalent (FUE) license. Each license type has a different weighting, meaning the number of users does not directly translate to the number of licenses. The example below provides more insight.

This example shows that 760 users might only require 224 licenses based on their respective weightings. Note that as of writing, this is consistent between S/4HANA Cloud, public and S/4HANA Cloud, private.

Exploring SAP Package Licenses

In addition to Named User licenses, SAP also offers package licenses. These allow you to use additional software functionality with your ERP system. Package licenses are sold based on specific metrics depending on the product and there are hundreds of different metrics available. Some metrics are sold in blocks, complicating the calculation of licenses owned and the number of units you can use.

For instance, if you purchase SAP Invoice Management, the metric is sold in blocks of 1,000 units. Buying 500 licenses gives you the right to process 500,000 invoices per year. If each license costs £250, the total cost would be £125,000. Your entitlement is then limited to 500,000 invoices annually. Surplus entitlement can be either manageable or excess, depending on your future growth.

The concept of the package license does not change based on the SAP system you have (R/3, ECC, S/4HANA, S/4HANA Cloud).

The Role of the Database

All SAP ERPs require a database.

Pre-S/4HANA

Before S/4HANA, customers could choose from a various databases like Oracle, Microsoft SQL Server or IBM DB2. This could be procured either from the software vendor or from SAP. If purchased through SAP the charge would be a percentage of the software value running on this database, known as the SAP Application Value (SAV). For example, if Oracle Database had a SAV charge of 10% and you owned $1,000,000 worth of software from SAP, you would be charged an additional $100,000 to use the Oracle Database.

S/4HANA

S/4HANA mandates the use of SAP’s HANA database. Third-party databases are no longer an option.

S/4HANA Cloud

In cloud deployments, the HANA runtime license is included in your license contract. If you require a standalone database, you can purchase HANA Enterprise Edition in the cloud either via a subscription or through the Business Technology Platform.

SAP License Administration Workbench (LAW)

Also known as SLAW or LAW, this tool provides organizations with an overview of license usage. It is available for all customers as standard with their ERP deployment, whether on-premise or private cloud. This tool consolidates the usage measurement across all ERP systems (measured via transaction USMM) and forms the basis of SAP audits.

LAW and Named Users

The tool measures all assigned licenses for active users across all systems, providing a unique count of Named User licenses in use. This count reflects how an organisation has assigned the licenses rather than analyzing deeper authorisations or roles.

LAW and Packages

LAW is less reliable for package licenses. The tool measurements assess whether products are in use, but do not necessarily measure the number of licenses consumed. For example, LAW might measure user counts for a product with a Company Revenue metric. This measurement advises that the product is in use but does not tell you how many licenses you are consuming. This can lead to inaccuracies.

Be aware that LAW may generate false positives, cannot measure certain products or metrics and can sometimes provide inaccurate results. When assessing package usage via LAW, be cautious about its accuracy and ensure that you verify the results thoroughly.

LAW and Databases

LAW can identify the database being used per system but is limited in terms of additional detail. For more information on measuring HANA database usage, please refer to our dedicated HANA Article.

Conclusion

SAP’s licensing rules vary across its three major product families (R/3, ECC, S/4HANA, S/4HANA Cloud public/private). Understanding how changes to your contract affect product licensing and measurement is crucial. SAP’s standard tools provide an indication but lack the detail and accuracy needed for comprehensive license management and means it cannot be relied upon in isolation. For a deeper dive into optimizing your SAP licenses, reach out to JNC for expert guidance.

Download our handy reference sheet:  SAP summary table of license types