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SAP users react with concern to SAP High Court victory over Diageo

SAP UK and Ireland User Group has reacted to the supplier’s High Court victory over Diageo in indirect licensing dispute

SAP users have been reacting to the supplier’s victory over Diageo in the UK High Court last Thursday, when the drinks maker was judged liable for indirect licensing, and related, fees.

The case, adjudicated by Mrs Justice O’Farrell in the technology and construction court of the High Court, concerned Diageo’s use of mySAP enterprise resource planning (ERP) software in relation to two new-third party systems it put in place in 2012, based on Salesforce technology.

The judge confirmed the reach of licence fees for “indirect access” by Diageo’s business customers and sales representatives.
SAP is seeking £54,503,578 in licence fees and £3,955,954 in interest, fees for back support and maintenance, and an injunction. The exact amount of the award in favour of the supplier will be determined at a later date.

Philip Adams, chairman of the UK and Ireland SAP User Group, said in a statement to Computer Weekly: “This case highlights the growing concern around indirect access. It is a topic we raised at our annual conference in November, calling on greater simplicity and clarity from SAP on what constitutes indirect usage and the implications for licensing. We have also warned all our members to be vigilant and consider their individual licensing positions.

“We are actively engaging with SAP at a global level as part of the SUGEN [SAP User Group Executive Network] licence charter team, and locally we have been running a number of events and webinars to help our members better understand the challenge and share best practice.

“However, clearly there is a lot of work to do, customers don’t like surprises and, without greater clarity from SAP, that is exactly what we could get. This is why we have two members of our board participating in the SUGEN charter and why we continue to raise the issue both globally and locally with SAP.”

Read more about the SAP UK and Ireland User Group and licensing

Long-time SAP watcher and analyst Vinnie Mirchandani wrote on his Deal Architect blog: “One of the most toxic contractual terms in the SAP world is that of ‘indirect access’ where users exchange information with the SAP software in dialog or prompt mode. The issue is not with licensed users who access the software using its UX, more with those in surround systems that have been custom built or licensed from other vendors. SAP also wants to be compensated for those users accessing data in the SAP system.”

Mirchandani described this scenario as a “time bomb”, and said it sounded like Diageo had been its victim.

Chris Karnacarus, an analyst at Constellation Research, said of the Diageo court ruling: “SAP has long used licence audits to pressure customers into making payments for what it determines is illegal indirect access of its software. Constellation sides with the generally accepted industry parameters of indirect access, which should include: the ability to process batch data; aggregate information into a data warehouse or other data store; access data for use in another system via data integration; and to enter data from a third-party system.

“Based on that, it does not appear Diageo broke any written or unwritten rules. Diageo has the right to appeal the judge’s decision – and one would expect it will. But for now, the ruling may embolden SAP to seek further litigation around indirect access not only in the UK, but other territories as well.”

Meanwhile, SAP has issued the following statement: “SAP supports the Court’s decision in this aspect of the Diageo matter, giving clarity into the legal position regarding licensing software, critical to our industry.  The decision helps software providers protect their most valuable asset.  We believe the Court accepted SAP’s arguments and acted in accordance with the merits SAP set forth in the case.

"We are further pleased that Diageo remains a valued SAP customer. We expect our working relationship will last well into the future, for the benefit of both companies, their employees and customers.”

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