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How to improve SAP ROI with smart licensing
A recent study suggested most SAP projects have a 50% chance of failure. The risk of having incorrect SAP licensing could be far higher
The implementation of SAP is a major IT initiative that has the potential to streamline business processes and make the organisation more efficient.
But, as Computer Weekly previously reported, many projects fail to meet the business objectives and expectations of their key stakeholders.
Based on a survey of 113 individuals across 105 companies by SAP advisory service Resulting IT, 52% of the businesses surveyed said their project was over-budget.
Licensing is one of the areas that is often not given enough focus, according to Rory Canavan, author of the SAM Charter.
“You have to do regular value chain analysis,” he said. “Spot the money making areas in your organisations and the technology that supports this. Find out where SAP fits in to determine which modules do not add value.”
According to Canavan, licensing is a key criteria IT departments need to get right to improve the return on investment on SAP.
Incorrect licensing can be costly and may reverse any potential return on investment in a SAP implementation.
A recent example is the Diageo ruling in February 2017, which highlighted SAP’s stance on indirect access. Diageo wanted to empower its business customers and sales representatives through a Salesforce system, which connect to its back-end SAP.
The high court ruled that by connecting its Salesforce system to SAP, Diageo was using the core ERP in an unlicensed way. The sales team and each and every business customer was considered a SAP professional user, which incurs the highest licence fee. Diageo was fined £55 million for the unlicensed use SAP.
Canavan said businesses need to ensure they have licenced SAP optimally, to meet the requirements of different groups of users. “Many business still continue to buy licences and fail to reuse licences. To validate that, users who are running SAP are still at the company,” he said.
He suggested that if user email accounts hardwire to the Microsoft Active Directory, IT can suspend both email access and access to software when the user leaves. Going further, Canavan recommended IT departments consider using a configuration management database (CMDB) to ensure users are only given access to software when they need actually it.
“If you have a CMDB, you stand a better chance of shutting down software when people leave or move off projects,” he said.
There should be a periodic assessment of the level of use of SAP, said Canavan. This means IT needs to look closely at their expenditure, such as how many of the £9,000 professional user license they require.
Read more about SAP ROI
- Observing the enterprise software market today is like observing a major relationship crisis where one side is failing to listen to the other.
- Companies can spend millions, but half of SAP projects fail because there is no connection between the implementation and the original business case.
Among the issues businesses should be wary of when trying to maximise their SAP investment is that SAP may offer tempting software bundle deals, which include extra modules either free or heavily discounted.
“If the SAP salesman has got in before the system designer you may find you buy extra modules. People may not use all these modules,” said Canavan. However, these modules still incur an annual maintenance charge, even if they remain unused. “You have to ensure you right-size the licences based on how the modules are actually used,” he added.
Businesses also need to assess whether the additional cost of upgrading a running SAP system can be justified.
In a recent Computer Weekly article, Sebastian Grady, president of third-party SAP maintenance provider, Rimini Street, wrote: “SAP ECC6 – SAP’s flagship product – is an incredibly robust set of business applications containing more than 400 million lines of code, with many customers adding millions more in custom code to meet their business and specific industry needs.
“It appears, however, that innovation into this core product has slowed to a snail’s pace, and many customers are finding it harder to justify the high and rising costs of upgrades and maintenance and, more recently, the push towards its cloud product S/4 Hana.”
Given the recent licence disputes relating to what is and what is not deemed indirect access to the SAP system, Canavan urged IT departments to validate use cases with licensing to assess what type of licensing is needed.
“People don’t seem to follow software asset management best practices very well in SAP,” he said.
But with the growth of software as a service models in the enterprise, software asset managers are starting to look at their software as a service subscriptions on a quarterly basis. Canavan said this best practice is also applicable to SAP.
Along with counting licences, he said businesses should also collect metrics on their SAP support usage. This should cover not only the volume of support calls, but also the complexity of the support query and how quickly it was resolved. Such metrics can be used when renegotiating an SAP maintenance contract, or evaluating third-party support providers.