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AB InBev settles out of court in $600m SAP licensing dispute

SEC filing reveals that brewer Anheuser-Busch InBev has come to an agreement with SAP over the ERP provider's under-licensing claim

Belgian brewer Anheuser-Busch (AB) InBev has settled its US$600m licensing dispute with enterprise resource planning (ERP) software provider SAP, but the out-of-court settlement does not clarify SAP’s indirect access stance.

In March 2017, the Belgian brewer revealed in a US Securities and Exchange Commission (SEC) filing that SAP was seeking US$600m in compensation for unlicensed use of its software.

At the time, AB InBev said it would vigorously defend itself against the software licensing claims made by SAP. However, an SEC 20-F filing earlier this month revealed that the company had settled out of court with SAP.

Speaking to Computer Weekly about the settlement, Robin Fry, a director at software licensing specialist, Cerno, said it was frustrating for all SAP users that the details of the settlement are unknown.

“These legal proceedings were started and concluded behind closed doors. It is frustrating for all users grappling with SAP licensing practices these things do not come out in open. If a business the size of AB-Inbev can’t agree what their SAP license wording means, there’s clearly very great risk for all corporates using SAP. How can any business using SAP know where they stand?”

Licensing terms open to interpretation

Fry said software licensing was still a considerable risk for major corporates.

“Relying on software asset management tools is never enough to know the true licensing position. SAP like many other major vendors use archaic license terms – often with many ambiguities – which they seek to apply to shifting technologies. License terms can often be interpreted in a partisan and unfair way leading the way to massive claims such as this one against AB-Inbev. Why bother with new sales when you have a gun that you can hold to the head of your own customers?,” he said.

“It is very rare a business will knowingly infringe copyright. They want to be correctly licensed”

Fry argued that businesses using SAP need to know their true licensing position, pointing out that it is very rare for a business to knowingly infringe copyright.

In his experience, many corporations are embarrassed and worried that their reputations will be damaged if they are in dispute with their software provider.

Is there a Salesforce connection?

Last March, AB InBev’s 20-F SEC filing revealed it was being pursued by SAP for multiple breaches of a 30 September 2010 software licence agreement based on allegations that AB InBev employees used SAP systems and data, directly and indirectly, without appropriate licences, and that the company underpaid fees due under the service-level agreement.

Although details of SAP’s complaint against AB InBev are unclear, what is known is that the brewer had recently begun using Salesforce to help it integrate data with SAP. In February 2017, SAP went after another brewer, Diageo, over its use of Salesforce to provide indirect access to the company’s back-end SAP ERP.

At the time, the judge ruled that Diageo had broken this agreement after the company’s implementation of a system for its sales reps using a Salesforce application called Connect that connected to SAP.  

“In my judgment, the interactions identified above between the Connect customer and mySAP ERP constitute use of, or access to, the mySAP ERP software,” the judge stated in the High Court ruling. Diageo was fined.

According to Martin Thompson, an analyst and founder of Itam Review, who attended a recent BCS event on licence management, Diageo is expected to dispute the court’s ruling, “citing a lack of specialist knowledge by the judge presiding over the SAP litigation”.

The blurred lines of licensing

Fry said indirect usage was too broad a category from a licensing perspective. 

“We are all indirectly using SAP. Every time we use a payment service online, a back-end SAP system may be triggered.” It would be crazy to licence for every distant consumer access to this system, Fry said. "The issue as far as auditing indirect access goes  is where does the licensing usage stop."

At its 2017 Sapphire Now annual user conference, SAP CEO Bill McDermott ruled out charging for static read access from third-party systems. “Today, I announce simplified pricing. The ‘procure to pay’ and ‘order to cash’ scenarios will now be based on orders, which is a measurable business outcome for any business. Static read access in third-party systems is your data, and so SAP will not charge for that.”

The challenge for many businesses is that their back-end ERP system, like SAP, is effectively a system of record. To become more customer-centric and embrace digitisation, it is necessary to expose the data held in these systems to customer-facing systems, which helps to build a more seamless experience.

As an example, Fry described a potential software licensing gap in how road tools are processed: “Every time you drive through a road toll barrier, the radio device in your vehicle triggers a payment process in a back-end system. These large ERP systems are being activated.”

McDermott said the orders process is measurable, but the question for many businesses is how much it will cost to license access to the SAP-powered business process.

Fry said corporate goodwill was not sufficient to overcome the uncertainty surrounding SAP licensing. “You need certainty, not goodwill from the vendor,” he said.

“SAP fails to understand that businesses need certainty - not occasional goodwill concessions from a dominant vendor. A lot of licence agreements were put together 20-30 years ago and have been shored up with addenda, non-binding policies and whitepapers.” All of these complicate a company’s licence compliance, Fry warned “Absolute predictability over their license commitments – and the consequent costs - is the way business wants to work,” he concluded.

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