Sapphire 2017: McDermott declares SAP indirect licensing policy change

At SAP’s annual Sapphire Now conference in Orlando, Florida, CEO Bill McDermott ruled out charging for static read access from third-party systems, after recent controversy

SAP CEO Bill McDermott tackled the controversial issue of indirect licensing in his opening keynote at the supplier’s annual Sapphire Now conference in Orlando, Florida.

At the 2016 event, McDermott led on a theme of an ambition for increased customer empathy. This year, he said an example of that is the company’s decision to change aspects of its approach to indirect licensing.

“I hear that indirect access is causing some anxiety, so let’s tell it like it is. Protecting IP [intellectual property] and accommodating ease of doing business is a delicate balance. But, even as we maintain that balance, we can show greater empathy,” said McDermott.

“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.”

Recently, SAP has been embroiled in legal cases – one with Diageo and one with Belgian brewer Anheuser-Busch InBev – which have turned on the putative use of SAP systems and data without appropriate licences.

In the Diageo case, the High Court in London ruled in favour of SAP and against Diageo in an indirect licensing case concerning the use of mySAP enterprise resource planning (ERP) software on a Salesforce platform.

In a press and analyst session following the keynote, McDermott said there was “a necessary balancing act between protecting intellectual property and having an empathetic heart”.

He said the legal disputes between SAP and Diageo and, more recently, the supplier and the Belgian brewer, “were separate and private things, and I am confident it will all work its way out”.

Modernising SAP pricing

In a blog post, Hala Zeine, SAP corporate development officer, said: “We recognise that traditional approaches to business are being replaced by newer, more transparent, modern ways of thinking and acting, which is why we are committed to modernising our pricing approach.

“As we spoke to our user groups about how to specifically address this, the topic of indirect access repeatedly came up. Indirect access is a term created by our user groups to describe when a user accesses the SAP system via a third party or custom-made software.”

In the post, Zeine goes into detail about procure-to-pay and order-to-cash scenarios in ERP software, but it is her comments on indirect static read access that seem more relevant to cases similar to Diageo.

“Indirect static read access reinforces that a customer’s data is yours. Just because the data was in the SAP system does not mean you should pay to view it when it is outside the SAP system,” she said.

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“Indirect static read is read-only that is not related to a real-time system inquiry or request and requires no processing or computing in an SAP system. Indirect static read will now be included in the underlying software licence – i.e. free of additional charge when a customer is otherwise properly licensed.”

In an interview ahead of Sapphire, Sonya Swann, vice-president and global head of pricing and commercialisation at SAP, told Computer Weekly that SAP user group communication and feedback from late 2015 onwards had brought the issue of indirect licensing to the fore.

“The industry is changing and we need to evolve with those changes,” she said, referring to widespread shifts to cloud as a delivery mode, and to SAP customers using other applications that interface with SAP’s ERP software.

“The world has changed since the 1990s, when employees at our customers logged directly into [enterprise software] systems. Now there can be a multitude of populations of users – partners, consumers making orders through e-commerce portals, and so on. There are even devices, such as sensors, mimicking human access.

“User-based pricing worked well in the past and it still does to some extent, but it does not work for indirect usage scenarios. This has not been in response to the Diageo case. We have been thinking proactively about this topic for the past two years. It is a decades-old problem, and SAP is not the only one facing it. It is a very complex challenge and we won’t be able to solve it overnight.

“Is this about moving from selling code to selling business outcomes? Yes, it is. Essentially we are saying we are focused on outcomes from processes – as with the sales and purchase orders processing scenarios, where the business value you are receiving is [precisely] the processing of orders.

“What we don’t want is for customers to go off to third parties that are not necessarily providing our customers with the best advice [about licensing]. We want customers to feel comfortable in approaching us, and consulting us,” she said.

From the user side, Paul Cooper, chairman, UK and Ireland SAP User Group, which had expressed its concerns on the Diageo judgment, said: “We are pleased that SAP is finally taking action, as we have raised the issue of indirect licensing both directly and through SUGEN [SAP User Group Executive Network] for a number of years. It has become a critical topic for many of our members and we are sure the new licensing model will be met with interest. Broadly speaking, moving from a named user to business metric based model should make life simpler for most customers. 

 “Overall it is a start and it’s good to see some clarity around three of the most popular processes SAP supports, but there is a long way to go. Through SUGEN, we have already provided feedback on where improvements need to be made and highlighted the areas where there needs to be greater clarity. For example, there are very few users that only process orders. When it comes to deciding which licence metric to be used (named user or order quantity), customers need to ensure they understand what is best for them and their business, both now and in the future.

“Licensing is an incredibly complex topic, so it will be imperative that SAP provides as much information and education to customers as possible, with working examples that customers can clearly understand.  SAP also needs to ensure that account managers are fully educated regarding this, so they can work with customers and articulate the right way to proceed.”

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