Licensing Discourse

SAP's success and rapid growth are reflected in the license agreements of existing customers. Former SAP CFO Werner Brandt casually commented in a conversation, "We probably don't have two customers with the same license agreements."

The DSAG user association has been calling for a consolidated price list for many years. At SAP, there is the public PKL, price and conditions list. However, in the PKL only the usage rights are defined without prices. The real price list is an Excel spreadsheet that is not publicly available. Information about products, metrics, prices and conditions is difficult to obtain. Even among existing customers, there are only a few trusted people who have this Excel price list. Only by belonging to the DSAG working group on licenses is it possible to obtain the Excel information, which is so sensitive from SAP's point of view.

There is a reason for the strict secrecy and mistrust of the SAP community: SAP and its qualified partners negotiate licenses with each individual customer in a very intensive and individual manner. This strategic approach has the very pleasant side effect for SAP of obtaining the maximum in each case. For this purpose, SAP has a database with numerous parameters of its existing customers. Thus, the SAP sales representative knows quite precisely about the IT budget, personnel resources and software equipment of his existing customer.

On the customer side, it is now necessary to be conscientiously prepared when entering into discussions with SAP and to always keep a close eye on one's own license situation. However, because there is not always enough time to study SAP's PKL and GTC in addition to day-to-day operations, there are experts like Dr. Jana Jentzsch and commercial license measurement tools from numerous SAP partners.

Ultimately, it is an open competition for arguments and contracts - a discourse of license. This discourse can be understood in its original sense, as a play on words, as once defined by the philosopher Ludwig Wittgenstein (1889 to 1951): Wittgenstein refers to certain idioms as games because they follow their own laws and give words specific meanings. An SAP license discourse is now proceeding in a similar way.

AnyDB versus Hana

One of the current licensing discourses deals with the topic of AnyDB and Hana. With the step towards S/4, it is also necessary for existing customers to have a
Hana license and then put the new database into production for the S/4 system. This can result in duplicate DB licenses: for AnyDB in the form of Oracle, IBM DB2 or MS SQL Server and for Hana. However, because in many cases only the old ERP/ECC 6.0 with AnyDB is running productively, while S/4 with Hana is only in the customizing phase, many existing SAP customers argue that they only want to pay the licenses and maintenance fee for one database.

Contract terms and fees

An expensive side issue during the S/4 release change is the database fee. SAP tries to charge for Hana DB licenses even if the system is not yet productive. This means that the existing SAP customer pays twice during the transition period.

"On the basis of the Order Forms, license fees are generally payable at the beginning of the contract term, regardless of whether the system is already productive", knows lawyer Jana Jentzsch from her professional practice. "Depending on the type of conversion, there may be credits for the old database. With regard to the maintenance fees, these are also generally payable from delivery. It is difficult to achieve deviations here, but not impossible in certain constellations."

In the case of mixed database landscapes, other complex regulations must be observed. There, arbitrary data exchange must not occur: "A popular pitfall", warns Jana Jentzsch.

Members of IG SAP Switzerland reported that, with skillful negotiation, it is very possible to force the suspension of the Hana maintenance fee until the productive start of S/4 Hana. However, all parties involved emphasized that success can only be achieved with conscientious preparation. On the other hand, SAP is also not closed to good arguments. Ultimately, the SAP community discourse boils down to give and take.

Legal Navigator for S/4

The real challenge of S/4 conversion is thus not so much the legacy data sets or Z-modifications. On the website of Jana Jentzsch's law firm, a "Legal Navigator for SAP S/4 Hana" is advertised. That sounds dramatic. In the SAP community, the S/4 color doctrine has been discussed so far - whether green, brown or bluefield conversion. Does this mean that the real difficulty lies in the legal design of the release change and less in the organizational or technical task?

"The design of the changeover to S/4 Hana is an immense challenge for companies. It is necessary to prepare decisively both legally and organizationally, commercially and technically, in order to successfully pass the contract negotiations.", Jana Jentzsch describes the current situation. "It is not a question of which is more important. It is essential to set up the project on a company-wide basis, to involve the management board, and to bring the various interests of the specialist departments into line. If you skimp on the legal aspects, you will not have tapped your full potential and may have to pay for it later."

Successful S/4 conversions take all aspects into account right from the start. The release change from ERP/ECC 6.0 to S/4 Hana must be viewed holistically and distributed across many shoulders. Accordingly, a CCoE manager would be overburdened.

Ms. Jentzsch also emphasizes the holistic approach in the E-3 interview: "It is important to involve everyone at a very early stage of the project. A legal review of only the draft contract at the end is not enough; that hasn't worked for a long time. Only if we have an understanding of the project goals, history and status quo can we see what the customer really needs. It is becoming increasingly important to set up and manage projects in an interdisciplinary manner from the very beginning."

History is a particularly important point when assessing SAP's license situation. Ten years ago, Gartner analysts advised existing SAP customers not to convert existing SAP licenses under any circumstances and not to accept new terms and conditions for them. This is because old SAP licenses often have considerably more rights than newly purchased ones.

Individual challenges

Does that still apply today? "I would never presume to know what is better or worse for all SAP customers. That can only be decided on a case-by-case basis", Jana -Jentzsch relativizes and explains: "It is true that legacy contracts often still contain special users that SAP no longer offers today. It is then necessary to determine what the best strategy is and what rights the customer will really need in the future. This can change dramatically over the years. Special users defined in detail ten years ago may have become less important today in the course of digitization; of course, the reverse is also conceivable. Incidentally, a distinction must be made here between the classic GTC - which do not regulate usage rights in detail - and the detailed price and conditions list, which contains the metrics."

A successful licensing discourse obviously starts with defining one's own needs, as Jana Jentzsch points out: "The key question - also for the S/4 transition - is always: What does the customer really need? Where does he need room to maneuver? What is his strategy for the future? But also: What can he do without? What can be criticized is that SAP today offers significantly fewer user types and that blanket regroupings in the new SAP licensing system are often not financially advantageous for the customer, also because rights are granted here that are not needed at all. The goal must be a future-proof contract that gives the customer all the rights he needs, but also grants design options, and that is also financially attractive in the long term - and not just at the moment the contract is signed."

The S/4 draft contract

The question for every existing SAP customer is: How should an affected party prepare for S/4 conversion? "He should start planning as early as possible and set up a company-wide project involving all relevant departments", is the quick answer from Jana Jentzsch. The technical, commercial and legal challenges must be defined. "The draft contract SAP sends is the final phase of the project, not the initial phase", emphasizes the licensing expert.

From a non-lawyer's perspective, the question to attorney Jana Jentzsch: How does an existing SAP customer migrate to S/4 in a legally secure manner? "The question is what 'legally compliant' actually means in an S/4 Hana migration. If you mean that with 'without If you want to translate this as 'no legal risk whatsoever', then I will tell you that this is not possible." SAP is too powerful in the negotiations, Jana Jentzsch interprets the situation, but "this is about risk management. By 'migrate to SAP S/4 Hana in a legally compliant manner', we mean that the customer should understand the legal risks in particular and cushion them efficiently."

S/4 conversion becomes a Sisyphean task. "Think of S/4 migration as a puzzle with 100,000 pieces", Jana Jentzsch illustrates the challenge. "These 100,000 parts also have a direct or indirect legal reference. The individual parts have to be identified, understood, prioritized and finally put together. When putting them together, many corners and edges still have to be polished so that it ultimately fits. And, of course, it must be decided where no compromises can be made, where the risk must be minimized, and where everything must fit."

Being right and getting right are not the same thing. "The law and the contract design based on it are the right instrument to implement accurate risk management", emphasizes the licensing lawyer. "We often see that risks are not properly assessed because there is a lack of legal understanding. Many customers don't know the contractual details - I mean the contents of the GTC, PKL, data protection agreements and product supplements. We have already advised a dozen DAX corporations, mostly in the background. The goal is first of all to put the clients in a position to make informed decisions and to position themselves in the best possible way in advance of the contract drafting."

Cloud Exit Strategy

A very difficult topic in the SAP community is a possible exit strategy for cloud users. Rise with SAP and the SAP cloud strategy give the impression of a one-way street.

"An exit strategy is important and should definitely be considered by the customer", affirms Jana Jentzsch. "Of course, the cloud contracts also offer the option of termination. Renewal is not mandatory; the customer can terminate. However, these rights are rather inflexible and possible options for action should be explored at an early stage. It is important to know which scenarios are to be cushioned. Not all clouds are the same. For example, the private cloud can also be a possible exit scenario for the public cloud if this meets the customer's needs." Thank you for the discourse.