The current license issues of the SAP community

It is likely that SAP wants to achieve growth through higher license fees and not through better performance and more functions. The fear in the SAP community is a 20 to 50 percent increase in the basis for calculating fees after a move to the cloud. With CPEA credits, Cloud Platform Enterprise Agreement, and FUE, Full Use Equivalent, SAP has created a highly sophisticated tool for license transformation.

Based on an S/4 TCO calculator developed by SAP in the form of an Excel form, the figures are naturally different.

But the additional costs in the cloud seem logical when SAP CFO Luka Mucic's projected revenue growth is factored in. According to the table, on-prem and the hyperscalers would be more expensive than the SAP cloud. SAP CEO Christian Klein said of the cloud adventure, "The migration to the cloud has effects on the capital market. In the end, SAP also has to earn a little money, but so far it all looks very good. Our operating costs are covered, and so is our cross margin. We are doing very well. And one last note: One adventure is to lift your ERP into the cloud without SAP. If something goes wrong, who do you talk to? When you go to the cloud with Rise, you have a fixed point of contact. That's why Rise is anything but an adventure, but a service that companies value."

Accordingly, all licenses must be checked before an S/4 cloud release change. According to SAP's plan, the license types are not transferred one-to-one from an on-prem system to the cloud, but are transformed via a key, Full Use Equivalent. This FUE transformation can result in higher license revenues for SAP - but it does not have to! If the existing customer analyzes and adjusts its licenses in advance and actively manages the transformation process, savings of up to 20 percent can result.

And what does the existing SAP customer lose when they convert their on-prem licenses to cloud computing with FUE? "The customer initially loses a permanent, i.e. unlimited right of use", warns licensing expert Dr. Jana Jentzsch. "Many customers are often unaware of the fact that they have become the owner of the on-premises software in the course of a purchase agreement and are accordingly entitled to use it for an unlimited period."

Only tenants in the cloud

Cloud computing is a new infrastructure and attorney Jana Jentzsch emphatically emphasizes: "In the cloud, you are just a tenant. SAP is the landlord. The legal position of a tenant is weaker than that of an owner. Therefore, the dependency on the provider grows. The customer loses a piece of sovereignty, also because the data no longer physically resides with him, but with SAP or its subcontractors. This is not just the case with SAP, but with every cloud provider. Given SAP's standard terms and conditions, it is important to think about an exit strategy early on, at least as a back-up. Many customers don't know the pitfalls of cloud contracts and believe in flexibility that doesn't factually exist. Here I hope that SAP is prepared to learn in the future and to give customers what is essential in the cloud: flexible design options. Otherwise, I see a high potential for frustration among customers."

Contract or Product?

Based on FUE, there are two paths into the SAP cloud for existing SAP customers. What does the existing SAP customer get with Contract or Product Conver-sion? "Here, too, a blanket answer is out of the question", explains Jana Jentzsch. "We have recommended both Contract and Product Conversion to various clients, depending on their situation. This depends on different factors: Does the customer want a phased conversion or to transfer his entire portfolio to S/4, or does he possibly not want to operate certain systems with SAP at all in the future? Questions of this kind must be clarified in advance. Then the various approaches can be compared. Incidentally, there may well be mixed forms between contract and product conversion."

A first reaction to Contract or Product Conversion: SAP existing customers try to keep their on-prem licenses! There may be two reasons for this: Many cloud providers including SAP coined the term BYOL (Bring Your Own License) and there is still no value SAP cloud exit strategy. So if you want to maintain a safety net for a cloudless time, you better keep your licenses in the company vault. BYOL and the appropriate license management are currently the only insurance for an exit strategy.

Digital Access

The challenge of indirect use still exists in the SAP community. What is Jana Jentzsch's advice to existing SAP customers regarding third-party applications and digital access?

"Customers should know their usage of third-party applications that interact with SAP. This usage must be analyzed in order to decide which uses require a license in the first place. Anyone who believes that a digital access license is required for every data transfer with third-party applications is mistaken. In my opinion, SAP often treats this topic too lightly, which can lead to documents being counted that should not be counted, to the detriment of the customer. The issue here is both the correct understanding of the SAP license terms and an adequate copyright assessment. Overall, this is a very complex and challenging topic and it requires technical and legal understanding in equal measure. There are lawyers who take the view that any charging of license fees for so-called indirect uses is illegal per se. But I have never belonged to this group. In my opinion, it is more legally accurate to take a differentiated approach. My advice is to deal with the issue technically and legally in depth and in a differentiated way, because that can save a lot of money."