S/4 licenses affect the management

Recent developments as well as the current pandemic show that people are becoming less resistant in some areas as their standard of living and prosperity rise. This insight can also be applied to the topic of IT licenses.

The fast-moving times with increasing IT demands and more complex software solutions more and more often overwhelm the management and the companies with the respective licenses. I have made this experience not only personally as an IT manager, but also as a consultant in other projects.

There are major differences between the licenses of U.S. and European IT companies. SAP, as the world market leader in enterprise resource planning (ERP), often still plays its own role.

The technology change and transformation process by SAP as ERP market leader has been driven forward with the greatest effort for six years. From the management's point of view, however, the topic of licenses has been given comparatively little attention, which is surprising given that this is SAP's core business.

Many executives have the feeling that they are hardly actively informed by SAP, even though they are the decision-makers. The necessary detailed information on license transformation is provided primarily by specialized SAP partners, DSAG and E-3 Magazine.

The main focus is on the new licenses for the Hana database, S/4 applications, cloud solutions and new technologies. Due to the expanded product portfolio, there are new license models in different segmentations and legal complexity. What has not changed are the customers' goals: Investment security and flexible license models at favorable conditions.

SAP primarily offers the variants Product Conversion or Contract Conversion for S/4 Hana licensing, whereby the option of license optimization should also be used.

In the Product Conversion, the current SAP main contract essentially remains in place and only the affected R/3 modules and areas are replaced by the new S/4 individual licenses (DB, on-premises and cloud). The user categories also remain unchanged. Crediting of the individual legacy licenses is possible.

With Contract Conversion, the procurement process has been made much more complex and at the same time raised to a strategic level. The contract date of the legacy contract for indirect use plays a major role, as does the crediting of the current license volume.

With the new SAP cloud strategy, rental licenses (subscription model) were also established at the same time, with risks hidden in the small print. For many customers, this means that hybrid license models consisting of purchase and rental licenses are also emerging for the first time, which would also have to be considered economically.

The conversion to the new S/4 license agreement must be supplemented with the internal SAP strategy for the next three to five years for the purpose of determining the necessary software solutions. At the same time, a team of experts from the affected areas and consultants should accompany the entire procurement process and develop a negotiation strategy.

Experience shows that this is decisive for the success of the license negotiations in terms of content and costs. In comparison to the U.S. IT companies, SAP can be credited with a certain degree of flexibility.

According to a survey by DSAG, S/4 licensing is also a massive issue for many customers during project implementation because the long or multi-year project runtimes mean that the three-month test licenses are completely inadequate. Customers already have to pay high license costs in advance on the project systems. According to the latest information, however, there are already talks with SAP for a solution.