License rescue approaching - or?

Indirect use," which has been the subject of controversy for many years, is just the tip of the iceberg. The licensing of intellectual property such as algorithms is complex and complicated.

The analogy to an iceberg in stormy seas is apt to the extent that the weather conditions - the specifications and wishes of the providers - as well as the views and necessities of the users change continuously - due to technical developments.

And the real problems can only be seen with close and detailed observation, because "indirect use" is only the tip - even more challenges lie beneath the surface: The topic ranges from authorization management to compliance and license measurements!

Authorization management

SAP unveiled a new sales, audit and pricing model for so-called indirect access in April of this year, which was developed in close collaboration with user groups, customers, partners and analysts.

The new approach is intended to ensure that customers can use their SAP licenses more easily and transparently in the future. The model differentiates between direct/human access and indirect/digital access and aims to create clear rules for licensing, usage and compliance. There is thus movement in the "licensing scene".

Due to new use cases such as IoT, blockchain and Industry 4.0, new licensing models are needed that go beyond the human/software relationship.

The challenges are enormous because a licensing and authorization architecture has to be created in terms of organization, business management and technology:

Accenture has partnered with SAP to develop an intelligent entitlement management solution. Designed specifically for high-tech companies, the solution is intended to enable users to develop, implement and scale new digital business models quickly and easily.

Compliance

Furthermore, SAP intends to introduce a clear separation between license sales and audit and compliance and also create new rules in organization and governance that provide for a strict separation between the sales organization and processes and the audit organization and its processes.

To this day, disagreements continue to arise between customers and SAP over how older contracts should be interpreted with regard to the new digital requirements.

In some cases, this has a negative impact on parallel discussions on the acquisition of new software. The organizational changes on the SAP side now allow these matters to be separated and should enable independent discussions.

This could make it easier for customers and SAP sales staff to work together. There are also plans to make measurement tools available so that existing customers are able to monitor their own user and license consumption at any time.

Adds analyst Ray Wang of Constellation Research:

"Digital transformation means that every company has to clarify for itself how it creates new added value for its customers. As soon as companies evolve their business models from products to services, from services to customer experience, from experience to measurable results, this also affects pricing models.

Enterprise software providers are therefore not only moving in the direction of outcome-oriented prices. They also need to find models that on the one hand protect previous IT investments, but on the other hand also enable customers to switch to new business models in a fair and equitable way."

Indirect use

Is "indirect use" a myth of SAP, or can we take the view that the interaction of software components is their causal determination?

"Well, you can't speak of a myth".

says technology and licensing expert Guido Schneider from Aspera.

"I suspect that SAP originally wanted to combat abuse with this. Technically, it is very easy to set up a non-SAP application alongside an SAP system.

Employees then log on to the non-SAP application instead of directly to the SAP system. SAP transactions and reports can be called up via BAPIs and mapped externally. This can save customers hundreds or thousands of user licenses.

This is license abuse and, according to copyright law, even a criminal act."

In the early days of R/3, it was similar - to SAP's advantage: Anyone who installed their R/3 on an IBM AIX server RS/6000 only needed two users under the Unix operating system AIX, an administrator and the R/3 system. Regardless of how many users were working with R/3 one level up, the AIX license payments included only two users.

"SAP's key account managers today don't know where misuse ends and intended use begins. With dollar signs in their eyes, they have been approaching their customers since late 2014 and increasingly in mid-2015"

sums up Guido Schneider.

"This behavior led to a breach of trust with SAP. Customers were not used to that. SAP used to be a partner that helped existing customers optimize their business processes and map them in software."

Unlike previous usage-based licensing models for indirect access to ERP applications, the new SAP licensing model is based on the value created by creating specific documents in the SAP ERP system.

"SAP has taken an important step with this innovative model to regain customer trust, which seemed to have been lost somewhat recently"

said Andreas Oczko, DSAG Board Member Operations/Service & Support and Deputy Chairman of the Board.

With regard to the announced SAP pricing model for the Internet of Things, the DSAG association would like to see a solution that meets both current and future requirements.

"A first step has been taken to continue on the path to digital transformation. However, the goal must be to develop a true, breathing model based on a pay-per-use approach"

Andreas Oczko explains.

DSAG will continue to advocate for this and other issues on behalf of its members in the upcoming coordination talks with SAP. However, SAP's demand for "SAP NetWeaver Foundation for Third Party Applications" licenses can be debunked as a myth.

"This is about interoperability with other computer programs".

explains Guido Schneider.

"SAP is not allowed to charge additional fees for this. But that has nothing to do with indirect use. This is often lumped together because SAP sales can't tell these issues apart either.

And if he's hit granite with his customers - and rightly so - on one issue, he tries to play the other card."

Third-party add-ons

Until now, the licensing model for SAP ERP was based on the number of users. In the meantime, however, more and more digital access to SAP systems is taking place. This is a challenge for customers, who are therefore increasingly looking for an alternative licensing model.

In the future, SAP will differentiate between Human Access, which will be calculated according to the number of users, and Digital Access, access via third parties, Internet of Things (IoT), bots and/or other digital accesses, which can be licensed on the basis of the documents processed by the system itself.

According to SAP, it works technically as follows: Direct Access/Human Access occurs when a user accesses SAP's digital core through an interface provided with or as part of SAP software.

Indirect Access/Digital Access occurs when devices, bots, or automated systems access the digital core. Or when people, devices, or systems use the digital core indirectly through intermediary third-party software - for example, a non-SAP front end, a custom solution developed in-house, or a third-party application. Logical and fair?

"Absolutely not"

says Guido Schneider.

"It even contradicts the protection of competition (§ 4 UWG). This serves to protect the providers of non-SAP applications and is intended to ensure undistorted competition.

However, the relationship between SAP customers and SAP is also to be protected against unfair business practices by Directive 2005/29/EC. In addition, it probably also violates antitrust law. The new pricing model does not change this.

This new SAP pricing model for indirect usage only helps one thing: SAP. With this, it can finally measure indirect usage and at the same time ask customers to pay in the new digital world. This will only make SAP more money, nothing else."

Of course, the new SAP pricing model still has to prove itself in reality. In this context, it would be important for SAP to seek individual discussions in order to find a viable and fair solution for indirect use in a timely manner, taking into account the old contracts and the history.

"These agreements must be legally binding, sustainable for both sides, economically viable, and draw a line under this issue"

adds Andreas Oczko.