Understanding SAP license, Metrics and support
In this blog, I’m going to share information about the ever-changing SAP license & its metrics. This information will give a good understanding about the modus operandi of SAP licenses & its complications.
Since SAP AG started reselling licenses through partners, it has changed it’s pricing model & metrics of billing more than 30 times in the last 20 years or so. As of August 2017, there are about 805 line items in On-prem ECC bill of materials alone. This BOM caters to 14 verticals that include Automotive, Banking, Consumer Products, Defense, EC&O etc.
There are mandatory items needs to be procured when purchasing SAP license for the first time namely user & database licenses. There are 17 types of user licenses in ECC, with prices ranging from USD 60 to USD 9,000. With a clear understanding of the license usage, customers will be able to size their requirement accurately. In most cases especially during first time purchase, customers are not educated upfront about the licenses types & usage. Customers rely on partners or OEM to propose the license BOM and I bet, 99% of the times the BOM is not accurately addressing to the current requirement of a customer need. Even if someone tries to learn about it, they will eventually be lost with the complications in the license BOM & its metrics. In this series of blogs, I will walk you through the different type of licenses and metrics of billing with easy take away’s.
On a high level, SAP licenses are classified as follows:
- General licenses – 805 line items
- Cloud applications – 842 line items
- S/4 HANA solution – 753 line items
- Native HANA solution – 16 line items
i.e Total of 2416 line items.
2416 line items in SAP license bill of materials depicts that the main reason how SAP makes billions of dollars every month. These licenses are governed by over 80 metrics in which general licenses & cloud applications are categorized into, Ex: users, revenue, spend volumes, transactions, locations etc.. About 26 metrics in S/4 HANA solution.
Understanding these metrics is very important to evolve an optimized bill of materials. For a first time buyer, I guarantee at least 30% cost optimization if metrics are thoroughly read and understood. Ex: license usage of S/4 HANA productivity use (US$ 450 per user) & S/4 HANA professional use (US$ 5250 per user) although has major differentiation in function, In a 100 user organization, productivity use will cater to at least 25% of the user base. But, the first BOM proposed by SAP or a partner will not have this proposition.
There are five types of support offerings,
- SAP Preferred care(Cloud platform, Business ByDesign & Ariba) – 20% of license value payable every year
- SAP Preferred Success(For Hybris & SuccessFactors) – 20% of license value payable every year
- SAP Standard support – 19% of license value payable every year
- SAP enterprise support – 22% of license value payable every year
- SAP VAR delivered support (VDS) – 22% of license value payable every year
While SAP preferred care & SAP preferred success are optional to customers. SAP standard/enterprise / VDS is mandatory when buying On-Prem licenses. There are three levels in support offering, Level 1, 2 & 3.
Unless VDS is executed between customer & partner, SAP provides support to all customers on all levels as well SAP charges a fee of 200 EURO (+VAT) for some of the incidents.
For arriving at an optimized SAP license BOM or to optimize your existing SAP License, talk to one of our License optimizing executives by leaving a query here or email me at firstname.lastname@example.org for details