By Dr. Jan Hachenberger, KPMG
ITAK V8 I8
All around the world, enterprises are realizing that they must employ Software Asset Management (SAM) to assure license compliance and to reduce license costs. And major software publishers such as Microsoft, IBM and Oracle have made it much easier to manage their software licenses through the SAM lifecycle. But, what about SAP? Enterprises running SAP are now looking to SAM to help them manage their software usage and license costs. Starting with their dominant position in Enterprise Resource Planning (ERP), SAP’s growing offering of application software is consuming an ever larger share of enterprises IT budgets. In fact, in the last 10 years, SAP customers have experienced double-digit increases in their annual costs for maintenance and licensing charges. Since SAP’s deployments are complex, understanding and managing SAP contracts, deployments and license usage is challenging. But it is becoming more and more essential.
The reality is that SAM best practices can be applied to managing SAP licenses, provided that SAM practitioners inside enterprises, SAM consultants and SAP administrators understand the differences between SAP and other software publishers and take the challenge to achieve a successful outcome. For Microsoft, Adobe and other publishers of desktop software, a software inventory – regardless of the growing need for integrated SAM tools – based on data coming from data sources such as deployment tools, discovery tools, management tools or even a manual inventory, can still provide the required information on software usage. In addition, all these tools including SAM tools are not vendor specific; they are task specific with templates created to cover the requirements of specific software publishers. Yet, for SAP – due to its proprietary, modular, interleaved and distributed system – it takes a more profound approach to ensure completeness, correctness and reliability of the usage information retrieved for SAP. Foremost, it requires a SAP integrated and automated software tool for discovery and metering, as well as license compliance and optimization, including license retirement and recycling: a SAP SAM Tool.
SAM Business Case
All would agree that a successful SAM implementation offers a number of outstanding benefits:
Coherent, unified and comprehensive inventory: Through software discovery and metering, SAM provides an accurate assessment of the software inventory. Discovery detects the actual software provisioned, while metering monitors the actual patterns of software usage. A license inventory taken from software publisher and reseller reports or systems, invoices and other proofs of license, contains details on the number of available licenses and the license terms. The balance between both inventories creates a SAM baseline.
Improved compliance and risk management: The SAM baseline helps limit or even eliminate the legal risks of improper software usage. The SAM baseline also enables an enterprise to determine what software is actually running – a critical part of security, data integrity and privacy risk assessments.
Lower costs: SAM helps reduce enterprise software procurement costs by maintaining accurate software and license inventories and an assessment of business requirements, which also provides greater leverage in contract negotiations and more intelligent purchasing of what is actually needed. By managing software assets throughout their life cycle – including license retirement when an employee leaves and recycling of licenses for re-use – enterprises can realize a better return on their investment and prevent unnecessary license purchases.
While SAM is often seen as largely compliance-focused – mainly due to the fact that a SAM baseline for Microsoft or Oracle in most cases will reveal unlicensed use resulting in additional license payments or even financial penalties instead of savings (see figure 1 for schematic illustration) – the financial and business benefits SAM delivers through best practices can be dramatic for SAP. For example, it is possible for a large enterprise to re-capture more than $10 million per annum in SAP licensing procurement and maintenance costs through a well-implemented SAM program. This is true because SAP has implemented audit controls, such as License Administration Workbench (LAW), which ensures that a company using SAP software stays compliant. However, these controls may call for higher license and maintenance cost then an enterprise must invest in order to be compliant.
SAP SAM Challenges
For those who want to integrate SAP licenses with their Software Asset Management (SAM) best practices, there are challenges that must be overcome:
No support for Software ID tags (SWID tags): As a result, inventory control and management is more challenging. SWID Tags are part of the ISO 19770 standards (ISO 19770-2 and 19770-3) and supported by vendors such as Microsoft, Adobe and Symantec. With SAP, each license is associated with a named user which can be used to identify and manage that license throughout the life cycle. Conventions and standards for the allocation of users and their names must be standardized. Discovery software is necessary to develop a SAM baseline of licenses that have been issued and deployed.
Different license types: License types such as Professional, Limited Professional, Developer and Employee Self-Service have no clear-cut delineation between them. As a result, assessing compliance is difficult and puts enterprises at the mercy of SAP’s annual audit process. Software for metering of user-activity is needed to assure compliance and “best-fit” the license types through actual usage patterns.
Indirect Usage Fees: An increasing concern for SAP deployments is that indirect usage fees are often difficult to identify, assess and control. When 3rd party applications provide access to SAP data through the SAP application programming interface, an annual charge is applied. It’s critical for enterprises to track the level of activity and the financial exposure of these indirect license costs, which can come from B2B or mobile applications that are connecting to the backend SAP ERP system.
The challenge of retiring and recycling SAP user licenses: When an employee leaves a firm, that person’s license remains in use even though it may be marked “inactive” to prevent access to the system. Identifying duplicate, erroneous and obsolete user licenses requires sophisticated software tools that automate what can be a complicated process to recycle the license for future use.
Procurement: Due to all the issues just mentioned, efficient procurement is hampered due to the lack of connection between past contractual purchases, deployed licenses and the actual utilization of licenses.
SAP SAM Solution
For those integrating SAP into their SAM process, the aforementioned challenges are meaningful but not insurmountable.
In order to “Plan” and “Acquire” SAP licenses (see figure 2), the first step is to understand what is already contractually owned and what is actually being used. That requires gathering all SAP contracts from across the enterprise into a contract management system. Gathering and organizing contracts provides a holistic view of purchases, showing what is actually deployed and being used. Once the terms of the contracts, pricing and actual usage are understood, then the “Acquire” part of the SAM life cycle comes into play. Here, it’s best for enterprises to use either contract benchmarking data and/or a seasoned advisory firm that can negotiate with SAP on its behalf. Saving 50% off the standard pricing is good, unless the industry standard discount is 65% or you are buying licenses while you already have thousands that have not been properly retired and recycled.
The “Deploy” phase of the SAM Life Cycle follows the standard best practices used with other enterprise software. Here are some SAP-specific issues to consider:
Proper license type for each SAP user: Make sure the license supports the capabilities of each user. Compliance must be balanced against over-licensing which can result in a 10X to 20X difference in price per license. Using a SAP Inventory Tool, metering of the exact usage is the best way to “right-size” the license type.
Indirect usage: It’s a highly underestimated expense that must be understood and managed in the SAM context. SAP generally has a very novel provision in each of its contracts which says, “if a third party application uses the SAP system to access data, then an indirect user license is required for each user.” This can apply to mobile, B2B and B2C e-commerce applications, as well as internal portals and even point-of-sale systems.
The “Manage” phase of a SAP deployment under SAM should involve a constant monitoring of both contractual activity and usage activity to assure the two are in balance. With a SAP SAM Tool monthly self-audits of SAP license activity should be carried out to best understand how the enterprise will fare on an upcoming vendor audit. Usage optimization should be carried out to assess potential over-licensing from redundant, obsolete and erroneous users. Metering should occur to assure both license type/role compliance and the “right-sizing” of license types.
Finally, the “Retire/Recycle” phase is very important from both financial and compliance perspectives. It is not unusual for up to 25% of all SAP licenses to be obsolete, duplicate or erroneous. Following usage optimization, SAP administrators can use a SAP SAM Tool to retire these licenses and recycle them for subsequent use. This will likely free up some acquisition costs for new SAP licenses since the inventory on-hand should reflect the available retired and recycled licenses.
SAM is a discipline combining both processes and tools to assure compliance, improve procurement, deployment, retirement processes, and reduce cost for both license purchases and on-going annual maintenance fees. SAP software can be one of the largest investments enterprises make, and yet it is rarely folded into the SAM practice. This has historically been because of the complexity, lack of vendor support and inadequate software tools to assist enterprises in their SAM efforts. But by working with the right SAP SAM experts and by using next-generation software tools that provide SAP discovery, metering, compliance and optimization, enterprises can master the SAP SAM challenge.