How to Take a MultiDimensional Approach to SAP Indirect Access

Executive Summary

  • The Way Indirect Access is Often Presented
  • Who Are The Providers of Information on Indirect Access?
  • The Important Dimensions of Indirect Access
  • Locking Down Information to Your SAP Consulting Company

Introduction

This article is directed towards clients of mine regarding how to best resolve SAP indirect access claims. This article was motived by the fact that I have had many conversations with clients and prospects who asked what it takes to get past the claim and what is involved. So this article is essentially the explanation that I provide, and since I have provided it orally I thought it made sense to have it in a documented and shareable form.

A good place to start is to review the providers of information on indirect access.

Who are The Providers of Information on Indirect Access?

The following entities provide information on indirect access and SAP.

  • *SAP: SAP provides very little information on indirect access. Their intent is to be as ethereal as possible on the topic. They also release false information on the topic, as I covered in the article How to Best Understand SAP’s Indirect Access Announcement.
  • *Most IT Media Outlets (ComputerWeekly, Gartner, Diginomica, CIO): Recipients of money from SAP, they seek to seem authoritative on the topic while also accepting most of SAP’s assumptions about indirect access. They want to cover the story like a sporting event rather than providing any real insight. And because of funding, they must side with SAP, but without appearing to do so. SAP remotely controls most media outlets through funding. I estimate that Gartner receives over $100 million per year from SAP, and unsurprisingly, Gartner will not disclose the amount. If you are getting paid by SAP, then you cannot provide unbiased information on indirect access, which is an issue that is against customer’s interests and 100% in SAP’s interests.
  • *ASUG: A puppet of SAP that pretends to represent users interests, ASUG distributes false information on indirect access as covered in the article ASUG’s Biased and Inaccurate Article on Indirect Access. ASUG wants to help customers negotiate with SAP and has written articles proposing that they can be an honest broker, when in fact, they would instead gang up on the customer while pretending to serve an independent role. I have never participated in a negotiation with ASUG, but given what they have published on the topic they would reinforce SAP’s position, while most likely stressing the importance of coming to a reconciliation….on SAP’s terms of course. Afterward, the ASUG rep will call his buddies at SAP and most likely laugh about it.
  • #Various SAP Contract Negotiation Entities: Some entities perform contract negotiation for SAP customers. That is they sit opposite of SAP and use their experience in a number of negotiations to try to get the best deal for customers. They very strongly tend to present coming to a resolution on an indirect access claim as all about reviewing the contract, when in fact this is a small part of the puzzle. The parts of the SAP license agreement that deal with indirect access is normally just a few lines.
  • UpperEdge: UpperEdge is a contract negotiating entity, but they differ from most in that they have expertise in indirect access and have shown the willingness to challenge SAP on this topic. They also do not present the commonly presented simplistic platitude that all one needs to do is review the contract. I have been careful to read all of UpperEdge’s material on this indirect access.
  • *SAP Consulting Companies: Like SAP they prefer if their clients don’t know about indirect access as it interferes with software sales and therefore implementation money. One would have to be quite unknowledgeable to use a consulting company that is an SAP partner to negotiate with SAP, as they have more allegiance to SAP than to their clients. But the SAP consulting companies share roughly the same view of indirect access as the contract negotiating entities publicly. Although they are far more disingenuous as they leave out the fact that they cannot represent any customer’s interest against SAP.
  • License Software Companies or SAM: Companies like Snow Software sell software that describes the state of a company’s indirect access (as well as other licensing) liabilities. Their software is loaded onto SAP and performs an audit of the liabilities. They want to sell software and support customers in their indirect access battles with SAP, but as they are partners with SAP they must be careful to not say things publicly that would place their partnership in jeopardy. This is not a criticism per se, these types of companies are in a tight spot and simply don’t have the latitude to share a lot of what they know publicly.
  • Attorneys: Attorneys don’t tend to publish on indirect access. With UpperEdge, which both specializes in contract negotiation and is staffed with attorneys, being the exception. Once an indirect access claim becomes large enough, or obviously if a lawsuit is filed as in the case with Diageo and InBev, then the attorneys come into the picture. Customers have their own general counsel, but one requires a specialized type of attorney that is focused on similar types of law related to indirect access. Outside of the very few attorneys that have any indirect access experience, they will need to work with an expert witness to fill provide the context, industry standards, etc..

Symbol Key

*Providers of false information on indirect access

#Providers of often limited information on indirect access

The Dimensions of Indirect Access

Something I have begun to conclude after researching indirect access is that handling an indirect access claim from SAP requires multiple dimensions of knowledge. And no one group really has the complete answer. But some entities really can’t be part of the answer because they are in some way controlled by SAP. ASUG and SAP consulting companies being the perfect example of this. I see the following necessity for information to come to the best possible resolution on indirect access.

  1. Likelihood Determination: You must know the likelihood that you will receive an indirect access claim. There are important markers that will tend to result in SAP bringing an indirect access claim against a customer. I have a future article on this topic planned. Likelihood determination is critical because after SAP brings the claim if the customer is not prepared, they face deliberately restricted timelines for providing a response.
  2. True Indirect Access Exposure: When SAP brings an indirect access claim it will nearly always overestimate the customer’s exposure. SAP is trying to arm twist the customer into license purchases, that is all that an indirect access claim is about. It is important to not lose sight of that fact. True indirect access license exposure can only be determined by software like Snow or Voquz. This is software that describes the usage of the system. The system output is the customer’s weapon against SAP’s claim.
  3. Contract Negotiation: The customer must have contract negotiation expertise. This can be an attorney but does not have to be. There are many contract negotiators that know SAP contracts and that is their expertise. Using the company’s internal procurement team, that focuses on price is not going to be a good fit for this negotiation.
  4. Attorneys: If the claim is big enough, then it can make sense reach out to outside legal. But normally the first few rounds will not require an attorney. If an law firm is contacted, in most cases the customer will spend a lot of money in just getting the firm up to speed on what indirect access is, which will often result in paying them to read articles on indirect access, in either a SAM vendor or me being contacted to explain what indirect access is, its history, etc. Again UpperEdge breaks the mold as they are both legal and contract negotiators and have indirect access expertise. Therefore they defy my categories. But very few indirect access claims will ever even result in the necessity to write up or file legal documents.
  5. Research & Standards: Both a contract negotiation and most attorneys will require an SME. That is a role that I fill. I am actively researching how SAP tends to use indirect access and what it accepts. When an indirect access claim is brought, it is controlled by the SAP account executive. The account executive will have spoken with their management and will have received the approval to bring the claim. And the reason it is brought is always the same. The account executive has concluded that they can sell more software by bringing the claim than through trying to sell software normally. And every single SAP account has indirect access liability under SAP’s interpretation of indirect access. Indirect access is very simply a hammer to be used against customers that are “drifting.”

Locking Down Information to Your SAP Consulting Company

There is also one party that needs to be kept in the dark regarding any indirect access preparation and particularly when fighting the claim. And that is the SAP consulting company (if they happen to be on the account). If information is shared with an SAP consulting partners, they will most often go back and share the information with their contacts in SAP. To be involved in a negotiation a claim with SAP, and have ever step of your strategy then communicated to SAP through your consulting partner puts you at a serious disadvantage versus SAP. Remember that SAP consultancies are constantly competing with each other to ingratiate themselves to SAP, and offering inside information like an ongoing indirect access claim is a great way to do it. The partner account manager for the consulting company on the account knows your SAP account executive, and it is a simple matter to either directly tell him what the score is inside your company, or if he is more subtle to “indicate” what is happening without overtly saying it. In fact, there is nothing to stop the account executive from contacting the consulting partner and asking. No rule would have been broken.

How Strong is Your Relationship with SAP?

One of the most impactful areas of the article is in the following quote, where UpperEdge asks the SAP customers to ask the question regarding the strength of their relationship with SAP.

Our experience shows that company executives are most comfortable navigating their SAP relationship when they fully understand the following:

  • How strong and of what quality is my SAP relationship? (emphasis added)
  • What is the overall quality of my commercial agreement with SAP?
  • What is my true utilization of the SAP software given what I bought and deployed and what optimization opportunities exist?
  • What is my overall compliance risk, inclusive of direct and indirect use?
  • Given my future demand profile with SAP, what should my next-generation relationship look like with SAP?

In summary, the issue of use by way of indirect access is not going away. SAP firmly believes it has the right to protect its intellectual property and believes it should to protect the value of its software. SAP customers are well advised to proactively assess their SAP relationship in a holistic manner as outlined in the 5 points above.

This is eyebrow-raising. UpperEdge is right here, but it is the implication which is bothersome and should be discussed.

If we unpack this we can see the following:

  • What is the best way to improve the strength of your relationship with SAP?
  • What would make the SAP account executive most pleased with you?

That is right, to purchase some SAP software. The account executive is not only looking at your present purchases but is estimating the potential for your future purchases.

And alternatively, what would worsen your relationship with SAP?

  • Either not buying more software licenses.
  • In particular not showing the signals that you intend to buy a substantial amount of licenses in the future.

The SAP Account Executive’s Expected Sales Level

What we are talking about is what I have coined the ESL, or the expected sales level for the account on the part of the account executive. This may seem strange, but it is the level of entitlement that exists at SAP. In SAP’s view, their customers owe them a particular level of revenue.

What this means is that the more the customer buys from SAP the lower your potential for receiving indirect access charges. If the account executive sees current or the potential for future sales that are in line with their TSL, then indirect access probably won’t come up. But if they don’t then indirect access has a far higher likelihood of being brought up.

What I noticed is how close this is the definition of an abusive relationship. Abusive relationships occur when one of the parties has the ability to do something that is not considered part of the normal relationship, in order to gain the power of the other party. Verbal abuse, controlling behavior, physical abuse, all have their foundations in the same motivation factor. That is the desire to get the other party to do what the abusing party wants. Abusive relationships also have a cycle.

The Standard Cycle of Abusive Relationships

According to Wikipedia, abusive relationships tend to have the following repeating cycle.

  1. Gain Trust:
  2. Overinvolvement:
  3. Petty Rules and Jealously:
  4. Manipulation, Power and Control:
  5. Traumatic Bonding:

If we look at SAP and their use of indirect access, we can assign it to this cycle thusly.

  1. Gain Trust: (Occurs during the sales phase. At this stage, prospects are told all manner of falsified concepts including the idea that SAP contains all best practices (covered in the article The Evidence for SAP’s Best Practice Claims), that the project will have a positive ROI, that SAP only recommends the consulting companies with the highest standards, that the project will implement very quickly because of SAP’s ASAP methodology, etc.)
  2. Overinvolvement: (After SAP a consulting partner implement software, they know everything about that company and they seek to control the IT spend at the account. This can happen with any software category, but it is particularly important when the ERP systems is involved, and SAP uses the ERP system as the queen on a chessboard. This is covered in the article How ERP Systems Were Trojan Horses)
  3. Petty Rules and Jealously: (On SAP projects, and I have been on many, all the current systems at a client are generally discussed in derogatory terms. SAP lead the industry in using the term “legacy” to reduce the status of all systems that the client already had purchased. This is covered in the article How SAP Misused the Term Legacy. When it comes to other systems, everyone from consulting companies to independent SAP consultants propose that all purchases be kept with SAP regardless of the fit with the requirements or the features of the system versus competitors. Fallacious arguments are presented that all integration is essentially a sin, and therefore the way around it is to purchase SAP.)
  4. Manipulation, Power and Control: (Both SAP and SAP consulting companies are highly manipulative entities. When I worked at KPMG the phrase that was used by one partner was that one should “penetrate and radiate the account.” That means to get business doing one thing and then look around to other work while doing the initial work. KPMG wanted its senior members to do what they could to control the account. But none of the partners I worked with at KPMG seemed to care about whether what they told the account was actually true. Both SAP and the consulting companies set forth a series of rules and simplistic platitudes that if followed lead to the customer purchasing more SAP and more SAP consulting services. All other software vendors are excluded. Most of the statements made by SAP and consulting companies ranging from the expected ROI of ERP projects to the difficulty in integration applications are either directly contradicted by academic research or through experience on projects.)
  5. Traumatic Bonding: (When indirect access is applied. This is the abusive event used by SAP to cut off the options of their customers that have the temerity to begin exploring alternatives outside of SAP. The intent is to bring the customer to heel and to have them understand their place, which is of course under SAP. Optimally, the customer thinks twice before ever exploring a non-SAP alternative in the future. SAP has effectively used its control over media, private messaging and now the Diageo case in the UK to make their Type 2 version of indirect access seem more valid than it actually is.)

After the traumatic event, SAP will then attempt reconciliation. Some account executives talk about “repairing” the relationship after they have enforced indirect access on a customer. Well, of course, the SAP account executive needs to continue to sell into the account. If you look at abusive relationships, they swing between periods of non-conflict and then the traumatic bonding. That is “sugar” is added to the sour notes. Relationships that are 100% sour can’t last, and the abuser knows this.

Well, of course, the SAP account executive needs to continue to sell into the account. If you look at abusive relationships, they swing between periods of non-conflict and then the traumatic bonding. That is “sugar” is added to the sour notes. Relationships that are 100% sour can’t last, and the abuser knows this.

This article captures the main discussion points and actions from two Special Interest Group (SIG) meetings regarding SAP Licensing.

This quotation is from SIG.

“SIG participants questioned why SAP would want to clarify indirect access, since it such a cash cow and they greyness in license terms allows them to drive their commercial agenda. The standard response from SAP to licensing ambiguity is “Come and talk to us”. Yet SIG members stated that SAP was the last place they would ask for clarity, since that would initiate an audit or sales enquiry. “[SAP] That would be the last place we go for licensing information” “[I’m] very paranoid about approaching them” This is akin to trying to find a competitive quote for new tires for your car, but having to go back to your old tire supplier to work out how to get the wheel nuts off. It is a RESTRICTIVE and UNCOMPETITIVE.”

This is accurate. Come talk to us is a standard line to get more business. The participant is wise to see it for what it is.

“In the case of Diageo, they were trying to explore an alternative system using Salesforce.com, which free competitive markets should allow them to do. The general consensus from SIG participants was that, whilst Diageo was not a landmark legal case, it would give SAP enough ammunition to give their customers the heebie-jeebies. “SAP will be after everyone” stated one SIG member. Customers are using SAP beyond what could be imagined when the contracts were created (Mobile, Internet, Virtualization, Ecommerce etc.) and SAP’s archaic contracts and manipulative approach to licensing is LIMITING INNOVATION.”

Type 1 Versus Type 2 Indirect Access

I wanted to clarify as I have in my other articles that there are two types of indirect access. One is legitimate and is what I call Type 1, and the other is what SAP enforces, which is called Type 2. These are explained in the article Type 1 Versus Type 2 Indirect Access. So I am not proposing that all indirect access lacks legitimacy. Type 1 indirect access violations do occur, it’s just that they are uncommon.

Type 2 indirect access is nefarious because any type of connection to an SAP system could be classified as Type 2 indirect access. This is what people that try to view indirect access as simply a matter of having the indirect access clause of an SAP license agreement either don’t get or are misleading their readers. Type 2 indirect access is actually new in the past few years and is almost exclusively employed by SAP (versus other vendors). Secondly, SAP does not hold to a position that a customer must actually pay the indirect access charges. No. SAP actually wants to the customer to make other license purchases in return for dropping the indirect access charge.

This allows SAP to do what SAP really wants, which is to grow license revenue, and for the customer to feel like they are actually paying for something of value, rather than simply paying indirect access fees. SAP wants to pose for investors and to other customers that its customers are “choosing to” purchase SAP. They do not want the broader market to know that they coercing customers into purchasing SAP’s software that customers do not want to buy. SAP likes maintain the illusion that they actually compete and win the business that they get because the value of the software is so outstanding.

This is validated by the following quote from SIG.

“SIG participants suggested that indirect claims were predatory, and that spending money with SAP made spurious indirect access claims go away. Spend money, or buy strategic growth products important to SAP such as HANA. One SIG member quoted their SAP account manager who said “wouldn’t it be easier just to settle with us and pay than to go to court”. Tantamount to BLACKMAIL.”

So SAP will pull all manner of underhanded shenanigans in private including things that appear to be blackmail to clients, all while presenting the face of being a completely normal and honest company that is just selling software and delivering fantastic value to companies with enormous innovation.

In fact, if we want to see how SAP projects itself that can be found in the 2017 Q1 analyst call.

“The facts show that we are executing our winning strategy at scale. Our customers are endorsing the unique breadth and depth of SAP core cloud networks, and all come with soaring adoption for our new innovation on a global basis. We believe SAP is the only company in the business software industry to deliver soaring cloud growth and double-digit license growth.

Driven by S/4HANA, our core innovations are growing really fast with software licenses up 13%. We now have more than 5,800 S/4HANA customers with global companies like Energy SE, choosing S/4 in the first quarter. Big brands like Citrix Systems selected S/4 cloud edition, the leading intelligent cloud ERP solution in the market by far.”

I am constantly reading SAP’s material, and I can’t find anywhere that SAP admits to coercing customers into buying software with indirect access claims. I can’t find anywhere that SAP admits to only charging extra fees for ERP licenses if a customer chooses Salesforce, but not charging for the ERP licenses if the customer chooses SAP CRM. This is why I have researched how SAP’s use of Type 2 indirect access falls under an antitrust provision as covered in the article on How SAP’s Indirect Access Violates US Law on Tying Agreement.

SAP presents all its revenues as if this is based upon customer choice, all while doing as much as possible to restrict choice in each individual customer situation

Conclusion

Preparing for a potential indirect access claim and responding to it is a multidimensional effort. There is a step one, however. And step one is to remove entities that seek to provide information that cannot demonstrate financial independence from SAP. This includes SAP, almost all media entities, ASUG and SAP consulting partners. If we cannot agree to use unbiased sources to come to a resolution, then the game is lost before it has begun. Step two is figuring out who can add value where. This means using the specialization of each party based upon their true domain expertise.

There is something very wrong with responding to being shaken down by SAP on Type 2 indirect access, by having to ensure that you are meeting the SAP account executive’s ESL. SAP is trying to have its cake and eat it too. They also want to keep IA as quiet as possible and spring it on customers at the time of their choosing. New accounts are not being told about IA during the sales cycle. Type 2 IA is something you use on a customer most often years after the sale is made and the software is implemented. Indirect access is used when the company is many millions of dollars down the road and when their SAP’s leverage is at it maximum. And like an abusive relationship, after SAP uses IA against a customer, they want to focus on repairing the relationship afterward. With the major consulting companies recommending SAP no matter what the quality, maturity, capabilities regarding the other offerings in the market or fit with client business requirements combined ith use of indirect access, the one thing SAP does not want to do is actually compete on a level playing field against other software vendors.

More information must be learned and published about how SAP is enforcing indirect access, and as time passes I learn more as I interact with more SAP customers and vendors facing this issue. However, there is a way to speed up this process, which is why I am undertaking research into SAP indirect access enforcement and outcomes. If you are an SAP customer or vendor, please provide information to the questions in this article which is an Announcement of Research into SAP Indirect Access.

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References

*http://upperedge.com/sap/sap-indirect-access-diageo-case-means-sap-customers/

https://en.wikipedia.org/wiki/Power_and_control_in_abusive_relationships

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