Category Archives for "SAP License Strategy"

Why SAM Software Will Never be Included with SAP

 What This Article Covers

  • The LAW Transaction
  • What Many SAP Customers Think LAW is Used For
  • What the LAW Transaction is Actually Used For
  • How the LAW Transaction Works to Provide Information to SAP

Introduction

In this article, we will review the LAW transaction, particularly the interpretation of LAW versus true SAM software.

The License Administration Workbench (LAW)

This is what SAP says about their LAW transaction:

The License Administration Workbench (LAW) supports you during the License Audit Process for complex system landscapes. You use the LAW to collect and consolidate license-relevant measurement data (users and engines) for the component systems and the central system (LAW system) in which LAW is run. This provides system administrators with a better overview, and the system measurement is simpler and also more reliable.

Before you start LAW, you should classify the users in all measurement-relevant systems in accordance with their tasks; that is, assign them to a contractual user type (in transaction USMM, SU01, or SU10). During the consolidation that then takes place in LAW, the users for a person are listed and assigned one contractual user type. The multiple assessment of a person is therefore practically eliminated ‑ the Multi-Client/Multi-System classification is superfluous.

Actually this definition of the LAW transaction. A correction of the definition of what LAW actually is, would be the following:

The License Administration Workbench (LAW) supports you (No, it supports SAP) during the License Audit Process for complex system landscapes (No,the complexity of the landscape is immaterial. LAW is a transaction used for all SAP customers). You use the LAW to collect and consolidate license-relevant measurement data (users and engines) for the component systems and the central system (LAW system) in which LAW is run (True, but the output is not very useful for the customer, nor is it designed to be). This provides system administrators with a better overview, and the system measurement is simpler and also more reliable (No, this provides SAP with the usage of the system).

As should be evident from the corrections, SAP explains LAW as if it is some type of overall administration tool, and completely underplays how much SAP relies upon it during audits. This is why it is often the case that SAP’s technical literature cannot be taken at face value. This is not a technically accurate description of the LAW transaction.

This description, along with explanations by SAP consulting and SAP account executives is likely the reason that it is often assumed by many customers that LAW is SAM or software asset management software. It isn’t. SAM software is software that allows SAP customers to audit their SAP usage. SAM software is designed to be understood by the SAP customer. The LAW transaction is something that is primarily designed to provide information to SAP in order to audit companies.

How the LAW Transaction Works to Provide Information to SAP

The LAW transaction along with the USMM transaction are typically run once per year. This is the soft audit that SAP requires of all of its customers. The information is then sent to SAP so that SAP can review and determine if the customer is under licensed. If the customer is over licensed, the customer will not be informed of this fact by SAP. Instead over licensing is left to the customer to figure out for themselves.

SAM Software

SAP will not directly bring up the topic of SAM software. They will tell the customer about the LAW and USMM transactions but prefer that their customers not look beyond these transactions. This is because a SAM application allows a customer to determine their system usage, compare it to their licenses that they have purchased and to know their licensed position and which puts them in a better position to negotiate with SAP.

Conclusion

Companies should never accept SAP’s self-serving analysis of their licensing state. The LAW and USMM transactions are for SAP. SAP states that they are for the customer but that is a smoke screen.

References

https://help.sap.com/saphelp_erp60_sp/helpdata/en/ee/ee133bfae0750ce10000000a11402f/content.htm

Are SAP Customers Actually Under Licensed After Indirect Access?

What This Article Covers

  • SAP’s Obsession with the Term Under Licensed
  • The Likelihood of Being Overlicensed

Introduction

SAP has written a great deal about customers that are “under licensed” with respect to indirect access. This is a quotation from their announcement at SAPPHIRE on indirect access.

 If you’re fully licensed, there’s no action for you. However, if you’re questioning whether you are under-licensed, let’s talk about it. We want customers to proactively engage us on this topic. SAP assures customers who proactively engage with SAP to resolve such under-licensing of SAP software that we will not collect back maintenance payments for such under-licensing.  We will look at your specific circumstances when resetting your licensing agreement, including providing you the opportunity to receive credit for certain products you may have already licensed so you can update to the new metrics.

SAP loves to pitch the narrative of being under licensed. A full analysis of this announcement can be found at the article An Analysis of SAP’s Faux Policy Change on Indirect Access.

Being Overlicenced

SAP will never speak about customers that are over licensed. However, being over licensed is quite common. There are several reasons for this. Users are created, but then sometimes abandoned. People leave the company but their users are still in the system. Consultants come and go. In fact, in most instances, over licensing is more common than under licensing. SAP will not give back money to a company, so being over licensed means having a “bank” of unused licenses that can be used in the future.

Being Overlicensed and Indirect Access

Over the past 4 years, SAP has greatly ramped up the concept of Type 2 indirect access. SAP has been promoting customers to reach out to them, as is shown in the following quotation also from their SAPPHIRE announcement.

However, if you’re questioning whether you are under- licensed, let’s talk about it. We want customers to proactively engage us on this topic. SAP assures customers who proactively engage with SAP to resolve such under-licensing of SAP software that we will not collect back maintenance payments for such under-licensing.

Once again, SAP uses the term under licensed. SAP wants customers to proactively engage us, and to share information with them so that SAP can place an indirect access charge upon them. One may not have to pay back maintenance, but they will be paying forward maintenance of course.

What SAP does not address, and will not address is whether a SAM software analysis by an independent entity would show that the customer is actually over-licensed and if that over-licensing would cover even the faux or Type 2 indirect access that SAP has become known for. SAP has no interest in any customer purchasing SAM software. Instead, they want to present their interpretation of how “under licensed” their customers are, without independent verification.

Conclusion

Companies should never accept SAP’s self-serving analysis of their licensing state. Companies should not simply accept the assumption regarding Type 2 indirect access. However, even if SAP does bring an indirect access claim against a company, the company may be able to cover that claim (if it intends to not fight the claim through other means) with the licenses that it already owns. But the only way to know for sure is to have the information in hand that can only come from using SAM software and performing the analysis.

References

Modern Pricing for Modern Times

Can a Consulting Company Represent a Customer in SAP License Optimization?

What This Article Covers

  • Using Consulting Companies that are SAP Partners
  • The Problems With Using PwC and Deloitte

Introduction

Several consulting companies that are SAP partners specialize in license optimization. When these consulting companies perform a license optimization project they will engage with a SAM vendor. These consulting companies have some people trained on the SAM vendors applications. However, there are several problems with using companies like PwC or Deloitte to do this work.

  • Rate Level: PwC and Deloitte have very high rates.
  • Lengthening Out the Project and the Billing: PwC and Deloitte bill far more hours than would a SAM vendor to do work that is actually not at the same quality of the SAM vendor’s consulting.
  • Conflict of Interest: PwC and Deloitte and other similar companies will often complete the project, but then seek to be relied upon for supporting the negotiation with SAP. However, companies like PwC and Deloitte are SAP partners. They receive enormous amounts of business from having SAP consulting practices. They are bobbleheads to SAP and will repeat anything that SAP says, regardless of its accuracy, because it is profit maximizing fro them to do so. This is covered in the article How to Best Understand the Bobblehead Consulting Partners. They recommend SAP to customers, only under the arrangement that they will perform almost all of the consulting on the project. Therefore, PwC and Deloitte and any other consulting company that is an SAP partner value its relationship with SAP very highly. This means that PwC and Deloitte are not actually able to even release information about SAP without clearing it through SAP. It means that PwC and Deloitte and any other consulting company that is an SAP partner has a conflict of interest when supporting a negotiation with SAP.

Conclusion

Some SAM vendors tend to just sell the tool, while others also provide consulting. For those SAM vendors that rely on outside consulting for implementation, it is important that the consultant that the customer chooses not have the types of conflict of interests that companies like PwC and Deloitte obviously do.

References

 

Analysis of Snow Software on Ways to Cut Spending

What This Article Covers

  • Quotes from Snow Software
  • Analysis of the Quotes

Introduction

Snow Software wrote a paper titled 5 Ways to Cut Spending on SAP Software. In this article, we will analyze this paper.

Quotes from Snow Software’s Article

SAP has more than 40 named user license types in its standard definitions, ranging in price from $60 to $7,000 per license. These license types determine what transactions the user is permitted to perform in the environment. SAP puts the onus on its customers to assign the appropriately named user license type to each user account. Without the right data upfront, the only way to do this is to generalize and attempt a best-fit. The work that individuals perform can change year on-year. This means that a license type which once fit well beforehand is no longer compliant

It is in fact quite interesting that SAP has such a broad continuum of user license prices.

Organizations typically end up overspending because they do one or both of the following:

  1. Purchase unnecessarily costly named user license types to ensure coverage of user’s requirements, but also cover them for use of transactions that they do not need.
  2. Keep user-license assignments static until the next SAPmandated system measurement, and then pay the fees that SAP requests for any shortfall.

So basically customers have a hard time optimizing their licenses. I think there is a common misimpression that the company’s contract or purchasing arm will perform license optimization. This is not the case. And one does require software to provide the necessary information. This also keeps SAP from leading the discussion, which will, of course, lead to more of what SAP wants, rather than what the customer needs.

During a proof of concept, Snow typically discovers around 20% of licensed users in an organization who have been inactive for more than 90 days. Users who have been inactive for more than 90 days (or whatever date is deemed appropriate) can have their license returned to a pool (re-harvested) for reassignment as and when they are required.

This was quite interesting. This means that many customers are over licensed. This is also interesting because SAP only ever discusses the potential of being “under licensed.”

This environment evolves over time as new systems are added. Users must be licensed to access these systems and so they are often provided with a new account, the username of which may be different from the username they have for other systems.

Another issue where SAM software can assist.

Indirect Usage is, in simple terms, where an SAP system is accessed or queried through a third-party application. The way in which that application interacts with the SAP system and underlying data can have a significant impact on licensing requirements and financial exposure at the point of audit. If any individuals are accessing SAP-stored data through third-party software, organizations must ensure that they have an SAP named user license of the right type provisioned for them.

Why this is true. The assumption presented here is that all integrations to SAP applications mean that the customer needs to have licenses. This is an endorsement of SAP’s Type 2 indirect access. However, Brightwork has repeatedly questioned whether this type of indirect access is even valid. This is the concerning feature of SAP, that they can make a proposal which breaks with the legal precedent in licensing, and pretty soon everyone from consulting companies to SAM vendors is repeating it.

Organizations should build up an architectural diagram of Indirect Usage across the SAP environment. This places them in a strong position when SAP audits because any additional fees are based upon real usage, not an estimated and perhaps overinflated value which is indefensible because of lack of visibility.

Yes, this is true, SAP sets about to cheat its customers whenever possible. So SAM software is necessary because the customer must have access to usage information that is independent of SAP.

SAP licensing is not only based on per-user metrics, but includes software engines as well. SAP engines (aka packages, modules and add-ons) are optional applications for which additional licenses must be purchased. The metric used for licensing differs by engine, and is based upon the objects that exist within that application or its total CPU consumption. For example, the metric for SAP Payroll Processing is number of master records, while the metric for SAP E-Recruiting is number of employees.

This is apparent from reading the SAP Price List. It is so complex to price many of SAP’s applications, that even account executives rely on a professional pricing expert that does nothing but pricing within SAP. What Snow software is saying is that this pricing is built into their software. We are not validating this, but if true it is an impressive accomplishment given SAP’s pricing complexity.

SAP licensing is both complex and open to interpretation. Typically, environments have been running for many years, so it is difficult to get a handle on which licenses are assigned to which users, whether those licenses are correct for the user and indeed whether a license is required at all.

This quotation highlights how licensing must be run occasionally as the usage of the SAP system changes over time.

Conclusion

Snow Software’s paper was quite helpful and educational. The indirect access quotations are a concern for reasons already listed in this article.

References

http://go.snowsoftware.com/rs/377-PWR-208/images/5Ways_To_Cut_Spending_On_SAP_Software_en_aug.pdf?aliId=12824339

Type One Versus Type Two Indirect Access

What This Article Covers

  • Two Types of Indirect Access
  • Type One Indirect Access
  • Type Two Indirect Access
  • Differentiated Prices
  • Indirect Access Mind Map

Introduction

Often in discussions around indirect access, I have the person I am discussing the topic with bringing up the point around the advice that one receives to check the contracts.

This is also a concept that is promoted by those that work on contracts for a living. The idea is that all that is necessary to protect oneself is to have the sentence taken out of the SAP contract that states that the customer can only access SAP software either “directly or indirectly” through a license.

The problem with this approach to dealing with the issue is not the existence of this clause, and this is why statements regarding taking an entirely contract focused approach to indirect access will not work. It is also why it is inaccurate to state that in the SAP v. Diageo case was due to Diageo not paying close enough attention to the contract. It falls into the same category of misinformation and misunderstanding that SaaaS was responsible for the game-changing on indirect access.

To see why, and hopefully, to increase the knowledge in this area, I decided to cover what I am calling two different types of indirect access. In all of my reading on this topic, I don’t recall anyone proposing this, but it makes logical sense, and using this terminology will help mitigate confusion on this topic.

Two Types of Indirect Access

I view there being two basic types of indirect access. One of these types is a legitimate complaint on the part of the vendor. The other is not a legitimate complaint and is an attempt by one vendor, SAP, to expand the definition of indirect access in such a broad way that if it were accepted it would totally change the landscape in the enterprise software market. It would give the largest software vendors, even more, leverage than they already possess. In fact, I am now getting reports of other software vendors copying SAP and at least trying to invoke SAP’s definition of indirect access.

Type One Indirect Access

Type one Indirect access is when a company develops a user interface or uses a third party user interface to connect to an application. By using a user interface to access the data and functionality within the system, type one indirect access cheats software vendors out of rightful revenue.

Type one indirect access is completely well founded and is difficult to argue with. However, the problem with considering this type of indirect access is that it is not very common. It has been the historical reasons that software vendors have gone after customers for extra licenses.

Type Two Indirect Access

SAP has the following definition of indirect access, which I took from JNC’s article on this topic.

“Indirect access is user or third party application creating, manipulating or viewing data in the SAP systems via an interface.”

Well congratulations, SAP is describing any system to system interaction. Therefore SAP deserves a license sale for any system that is connected to SAP. So if a customer purchased 1000 licenses of Salesforce, it now owes SAP 1000 of ECC. SAP created its definition which in an amazingly self-serving manner for a company that already has its software installed at so many customers, changes the game to its benefit.

I quote from Dave Blake of UpperEdge

The most challenging aspect of SAP’s claim of a license grant violation here lies in the very definition of use itself. The definition fails to specifically identify the concept of indirect use which leaves it completely up to SAP to determine when a violation has occurred and to what magnitude. In the past, SAP briefly nipped at its customers’ heels on the issue of indirect access, but recently, SAP has shocked some of its loyal customers by going for the jugular. Through our customers, we have observed SAP use indirect access violations as an excuse for predatorily squeezing fees from their customers, and worse, seizing the opportunity to reduce flexibility and promote an anticompetitive environment.

That is correct. I like this entire paragraph, but the part that hits home is that SAP has created its definition of indirect access that no one outside of SAP seems to agree with. Dave Blake goes on to explain the following:

Although they can educate themselves about SAP’s behavior and negotiate accordingly from the get-go, SAP’s new definition of how their software cannot be used will handcuff even its new, informed customers into agreements which expose their company and now also include ludicrous restrictions on data extraction.

Once again, this contradicts the commonly presented idea that all one needs to do is to check the license contract. I also like the term ludicrous. I think I previously used the term lunacy to describe SAP’s new “interpretation” of indirect access, so ludicrous and lunacy seem kissing cousins as words, so Dave and I seem to agree on adjectives to use.

From our perspective, where non-compliance is clear, SAP is entirely within its right to demand payment for its customers’ use infractions. For example, it is acceptable for SAP to tout indirect use as a protective restriction when there is a legitimate reason for SAP to protect its intellectual property (IP). When unlicensed users knowingly take advantage of SAP’s infrastructure and unique processing capabilities without paying, SAP is justified in requesting its customer pay additional fees for the additional benefit. We also do not fault SAP for protecting its IP in situations where its processes enhance the capabilities of other systems. But of course, this is not where SAP’s definition stops.

I don’t know if this is the same distinction I am drawing between Type 1 and Type 2 indirect access, but it does sound similar.

If we take Dave Blake’s comment, regarding “knowingly take advantage of SAP’s infrastructure without paying…”

This wording gets a bit tricky. The reason being that when integrated, all applications take advantage of each other “infrastructure,” its data and its processing. That is the nature of application integration. If a CRM system sends sales orders to ECC, it is leveraging the infrastructure of SAP. But if the customer purchases SAP CRM, SAP does not charge the same license price for the ERP license. Actually in most cases waiving the license fee. SAP CRM is leveraging ECC’s infrastructure the same way as Salesforce. The fact that SAP is engaging in such differential pricing puts it into the category a tying agreement under US anti-trust law. In fact, I don’t think there should be much debate on this, and the details can be read in my article How to Fight Indirect Access with Tying Agreement Law.

So SAP applies a double standard. First, it will allow its applications to “indirectly access” (that is under its expanded definition) other applications, but if the software from another vendor does the same thing, then SAP wants licenses of the connected to system to be paid. That is indirect access only applies when the application is from a different software vendor. However, that is a completely inconsistent definition of indirect access. I want this point emphasized so.

  1. It is illogical for SAP to apply for indirect access only to non-SAP applications.
  2. It is illogical for SAP to have a definition of indirect access that is entirely contrary to the overall history of licensing of software.
  3. If SAP was going to take this approach to indirect access, they should have done so back in the 1980s when they started selling their ERP application. If they had, they would have never grown into what they are today.

If indirect access were applied to other types of software then if data were exported from Excel in a CSV format and then uploaded to a non-Microsoft database, then Microsoft would be owed an extra license of Excel. But on the other hand, if an Access or SQLServer were used, then no extra license of Excel would be required. That is the exact logic that SAP is using with its current determination. But it gets worse than that. If you agreed to purchase another unrelated application, for instance, Outlook, then the Microsoft account executive would waive the indirect access license for Excel!

Therefore, while I think Dave Blake here is on the right path, I don’t think the language is sufficiently specific to differentiate what is real indirect access from faux indirect access. This is why I prefer the terms Type One from Type Two indirect access. Type One is a legitimate form of indirect access. Type Two, which I also call SAP’s type isn’t.

Differentiated Prices

But there is also an extra dimension which must be captured, and it is not captured by the Type One and Type Two distinction that I have covered thus far. And, this is the questions of differential pricing as well as indirect access only applying to non-SAP applications being connected to SAP applications.

Indirect Access Mind Map

To help people make sense of this, I have the following mindmap graphic, with an accompanying description of the likely outcome depending upon where you are on the map.

  • A.) If both systems in question are SAP, then SAP will not apply for indirect access. Indirect access not defined by the use, but by whether the connecting system is sold by SAP.
  • B.) If you don’t buy other licenses from SAP that are unrelated to the first system that is being connected to, then SAP may decide to apply indirect access license fees.
  • C.) If you are willing to purchase other licenses from SAP, then the indirect access issue will most likely go away. SAP applies for indirect access inconsistently. It is used to punish customers that buy as much from SAP as SAP thinks they should.
  • D.) If you are not willing to purchase licenses immediately, but the account executive still sees you as a high or better than average potential account, then you will most likely not face indirect access charges.
  • E.) If you appear to be moving away from SAP, then indirect access becomes much more likely.

References

SAP Indirect Access Explained

SAP and Indirect Use: Is SAP Taking Advantage of its Customers?

ASUG’s Biased and Inaccurate Coverage of SAP Indirect Access

What This Article Covers

  • ASUG Article on Indirect Access
  • Digital Transformation and SaaS Driving Indirect Access?
  • ASUG as a Conduit to SAP on Indirect Access Concerns
  • How ASUG Plans to Corral and Dilute SAP Customer’s Concerns

Introduction

For some time I have questioned ASUG’s independence from SAP. And this questioning was reinforced through checking with several others who routinely go to ASUG conferences. There is all manner of problems with ASUG’s objectivity, with one prominent item being that SAP approves all of the documentation that is presented by other vendors or consulting companies at every ASUG conference. And SAP is quite particular what it allows to be placed into print at its conferences. ASUG is behaving much less like a user group, and far more like a marketing arm of SAP. This is another example of how information that may at first blush appear to be independent of SAP is controlled by SAP.

The latest article from ASUG on the topic of indirect access has been a real eye opener on how ASUG sides with SAP and obscures the issue when there is a point of contention between SAP and its customers. This was to such a degree that it seemed worthy of commentary.

Therefore in this article, I analyze the comments on indirect access made in an ASUG article on indirect access. This article by ASUG will demonstrate how yet again, ASUG primarily represents SAP’s interests against their customers rather than the other way around.

ASUG Article on Indirect Access

Geoff Scott: What should ASUG members know about indirect access and their SAP and non-SAP systems?

Joe Galuszka: Digital transformation is driving all companies—not just SAP customers—to buy third-party SaaS software—with CRM, HR or Financial applications being the leading customer-facing applications. At its simplest, indirect usage is those customers accessing data housed in SAP through those third-party SaaS applications, especially on mobile devices. – ASUG

This is wholly inaccurate. Companies have been connecting applications to SAP since SAP was first introduced. And the definition provided by indirect access is not correct. I cover the definition of indirect access in the article HANA Police and Indirect Access Charges.

Geoff: To me, indirect usage is any way that an SAP application is being updated or changed outside of an SAP-provided GUI or login. Digital transformation is the biggest place where you may find this, where you have CRM systems, e-commerce systems or IoT applications that are not SAP systems either feeding information into or taking information out of SAP. Customers may, or may not, have this type of access appropriately licensed. This is where the ambiguity begins, and where ASUG members are the most concerned. – ASUG

This definition would include every single application that has ever been integrated into a SAP system. According to Panaya.

40 percent of SAP shops have 20 to 50 systems interfacing wit their ERP. Of these less than 10 are SAP systems. Each of these systems have dozens of interfaces to the SAP system.

Once again, digital transformation has nothing to do with this topic. What is described in the response is standard application integration.

Some of the challenge is that the SAP product portfolio can be vague when it comes to terms and definitions, so a lot of this is open to interpretation, which is really the first thing we heard from our membership. They said: “I’m just confused.” – ASUG

A major reason why customers are confused is that SAP’s proposals on indirect access, in fact, their definition of indirect access is an expansion of indirect access, and other vendors do not share this definition.

Joe: Regarding the U.K. ruling, it’s important to note that the mySAP ERP contract was signed in 2004. At that point the understanding of SaaS-based applications and what the potential implications would be of integrating them into the SAP ERP ecosystem was not necessarily a primary factor in the acquisition. Of course, so much has changed based on the business value of SaaS applications and the significant growth in usage.

Geoff: True. Not too many were thinking about how the application world would look today. I know I wasn’t. The cloud business, as we know it now, was in its early infancy.

When the SAP contract was signed, and the rise of SaaS has nothing to do with indirect access. This is another thread along the logic of trying to propose that technology brought this to the front, rather than a policy change. SaaS is only the delivery mechanism of the software, and it has nothing to do with changing the integrations. SAP had many non-SAP applications connecting to it back in 2004. Other software vendors are not enforcing indirect access against their customers. SAP is doing so. Why?

Joe: That’s why it’s so important for ASUG to have this dialogue. Plus the fact that some SAP customers may be reluctant to go to their account team and open up this dialogue. This conversation should first happen within the confines of ASUG with the members, and then when you have the ability to consolidate and represent a view point, take that forward to SAP. ASUG should be the consolidated customer viewpoint. Otherwise this topic will continue to be vague and confusing to your members.

If ASUG is going to mislead SAP customers as to the nature of indirect access, it seems that the nature of the dialogue will be quite deceptive and tilted for SAP. Interesting how the topic should be consolidated and confined within ASUG, and entity that is not independent of SAP. If customers agree to do this, one can be assured that the outcome will be on SAP’s terms.

Joe: I know you had meetings recently with the Executive Exchange [ASUG’s community of C-level leaders]. What were you hearing from them?

Geoff: I took a couple things away. They were very animated about this topic. We could have doubled the time we had allotted for this conversation and still not covered all the viewpoints. What I took away is that there is a lot of concern. “What does this mean to me and my company? On the basis of this ruling, I may be in violation. I don’t think so, but now I am not so sure.” They are looking to ASUG to help mediate a fair and equitable solution to this challenge. – ASUG

“Animated” is an interesting description that is a politically correct euphemism for customers being infuriated and feeling betrayed by SAP.

It is ludicrous that ASUG, unable to even publish an honest article on the topic of indirect access, will be the entity to mediate a fair and equitable solution to the challenge. A challenge that non-SAP customers have yet to even see on the horizon.

Joe: What’s also interesting to think about is what causes this business situation to occur. To me it squarely falls on the digital transformation that is happening right now. The fact that companies are going out and finding cloud and SaaS-based solutions they think will provide best-of-breed apps or increase flexibility to provide better solutions to their business users.

And let’s also point out that so often now it’s the actual business user who is driving the demand for the new application in order to better serve their business unit and their users. The fact of matter is that users go out and buy competitive products which creates concern on the SAP side of the equation. Especially if data inside the SAP application is being assessed, created or modified.

And one more time with the “digital transformation.” The second paragraph is simply an endorsement of SAP’s viewpoint on indirect access.

Geoff: So be prepared and do your due diligence now so you are not surprised. What else should our members be doing?

Joe: This should be ASUG members’ main call to action: If they were avoiding this issue or not paying attention to it—that time period is over. This certainly tells the users they need to be aware of how their licenses are being used and whether or not there is a potential compliance issue.

The second would be to bring that information forward to ASUG to start having the conversations for the first time or again, so it creates a momentum that ASUG can take forward.

I think this customer fear and the emotional response should be acknowledged in the market place. Geoff, you’re just coming back from that meeting with a lot of CIOs, and there is no question there is a fear that is being generated in terms of what this means from a financial risk perspective.

So the first two paragraphs above are boilerplate.

Then the third paragraph points back to ASUG. Again, there is no indication that SAP is doing anything untoward, and there is no attempt to relate the indirect access definition applied by SAP to the non-issue of indirect access at other software vendors.

The last paragraph acknowledges the fear, but once again does not discuss legitimacy.

Geoff: Do think what happened in the U.K. will be applicable across the globe?

Joe: You have to remember that this court case is but one judge, one ruling, one case, one court and potentially not the definitive answer. There are a lot of factors, and this could have been decided in a different way by a different court, if the factors were weighed differently.

Regardless, we now have a ruling. Meaning, if you have contractual SAP agreements, you better read them and understand what are the legal implications of the agreement you signed.

This is one of two accurate sections in the entire article.

The UK judge did not appear even to review SAP’s definition of indirect access. But the last paragraph of the response is entirely dishonest. Indirect access as interpreted by SAP is not a legitimate claim. Companies that signed SAP contracts did read and understand the legal terms. SAP changed their policy and had changed the interpretation of indirect access.

Geoff: Is the “named user” even relevant in today’s world? Are we trying to use legacy definitions in a digitally transformed world, and perhaps that isn’t working?

Joe: Yes and no. If you look at Salesforce, for instance, they typically have three user categories based on the level of use and functionality required that follow similar conventions. As an industry, the named user is still the primary way that licenses are described. That doesn’t work as well when the named user may be an interface or a sensor, or some other device.

Way back when, for an on-premise system like SAP, the users were the employees of the company that accessed that system through a display device. It was all contained within the company environment. That was the only way you had access to the software. And it was easy to say at what level of access or functionality there was an equivalent fee based on the usage.

Today, that notion has become even more convoluted given outsourcing, e-commerce, partnerships and third-party customers.

ASUG is perpetrating or allowing a false framework to be promoted. A named user never applied to application integration. This is because SAP’s application and interpretation of an expanded indirect access definition are new. These two comments by Geoff and Joe are either completely misinformed, in which case Geoff and Joe are the wrong people to interview on these topics, or Geoff and Joe are lying, in which case again, they are the wrong people to interview on these topics.

The last two paragraphs have nothing to do with the topic. The last items listed, “outsourcing, e-commerce, partnerships and third-party customers” have absolutely nothing to do with indirect access or the Diageo v. SAP case.

Joe: I firmly believe user categories are still relevant. The fact is, previously, they were protected by the boundary of the company and the employees. And that certainly has been opened up in terms of this ongoing indirect issue. As we discussed, this is not a new issue. But this case certainly highlights the issue and brings it to a level of awareness that is probably unlike other things we have seen.

No kidding Joe. User licenses are still relevant! This is the insights that ASUG readers get from ASUG. And indirect access as applied by SAP is new. What is not new is that applications have been integrated with SAP since SAP started selling its applications.

Geoff: The other issue for customers might be ensuring they’ve got all their contracts lined up. For most SAP customers it’s probably not going to be one contract, but a series of contracts with amendments. Language layered upon language.

Customers have to cut through all of that and align back to how the software is being used today versus how it may have been licensed yesterday. Start thinking about this now, how you are doing business, and why you think you are licensed—or not.

No, incorrect. SAP’s application of indirect access is new. The use of the software is not “different’ on indirect access. ASUG keeps proposing this, but it is not true, and the participants to this article don’t seem to know enough to know on this topic or they are simply lying.

Geoff: ASUG members should not universally allow SAP to define what indirect licensing is. This has to be a collaborative discussion between the user community and SAP about what is equitable and fair.

One of the few true statements in this article. Everything that Geoff and Joe have said in this ASUG article has simply directly reinforced SAP’s position on indirect access.

Geoff: We, as ASUG, are happy to bring that banner forward. And to advocate on behalf of every one of our members for a fair way to understand, in today’s digitally transformed world, how complex licensing concepts should be applied and executed.

What’s interesting is that we were already speaking with SAP on this topic, along with the rest of the global user communities. The ruling in the U.K. brought this to the forefront. I promise our members that we are championing this topic on their behalf and that the ASUG Board, who are all SAP customers, are as vocal as the rest of the members.

I know personally that SAP isn’t interested in pursuing court action to resolve these conversations and would like to have a dialogue with customers on the topic, which is why these conversations are so important.

Look for a lot more from ASUG. ASUG advocating on these topics is what drives the value in being a member. And ASUG needs to hear your voice.

ASUG is patting itself quite a bit on the back here, but this article they have published indicates that they intend to be nothing more than a pawn for SAP.

ASUG Continues its Misinformation Campaign

ASUG published a second article with several other quotations.

As SAP has opened up its software to new data sources and software, the trend is poised to become a concern for SAP customers. The result of these types of unlicensed activities is, of course, a violation of SAP customers’ licensing agreements—which will not go unnoticed during a compliance audit.

Again, incorrect. This is a concern because has changed the interpretation of indirect access.

In general, the results demonstrate that “SAP is not doing a good job of educating their customers on this concept and what it means,” he says. “It reinforces why customers who have this issue—those customers who have had it brought to their attention—are completely caught off guard.”

This assumes that SAP wanted to educate its customers on this topic. What if by not educating the customers it puts itself in a better negotiating position? Has ASUG considered the possibility?

The majority of the respondents have more than five interfaces to non-SAP applications—with 12 percent claiming more than 50 interfaces. “Think about the number of potential users on the other end of those apps,” Blake says. “The magnitude [of indirect access fees], from an unbudgeted perspective, can be pretty significant.”

Right, except this has always been the case.

When asked about SAP’s legitimate indirect-access violation claims, most respondents perceive SAP to have a legitimate claim for indirect access in real-time and non-real-time (or batch) two-way communications. And a majority of survey participants indicated a willingness to pay additional license and maintenance fees under real-time, two-way communications between systems.

This is interesting.

Respondents were asked about their response if SAP notified their company that it would terminate their SAP license agreement for breach as a result of indirect access. Their responses: More than half (54 percent) would try to negotiate a settlement amount with SAP to resolve the dispute; 19 percent would pay nothing to SAP and dispute the claims in legal proceedings; another 19 percent were unsure; and 8 percent didn’t answer.

This shows how many companies are willing to come to the table with SAP on this topic.

Blake does give credit to SAP for working with its new customers on being more transparent in their licensing agreements, though he claims there’s still too much ambiguity in the contracts.

Of course.

For the first article, I had interviewed Joe LaRosa, head of global pricing at SAP. He offered straightforward guidance for customers on indirect access, and it remains applicable in looking at these survey results. “Assume that with anyone who uses our software there’s going to be a licensing fee,” LaRosa said, during an interview for the first article. “What the exact fee is is something customers need to address with their account executive.”

Right, well the question is what is the use of the software. I do not agree with SAP’s definition of use, and other software vendors do not either. The “use” Joe LaRosa is referring to was until very recently referred to as “integration.”

“The problem [in many of these cases],” Blake says, “is that no one out there knows the answer to that except SAP, and right now SAP wants to be more selective in enforcement.”

Right. SAp enforces indirect access if the customer is shown as lower in the potential for new sales than the SAP account manager expects them to be.

Conclusion

Is this article intended to inform SAP customers on the topic of indirect access? If so, it seems to keep away from the topic of whether SAP’s interpretation of indirect access is even valid. This article is clearly attempting to propose that indirect access is due to some change in technology, such as digital transformation, rather than being a policy change on the part of SAP. In another article on this topic by Diginomica, the culprit was SaaS and not digital transformation. The people writing this either do not understand the topic in sufficient detail or are deliberately obscuring the issue.

If you are a SAP customer, ASUG clearly has no intention of fighting for your interests. They can’t even provide a balanced viewpoint on indirect access. How can they possibly be useful in this debate?

The primary use of ASUG will be to corral SAP users into channeling their efforts through SAP so that the impression can be given that ASUG is helping “solve the problem.” That is ASUG will sell out the interests of its members, to the interests of its real priority, which is SAP. This is the problem when an entity pretends to be independent but isn’t.

How Much do You Know SAP’s Treatment on Indirect Access?

SAP Indirect Access Quiz

The following quiz asks a series of questions on SAP indirect access.

Our Work With the New SAP Construct

We are one of the few entities that focus on SAP but also tells the truth about SAP. If you want to be provided biased information on SAP, there are many choices in the market. We can recommend Deloitte, Accenture, KPMG, E&Y, Infosys, IBM and Gartner among others. However, for unbiased information on SAP, the options narrow considerably.

If you are interested in our advice on how to deal with SAP, and how to manage to diversify away from SAP, reach out to us. We offer a wide variety of advisement all focused around getting a better value from your SAP investment.

References

https://www.asug.com/news/asug-talks-with-sap-licensing-expert-about-indirect-access

http://go.panaya.com/upgrading_to_sap_ehp8_ebook_WTY.html?aliId=41403196

https://www.asug.com/news/sap-customers-sound-off-on-indirect-access-fees

The Argument for Per Se Treatment of Indirect Access and SAP

What This Article Covers

  • Background on Indirect Access and SAP
  • What is an Illegal Pre Se Basis?
  • The Argument for Per Se Treatment of Indirect Access
  • How Much do You Know About SAP’s Practices
  • Our Work with the New SAP Construct

Introduction

At Brightwork we have spent considerable effort in analyzing the connection between indirect access and tying agreements, which are illegal under US law. Indirect access is used by SAP to block out the access of vendors from their accounts.

What is an Illegal Pre Se Basis?

An “illegal per se” argument is that the activity which is the topic is illegal without any other circumstances of any other evidence being necessary.

The Argument for Per Se Treatment of Indirect Access

Brightwork was the first to connect indirect access to tying agreements. The following quotation is quite instructive on this topic.

“In determining whether there is a tie, it may be relevant to determine whether the defendant has market power, and whether it has actually used that power. However, once a tie is found to exist, this should conclusively establish liability. (emphasis added) The only remaining issue would be whether the defendant could show special facts that would justify the imposition of the tie-in, notwithstanding the strong presumption that all tie-ins injure competition. This approach is based on the following conclusions:

  1. There are a variety of reasons for a seller to impose tying arrangements. However, in some cases, at least one reason the seller wants to impose the tie is to leverage its market power in the tying product to obtain added sales in the market for the tied product.
  2. The use of this leverage power will have anticompetitive effects, particularly the foreclosure of competition in the tied product market.
  3. Although there are several other reasons a seller may have for imposing the tie, tie-ins, in general, do not produce any economic benefits, except in certain specific situations, and may lead to other societal losses. Therefore, again with certain specific exceptions, there will be no economic loss from condemning all tying arrangements, regardless of the seller’s motivations. Condemning them all will provide a clear line for businessmen and courts, and will simplify judicial application of the rule.” – A Simplified Approach to Tying Arrangements: A Legal and Economic Analysis, Vanderbilt Law Review

See our overall article on indirect access and tying arrangments or tying agreements.

How Much do You Know SAP’s Treatment on Indirect Access?

SAP Indirect Access Quiz

The following quiz asks a series of questions on SAP indirect access.

Our Work With the New SAP Construct

We are one of the few entities that focus on SAP but also tells the truth about SAP. If you want to be provided biased information on SAP, there are many choices in the market. We can recommend Deloitte, Accenture, KPMG, E&Y, Infosys, IBM and Gartner among others. However, for unbiased information on SAP, the options narrow considerably.

If you are interested in our advice on how to deal with SAP, and how to manage to diversify away from SAP, reach out to us. We offer a wide variety of advisement all focused around getting a better value from your SAP investment.

References

http://www.americanbar.org/groups/young_lawyers/publications/the_101_201_practice_series/the_wonderful_world_of_tying.html

How The University of Chicago and Harvard Write In Defense of Tying Arrangements

What This Article Covers

  • The University of Chicago and Harvard
  • How The University of Chicago and Harvard Consistently Work Against the Public Interest
  • The Overestimation of “Perfectly Competitive Markets”
  • Deliberate Falsehoods

Introduction

In performing research in indirect access rules as employed by SAP, I investigated the topic of tying arrangements in tying agreements. I found it interesting to once again run into two of the least reputable universities who proposed arguments that once again seemed quite in line with what their monied interests donors would want these two universities to publish.

The University of Chicago and Harvard

“Theorists of the Chicago and Harvard Schools hold the position that the efficient and competitive tying arrangements constitute the lion’s share of all tying arrangements.78 This assumption is based on the fact that tying arrangements are very common in completely competitive markets.79 In such markets, the tying firm cannot “coerce” consumers to purchase the tied product. Therefore, presumably, the tying arrangements are efficient and beneficial for both the tying firm and the consumer public. These efficient results relate to the very tying, rather than to the market being competitive or monopolistic. Consequently, if tying arrangements in competitive markets have a significant efficiency potential, then this is also the case when the tying takes place in monopolistic markets.80” – Seattle University Law Review

The tying arrangements that UC and Harvard refer to are things like a camera being combined into a cell phone. This is combination of technologies that literally no one has ever accused any cell phone manufacturer of engaging in a tying agreement. UC and Harvard offer a number examples that serve as primarily diversionary tactics. This is what leads to the next big falsehood which is that tying agreements are as often a pro-competitive as they are anti-competitive. Right, they are so procompetitive that it is why we have laws, laws which UC and Harvard are attempting to dilute for the benefit of their donors, against them.

Professor Elhauge. In fact, there is no basis—either empirical or theoretical—for the two approaches presented whereby the onus of proof should be shifted. While closing a significant segment of the tied product market strengthens the anticompetitive potential of the tying arrangements, it does not diminish their pro-competitive efficiency potential.162 It can even be argued that the foreclosing of the tied product market is a prerequisite for eliminating double markup distortions, which is a pro-competitive effect.163 Applying a presumption against tying arrangements in certain scenarios assumes that their anticompetitive potential outweighs their pro-competitive potential. However, this assumption has no anchor either in theoretical writing or in empirical research.164 – Seattle University Law Review

UC and Harvard make it sound like tying arrangements that are procompetitive are frequently deemed uncompetitive by the courts or by the FTC. However, there is no history of this happening. It is a ridiculous argument presented by these two universities.

UC and Harvard’s views on tying agreements are consistent with economics generally.

They argue that the leverage theory only rarely motivates sellers to engage in tie-ins, and that even if it did, it would rarely be successful; therefore, judicial concern based on the leverage theory is misplaced. Economists suggest that, instead, several other objectives motivate sellers entering into tying arrangements which have benign effects on competition. Finally, they argue that some tie-ins are motivated by efficiency considerations, and that proscription of these would be harmful to the economy. – Vanderbilt Law Review

This flies in the fact of reality, and as economist frequently do, they appeal to some theory that has in most cases never been proven. Here is another example.

All the tying arrangement can do is reduce the price of the tying product and raise the price of the tied product, leaving the combined price no more than it would have been absent the tie. – Vanderbilt Law Review

If we take the example of the indirect access fees charged by SAP for SAP ERP licenses to companies that do not purchase complimentary SAP products, and instead go with a non-SAP application. In this case the customer can very easily be redirected towards the purchase of SAP (non-ERP) applications as this will allow the customer to not have to pay for both a non-SAP license for non-ERP software plus the ERP licenses. This is because SAP will waive the cost of the ERP licenses if the SAP non-ERP applications is purchased.

The result is that the customer buys from SAP instead of buying from the non-SAP vendor.

Once the “objectives” of the economist become clear, then their arguments very much fall on hard times. Here is one example.

“Third, the fact that certain forms of tying arrangements might not shift any resources among competing producers, but will merely shift them between sellers and buyers, is nonetheless not irrelevant for antitrust purposes. Economic explanations are said to be value free; the distribution of resources among buyers and sellers, provided there is no increase or diminution in total societal resources, is a concern that economists need not address.2 The legal system ought not be equally value-free. 3 This Article not only proceeds onThe premise that it is not of negligible concern whether profit maximization goes to the seller or to the buyer; it makes the explicit value judgment that, all other things being equal, the buyers’ interests ought to prevail. For example, there is no need to be equivocal about tie-ins used to evade governmental price ceilings on the tying product, even if they cause no adverse impact on competition. Therefore, if it is asserted that the principal objective of tying arrangements is to achieve this shifting of resources effect, this in itself might be sufficient grounds to hold all tying arrangements unlawful.” (emphasis added) – Vanderbilt Law Review

It is almost impossible to believe that economists hold this as a goal. Therefore they consider immaterial if tying arrangements benefit the buyer or the seller, as “surplus” ends up “someplace.”

How The University of Chicago and Harvard Consistently Work Against the Public Interest

It should come as little surprise that the University of Chicago and Harvard would propose this. In fact, they consistently write in this exact manner on a wide variety of topics and their “research” is highly predictive. Time and again UC and Harvard propose policies that benefit the most powerful companies at the expense of all others.

  • Both UC and Harvard are aligned with the interests of the largest companies and oppose the interests of smaller enterprises or individuals.
  • UC states that not a single dollar is overpaid in the US and not a single dollar underpaid. And UC’s logic for this is that the labor market in the US is perfectly efficient.

The Overestimation of “Perfectly Competitive Markets”

Harvard performed research which was used to justify not regulating financial markets, and this was before 2008. Both UC and Harvard greatly exaggerate the number of industries that are perfectly competitive. They do this for the very simple reason that their donors want the markets that they operate in to be viewed as “perfectly competitive” so that they receive no oversight and they can continue to operate as unregulated entities.

Deliberate Falsehoods

Harvard and UC consistently don’t care what is true, they are about pushing forward arguments that support the interests of their donors.

UC and Harvard are writing about a public interest issue, but because UC and Harvard are so focused on the interest of monopolists they are unable to rationally discuss topics that are related to public interests.

Conclusion

Both UC and Harvard are consistently wrong on topics ranging from competition levels in various industries to what constitutes things like tying agreements. The less regulation of industries is performed, the more the donors to UC and Harvard benefit. Neither UC nor Harvard are reputable sources of information on this topic.

This is because they only represent the interests of the largest corporations that benefit from the promulgation of misinformation on how regulation is unnecessary and markets are perfectly competitive. In this way, UC and Harvard produce exactly the “research” that their donors request and their donor pay for.

How Much do You Know SAP’s Treatment on Indirect Access?

SAP Indirect Access Quiz

The following quiz asks a series of questions on SAP indirect access.

Our Work With the New SAP Construct

We are one of the few entities that focus on SAP but also tells the truth about SAP. If you want to be provided biased information on SAP, there are many choices in the market. We can recommend Deloitte, Accenture, KPMG, E&Y, Infosys, IBM and Gartner among others. However, for unbiased information on SAP, the options narrow considerably.

If you are interested in our advice on how to deal with SAP, and how to manage to diversify away from SAP, reach out to us. We offer a wide variety of advisement all focused around getting a better value from your SAP investment.

References

http://scholarship.law.nd.edu/law_faculty_scholarship/430/

http://digitalcommons.law.seattleu.edu/cgi/viewcontent.cgi?article=2233&context=sulr

How to Best Understand the Business Software Alliance

What This Article Covers

  • Business Software Alliance and their Motivations
  • Business Software Alliance as a Bully Organization
  • No Declaration of Funders
  • Publishing Fake Research

Introduction

The Business Software Alliance is a legal and lobby group which is ostensibly designed around enforcing copyright rules.

The Business Software Alliance performs audits for the software vendors that fund them, but there is some interesting debate as to who the Business Software Alliance serves. In this article, we will get into the topic of this entity’s motivations.

Business Software Alliance and Their Motivations

The Business Software Alliance was founded by Microsoft. They now have many other software vendors as members including Intel, SAP, Symantec and Adobe among others. However, research from previous cases where the Business Software Alliance has brought actions against companies that it found to be out of compliance, it turns out that the primary way to get the Business Software Alliance to go away is to purchase Microsoft products. This is true even at the expense of other software vendors that are in the alliance. Therefore, the Business Software Alliance has an official reason for being (to stop copyright infringement of the software of their members), but it has a practical reason for being, which is to move as much of the software purchases to Microsoft.

In fact, many of the attorneys for the Business Software Analysis also do work for Microsoft on other matters. This is in addition to the fact that Microsoft provides the most money to the Business Software Alliance. This means that it is very difficult for the Business Software Alliance to claim that they represent the interests of all their funders.

Business Software Alliance as a Bully Organization

The Business Software Alliance has a remarkably negative reputation. Their MO is to audit smaller companies, under the guise of being an “independent” audit. They then share any information that they have gathered with Microsoft. In fact, in some countries, a senior account manager (salesperson) for Microsoft is also the Business Software Alliance representative. Therefore, the lack of independence of the Business Software Alliance is not something that Microsoft even attempts to provide.

  • The BSA actively encourages ex-employees to rat on their previous employers offering large awards. And there is also a problem in that in many cases those that turned in their employers themselves had installed the software before they left that causes the violation of copyright.
  • There is also the problem that in some cases the employee, often working in IT and therefore familiar with the rules of the BSA, takes the receipts for software with them before they go, and they report the company as out of compliance with the BSA.
  • Finally, the evidence that the BSA requires appeared excessive and designed to maximize the finding of out of compliance licenses.
  • The BSA pays rewards to people that turn their companies in, but then state that the rewards are irrelevant in determining a motive. They state the only important thing is “the story they have to tell.” That is an interesting position to take, as motive is used to determine the credibility of witnesses during actual trials. The BSA has no way of knowing if those that turn in their employers are doing so for the money or because the company violated the copyrights of their funders.

The BSA has a way of making up its rules. Almost no BSA brought audits and actions are ever taken to court, so the attorneys that work for the BSA use their training primarily to intimidate the customer to settle. And settlement means purchasing (in most cases) more Microsoft product.

The BSA’s behaviors are quite horrid, but they serve to distract attention from the funders of the BSA. That is, the BSA can develop a terrible reputation for misusing power, but the vendors themselves are insulated from the PR damage.

No Declaration of Funders

The only way to find the funders of the Business Software Alliance is to look at non-BSA sources or to look for who is on the board of directors. Not declaring funders, for a group that purports to be dedicated to a high-minded ideal, and which purports to perform research, is a violation of the basic rules of transparency. Here are the list companies the people on the BSA’s board of directors work for.

  • Oracle
  • Symantec
  • Apple
  • IBM
  • Adobe
  • ANSYS
  • AutoDesk
  • Bently Systems Inc
  • CA Technologies
  • DataStax
  • Microsoft Corporation
  • SalesForce.com
  • SAS
  • Siemens Product Life Cycle Management Software
  • Splunk
  • Tend Micro
  • Workday

Virtually every member of this board is the General Counsel or Cheif Legal Office for the company the work for.

That is quite a large board, and it is no doubt necessary to placate all of the funders that they have a place at the table. We can be reasonably certain that these are the major donors behind the BSA. However, several of these vendors have voiced the concern that the BSA primarily looks out for Microsoft first.

Publishing Fake Research

Like most industry-funded groups, such as the American Petroleum Institute, research without any evidence is published which is beneficial to the funders. BSA follows no methods, never has its research peer reviewed, and routinely has its research lampooned in the IT press. The do not explain that the research is funded by software vendors, which have a strong financial incentive to overstated the losses due to piracy and other related copyright infringement, and present themselves as impartial, just looking out for apple pie, truth, and all that good.

Conclusion

The BSA is a front group that operates on pure intimidation. Their game is to shock a company and intimidate them into buying most often Microsoft products, but sometimes other vendor’s products as well. They are a beehive of conflicts of interest and follow none of the transparency rules that an entity that was playing fairly would normally follow. They set incredibly high standards of what constitutes evidence of purchased software to maximize the fines that they request, and the purchases made to their chief sponsor. In that way, they are an extra-legal entity, shaking down companies, not based upon actual copyright law, but based upon the cost of actually taking a case against the BSA, with their very deep pockets to court.

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How to Best Deal with SAP Audits

What This Article Covers

  • SAP Audits
  • SAP Audit Management
  • Audit Software Vendors that are Also SAP Partners?

Introduction

SAP audits are when the SAP comes to a customer and determines if the customer is out of compliance on SAP licensing. In the recent years,

In the recent years, SAP has increasingly come to rely upon software audits to drive revenue. Secondly, SAP’s licensing rules are some of the most complex in software (along with Oracle, another company that is known to heavily audit its customers). Generally, the largest software vendors (which includes SAP, Oracle, IBM and Microsoft) tend to perform the most software audits, and tend to have the most stiff penalties for being out of compliance.

What this means is that software purchased from the largest vendors tends to have the greatest liability associated with them.

SAP Audit Management

SAP audit management is actually the name of a SAP product that speeds the non-software internal audit process (according to SAP). This product runs on SAP HANA, which is a fast database. There is actually free trial of SAP Audit Management available. SAP Audit Management is an app offered by SAP. But it has nothing at all to do with software audits.

The term “SAP audit management” generally refers to the activities necessary to prepare for and manage a SAP audit.

One of the approaches to a software audit is for the customer to purchase audit software and perform the audit themselves.

  • Making Changes: Doing so can mean adjusting behavior which moves away from violating SAP licensing, as well as changing the roles within SAP so that the company is not out of compliance.
  • Simulation: It allows what if scenarios to be tested in terms of changing the usage of SAP. Some of the software vendors propose being able to determine the scenarios both the SAP licensing and support costs, however, that is not entirely knowable because of things like the discounts that are offered by SAP.
  • Purchase Proactively: It also allows the customer to approach SAP to purchase licenses before the fact. For example, users may have SAP user licenses assigned to them that they no longer use because of a job change or some other reason.

Another major liability that can be caught during an SAP audit is indirect access. Indirect access is covered in this article. But indirect access is a complicated topic which SAP is increasingly the enforcement of, and which increased the complexity of dealing with an SAP audit.

Audit Software Vendors that are Also SAP Partners?

Unfortunately, in order for a software company to build audit software for SAP, it must be an SAP partner. This means that it has restrictions by SAP on what it can say and what it can publish. I am in constant contact with many software vendors, and the complaints about SAP interference in what they can say and what the can do are unremitting. In fact, I am surprised that SAP would allow software vendors to offer an audit product as it states clearly, for instance in the promotional video from one of the software vendors that their product.

It ensures that you know more about your SAP system than anyone else, giving you the upper hand in any negotiation or audit.

Why would SAP want that? SAP wants the upper hand clearly. Snow software states that they can

..save 20 to 30% savings on their SAP costs typically within weeks alone.

But again, this is money coming out of SAP’s pockets, and they have the right to decertify Snow or any other software vendor at anytime. So if the audit vendors statements are true, how are they still certified partners of SAP. What this means is that SAP has a say as to how the software vendor’s software actually works. SAP can and will threaten the software vendor with a removal of their SAP Certification, which would impact that software vendor’s ability to exist.

If I compare how the SAP partnership agreement is used with other vendors, SAP will use it to neuter the marketing of the vendor so that everything the third party vendor releases is consistent with the needs of SAP.

Conclusion

There is something fishing going on with the market for SAP audit software.

One cannot both be an SAP certified partner and have free reign to provide whatever information you want to, to your customer. And unfortunately, audit software companies have to be SAP certified partners to have their software connect properly to SAP. This brings up questions regarding how much any audit software company can actually work for customer’s interests, which means working against SAP’s interests, without compromising their SAP certified partnership arrangement with SAP.

If you have questions or comments about our coverage of SAP audits and SAP audit software, reach out to us.

References

http://www.scmfocus.com/saphana/2017/02/07/hana-police-indirect-access-charges/