SAP has been making a big push to direct customers from its traditional software licenses to the new S/4HANA license models. The company has been highlighting the benefits of S/4HANA, including a simplified license structure, lower costs, and improved performance. Written by Gábor Hédai (IPR-Insights).
However, a transition most likely has never happened without challenges on this scale. Hence, many customers are hesitating to make the switch, citing the high costs and complex implementation process. SAP has been working to address these concerns, and has recently announced a number of initiatives to make the transition more seamless and affordable… still, customers have to go through a massive to-do list with success.
I’m sure the question arises in you: how much time we need to dedicate to the transition of an enterprise management system of such a magnitude? Well, the answer is, according to the latest official information, the following tasks must be completed by the end of December 2027, at the latest. The impact is not in question, I think. The scope is. The biggest internal tasks that certainly cannot be avoided are the following (in case of RISE, no infrastructure, platform needed):
- Migrating to SAP S/4HANA from ECC
- Designing a migration roadmap
- Planning Infrastructure
- Choosing platform and services
- Review and redesign business processes
- Review and redesign contract and license portfolio
We, at IPR-Insights Sapper, have a strong focus on SAP contracts and licenses so let’s dig a little deeper into the ground and take a closer look at the major tasks one by one.
Perhaps, the most important thing to do firstly-first is to collect all our current contracts, because this is the only way we can have a holistic perspective of our entire SAP software license agreement portfolio. If we do so, we will be potentially able to manage its content and consolidate it at the end of the process.
Once we have that, we need to assess our software licenses and their utilization. We need to determine how we are using or exploiting our current license portfolio. This requires an assessment of their compliance with actual use. Assessing how we use our software is not the same as an audit, because an audit only measures how much is allocated in the system and whether it is in line or not with the contracted amount, in terms of quantity. We need to determine how and to what extent the current portfolio needs to be modified so that we use only and exclusively what we actually need. This is the best practice to determine the ideal license portfolio for us.
Keep in mind that it could make a huge difference in terms of quantity, license type and cost, if we convert the existing contract portfolio versus the already optimized license portfolio into S/4HANA. Based on our experience there can be a 15-50% difference between the two!
We also need to assess and quantify our risks. Once we know what the ideal SAP software license portfolio is and we know what the risks are, we have to consolidate. The purpose of this consolidation is to see clearly whether we can cover our losses from our potential savings, and if so, to what extent?! This is a very important stage during a license conversion.
If the major source of risk is identified, don’t get surprised when it turns out that it is Digital Access. In 2018, SAP introduced Digital Access, which means that data generated by a third-party system that exchanges information with SAP, has to be licensed. Just think about RPA, EDI, etc. they evolve, spread, and at the same time, they may generate a license claim. We need to assess how much this means for our company, how it should be licensed and how much it will cost.
The next sensitive point regarding the licensing of the use of SAP systems is the authorization management. The development of the authorization concept and the definition of roles may not only affect our roles… but may also affect our compliance with transparent financial operations! The current authorization concept in the ERP/ ECC system will not comply with the S/4HANA authorization concept, as there are new transactions in the new system while many of the current transactions do not exist. For example, many of them are replaced by Fiori solutions.
The task here is to assess the current authorization concept and roles to see how compliant they are with S/4HANA. To do so, SAP helps us and released a manual for you that is a little over 1,000 pages. This includes how appropriate the current authorizations and roles are, in an S/4HANA environment. There are typically a lot of roles in a company, which can mean more than 1,000, but in some cases more than 10,000 roles. It is an extremely challenging and, to put it mildly, almost mission impossible task to perform manually. This can be a significant challenge for any SAP basis team. It is worth and highly suggested to think about how we can automate the data cleansing part of this task.
The essence is that we have to come to the conclusion of the compatibility test to find out how many resources we need to migrate the current authorization concept to the S/4HANA environment, or …we have to redesign the whole thing. This is important because the license models in S/4HANA are completely different, each license can be used on a per-user basis, and it primarily contains access execution rights, so the license execution rights must also be considered in the authorization concept.
Okay, we have our contracts collected, we are aware of risks, we have an optimized and ideal portfolio, and it is simulated for S/4HANA. Now it has to be said how this would look like exactly at the product level. The point here is that we have to be capable of doing our current business the same way, but in a completely new software environment that works legally, and balanced (not under-licensed or over-licensed).
In this stage, we need to create a contract that is best for us in terms of license, content and terms & conditions. Given that a contract should be suitable for both parties, we recommend you to work out your own standpoint in good time.
The message is simple: know exactly what and how much we want! Before we begin the negotiation phase, be prepared and ready for this round. Clarify what are the assurances in our contract that will allow us to use our license portfolio a little more flexibly in the future than we may have previously been able to do.
Not only does it seem like a tsunami of tasks, but it’s actually a quite complex and really challenging exercise, regardless of company size, it is well worth contacting an SAP software license consulting team. A team of experts who are familiar with the SAP software can support you to manage your licenses in a compliant way, while cost-effectively running the business.