The path and pitfalls of switching to Digital Access

In response to the controversy surrounding Indirect Access, SAP has launched the DAAP programme to steer its customers towards the new digital licensing model. Written by Gábor Hédai (IPR-Insights).

In May 2019, SAP announced the Digital Access Adoption Program (DAAP), prompted by the controversies mentioned in the first part of our SAP Access series, to help customers switch from an Indirect to a Digital Access model. Customers will have two options to choose from: License Conversion (Option 2) or Contract Conversion (Option 3), both will involve a two-step transition.

License conversion: this helps to keep the perpetual licenses available from previous purchases when migrating. The DAAP program guarantees that the SAP customer does not have to pay retrospective maintenance costs, or penalties if applicable. If the customer decides to migrate to the outcome-based model, it must first determine the number of unused licenses (credits), which will reduce its costs. This option could be chosen by those who have Indirect Access and would like to stay with that contract but want to improve transparency. This approach would also be a step towards S4/HANA.

A licensee would be provided to add an outcome-based licensing element as an add-on to the existing agreement. In SAP’s example, if a customer replaces an order license (Sales & Service Orders or Purchase Orders) and part of a user license, they can receive “up to 100% credit” from SAP for that license, but the associated maintenance costs remain the same.

Contract conversion: this can only be selected by migrating to S/4HANA. This is a new agreement, a new contract, but SAP promises to credit the customer up to 100 percent of the licenses in the old contract. The contract conversion provides an opportunity to simplify the current license portfolio and also allows for reconfiguration of the existing environment based on future plans. According to SAP, if contract conversion is chosen, existing maintenance fees will remain unchanged as there will be no difference in the value of the contract.

The two-step approach

In both cases, as mentioned above, the transition is a two-step process.

Step 1. Count the digital vouchers created during the current operation.

There are two ways to do this. The customer works with the SAP Global License Audit and Compliance (GLAC) team to estimate the number of documents created in current use. It is worth bearing in mind that this is based on the measurement methodology used by SAP.

The other option is to install a support package that includes SAP Passport and then determine the number of documents (estimated volume) created in current use with the support of SAP. SAP Passport is available on the latest version of ECC and document counting starts at the time of installation.

Step 2. Choose between the two financial incentive options.

Once you have the current number of documents, you need to estimate how much the Digital Access license fee will be. SAP offers its current customers two financial incentive options:

A 15% growth method, where the customer licenses (at least) 115% of the current estimated number of documents:

• SAP will license only the growth rate for a fee;
• but the customer can only use the standard volume discount.

90% discount method, where the customer licenses (at least) 100% of the current estimated number of vouchers:

• SAP charges a license fee based on the total number of documents;
• The license fee is calculated on the basis of the total number of licenses and a one-off discount of 90% is granted.

The 15% increase method is more expensive, and if the number of defined documents decreases, the customer cannot reduce its maintenance fee obligation. However, it’s worth bearing in mind that with the rise of automation and smart systems, the number of digital documents generated by businesses is to rise as well. Incredible increase can occur.

It is up to the customer to decide which scenario best fits their business plans based on the estimated number of digital documents and the financial opportunity. Attention! The discounts offered in the program apply to the one-off license fee, not the maintenance fee!

SAP introduced Digital Access pricing in April 2018, but customers who make the switch by the end of 2021 at the latest can take advantage of the financial incentives designed to accelerate the transition.

Risks of model change

Since May 2019, more and more SAP customers have been considering switching to document licensing. However, a serious risk of switching is that it can sometimes lead to dual licensing if not applied correctly.

For example, if a user has direct access to SAP through a user account using a username and password, and indirect access through a third-party solution, the document license will require payment for both Direct and Indirect Access. The same applies in other cases, in particular for EDI access. SAP also classifies non-human use, RPA (Robotic Process Automation), as Digital Access. This is rather controversial, as a distinction needs to be made between business documents generated with and without human involvement!

But SAP has made the change so financially attractive to its customers that many are ignoring the risk of higher than expected costs.

Although the DAAP program makes it clear that there are no benefits other than the two financial incentives, it is strongly recommended to negotiate the switch with SAP to reduce further potential risks.

This should be done by (1) ensuring that SAP does not add new document categories in the future; and (2) reimbursing the consideration for all Digital Access licenses if, as part of the antitrust litigation brought by Voice and pending in the German courts, SAP is forced to abandon its Digital Access model altogether.

What tangible risks and cost-saving solutions are available to SAP’s current and new customers will be described in the next part of this series.