SAP user group calls for licensing clarity

SAP’s licensing policies are top of mind at the conference of the German-speaking  SAP User Group (DSAG) this week.

While the cloud is the right way forward, DSAG members need transparency from SAP to allow them to make the move, DSAG chairman Jens Hungershausen said in a pre-event post.

“For cloud transformation to succeed, you need a consistent and harmonized architecture, uniform operating models, clear migration paths, and transparent licensing and discount models that can be scaled up and down,” he said.

For many organizations, the journey into the ‘new’ SAP cloud world still begins with SAP ECC or the ‘old’ Business Suite, and sometimes with S/4HANA On-Premises. When SAP discontinued its RISE with SAP package in April, replacing it with the similar but not identical Cloud ERP Private, subtle but significant changes in licensing and product components meant that CIOs faced increased costs and more complexity navigating that journey.

Gartner VP Analyst Mike Tucciarone said at the time, “With Cloud ERP Private, organizations receive nearly twice as many bundled SKUs compared to RISE with SAP Premium. While there are strategic additions like LeanIX, it’s important to note that some capabilities, such as SAP Datasphere, are no longer included.”

Transparency critical

Confusion and lack of transparency around changes like that is what’s driving DSAG members’ concerns.

Responding to those concerns, SAP said in a written statement, “We recognize that transparency and confidence are critical for businesses navigating transformation. We’re actively delivering on these needs and making meaningful progress through initiatives like the RISE with SAP Migration and Modernization program. Our goal is to equip every organization with the tools and insight to make informed decisions and realize tangible value from their transformation journey.”

However, a major issue facing prospective S/4HANA customers in the cloud, said Info-Tech Research Group advisory fellow Scott Bickley, is that “SAP is constantly moving the goalposts with regard to product nomenclature, feature mix, licensing practices, and price obscurity.” DSAG properly calls this out, he said, while simultaneously endorsing SAP’s cloud push.

“The issue here is how one can expect an enterprise to make a mission-critical decision around deployment models, which will incur a generational price tag for legacy ECC clients, without having clarity and transparency around the BOM [bill of materials] and line item pricing,” Bickley said. “SAP’s documentation provides only a high-level vantage point to where high-level functionality resides, and is always subject to change.”

Rebranding confusion

The recent rebranding of the RISE/GROW with SAP products to SAP Business Suite, the name of a legacy product, further muddied the waters, he said. “Adding insult to injury, SAP has introduced a bundled LOB licensing model for the public cloud version based on a per user per month (PUPM) model, while the private cloud version remains on the Full User Equivalent (FUE) model.”

He’s been unable to find the new model’s licensing and pricing yet, although, he said, SAP claims that they are posted publicly on its website.

 “With each changing of the product taxonomy, SAP is also reshuffling the deck by removing some products and features and adding others, making it extraordinarily difficult to track and quantify. Couple these changes with the ambiguous nature of SAP’s Capacity Units (CU) for BTP and AI Units for various tiers of AI functionality, both of which rely on a backdrop of an obscure feature catalog where different actions consume differing volumes of “units”, and one is left to depend on SAP’s workload calculators, abandoning proper transparency in the process.”

DSAG noted that the move to the cloud — it calls for a hybrid model — requires “consistent, harmonized architecture and uniform operating models”, and said, “From DSAG’s perspective, flexible licensing and discount models are also needed to make the switch attractive and easy for customers.”

Bickley agreed. “How can an enterprise model their spend against this type of dysfunctional backdrop of price and consumption obscurity?” he said.

And it’s clearly putting off legacy SAP customers, as evidenced by the slowing adoption rates of the new SAP Business Suite, he said. “Perhaps SAP is banking on the robust body of net new customers they have been benefitting from over the past few years, and are prepared to turn their back on the past? Either way, SAP has about a $9 billion legacy support backlog that will need to be reconciled, optimally converted to SAP Business Suite spend, and the current practices employed by SAP are not helping to accelerate this migration.”