SAP CEO Bill McDermott took the stage for the Sapphire Now conference's opening keynote this week, and after a few minutes of audience engagement and banter, launched into his first core topic. No, it wasn't about a new product or strategy, but rather something that affects many SAP customers: Indirect access.
The term refers to scenarios in which a customer uses a third-party application, such as Salesforce, to tap into SAP system data. The problem arises when a user doing so isn't also a licensed SAP user. In the course of a software license audit, companies can find themselves on the hook for substantial penalties for unpaid license fees, whether the violation was intentional or not.
Earlier this year, SAP won a landmark court victory against drinks distributor Diageo, who could pay up to $68 million in penalties. Diageo had developed two Salesforce-based systems which it connected to its core SAP system through SAP Process Integration. The court rejected Diageo's defense that PI served as a "gatekeeper" license to SAP.
SAP has also sued Anheuser-Busch InBev, the world's largest brewer, regarding both alleged indirect access violation and unlicensed use of SAP software. It is seeking $600 million.
Invoking the notion of "empathy" toward SAP customers—a theme he first introduced at last year's Sapphire—McDermott referred to the indirect access issue and said SAP had come up with "simplified pricing," which he briefly described.
"Procure-to-pay and order-to-cash scenarios will now be based on orders, which is a measurable business outcome for any business," McDermott said. The more significant statement came next. "In addition, static read access in third-party systems is your data," McDermott said. "Competitors charge you for static read in third-party systems, SAP will not."
SAP corporate development officer Hala Zeine elaborated on the topic in a blog post. During discussions over pricing and licensing with user groups, indirect access came up repeatedly, Zeine wrote:
We decided to tackle this topic first through the lens of pricing modernization. Our objective was to make pricing predictable, linked to unit of value, transparent, and consistently applied.
We looked first at the areas that would have the greatest impact on the greatest number of people. We found that approximately 80 percent of our ERP customers will benefit from our changes to just these three scenarios: Procure-to-Pay, Order-to-Cash, and Indirect Static Read.
Indirect static read access reinforces that a customer’s data is yours. Just because the data was in the SAP system, does not mean you should pay to view it when it is outside the SAP system. Indirect static read is read-only that is not related to a real-time system inquiry or request and requires no processing or computing in SAP system. Indirect Static Read will now be included in the underlying software license – i.e. free of additional charge when a customer is otherwise properly licensed. SAP leads the pack in addressing customer expectations related to this scenario.
Does this address every indirect access scenario in the age of devices, IoT, and collaborative networks? Not yet. There is much more to do and we are eager to keep updating pricing scenarios to bring you greater value. It is, however, a step in the right direct toward pricing modernization.
However, SAP in turn wants customers to help avoid an unpleasant audit experience by proactively examining their current landscapes and usage:
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. ... 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.
Analysis: A Measured Step In SAP Customers' Favor
The UK ruling against Diageo should have been a wakeup call for any SAP customer using third-party software in conjunction with it—which is obviously a large percentage of the overall base. SAP's case against Anheuser-Busch InBev is in arbitration, meaning the details—in particular, any defenses the brewer may have—won't become public.
While SAP is offering back maintenance indemnity for under-licensed customers who come forward willingly, doing so could still result in additional license fees, which then carry maintenance going forward. There's no sound argument to be made for willingly using SAP software without required licenses, but it remains to be seen how many customers take SAP up on its offer. In any case, Constellation has seen a significant uptick of late in inquiries regarding indirect access and related SAP license audits—in short, this issue is not going away.
Meanwhile, the concession SAP offered on indirect access is limited in scope. Indirect static read means just that—nothing that requires processing within the SAP system. Still, indirect static reads are part of many valuable use cases.
Constellation backs the generally accepted industry parameters of indirect access, which should include the ability to process batch data; aggregate information into a data warehouse or other data store; access data for use in another system via data integration; and to enter data from a third party system. On its face, SAP's new policy would only prohibit the last.
However, another telling passage in Heine's statement was this:
Does this address every indirect access scenario in the age of devices, IoT, and collaborative networks? Not yet. There is much more to do and we are eager to keep updating pricing scenarios to bring you greater value.
That's a bit opaque, considering how important those workloads are now and will be in the future. Digital transformation is the predominant theme of this year's Sapphire event, which featured the unveiling of an expanded product strategy called Leonardo, a "digital innovation system" that brings together machine learning, IoT, blockchain and other leading-edge technologies on SAP's cloud platform.
SAP, of course, sees digital transformation projects as its major growth engine and wants customers to come along for the ride quickly. To that end, it will hopefully provide a broader explanation of how indirect access will work in this new landscape soon, preferably before the next Sapphire rolls around. That would be the empathetic thing to do.
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