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Thursday, April 19, 2018

NEWS: SAP Announces New Pricing Model - Let the fun begin...

Software giant’s new pricing model attempts to address customer concerns about liability exposure due to “indirect access.”

Implications of the new model for companies will depend on whether they are potential net new customers of SAP, existing customers without indirect access concerns, or existing customers with potential liability for indirect access.

On April 10, 2018, SAP announced a new pricing model for licensing SAP software. This new pricing model is in response to an erosion of trust within SAP’s customer base precipitated by recent high-profile litigation brought by SAP seeking substantial additional license and support fees based on claims of indirect access to SAP ERP software. In developing the new pricing model, SAP sought input from user groups, customers, partners and industry analysts. SAP’s stated objective in the new pricing approach is to focus on business outcomes and provide an objective measure for the use of SAP ERP, SAP S/4HANA and SAP S/4HANA Cloud, which SAP refers to as the “Digital Core.” As discussed below, the new pricing model is a marked improvement, compared with SAP’s prior licensing regime, over the uncertainty and confusion surrounding indirect access, but leaves a number of questions unanswered for SAP customers.

Indirect Access Explained

SAP distinguishes between direct and indirect access to its Digital Core:
  1. Direct access “occurs when humans log on to use the ERP system by way of an interface delivered with or as part of the ERP system.”
  2. Indirect access (also referred to by SAP as digital access) “occurs when humans, or any device or systems indirectly use the ERP system via a non-SAP intermediary software between the users and the SAP ERP system, such as a non-SAP front-end, a custom-solution, or a third-party application.”

SAP New Pricing Model

Under the new model, direct human access to SAP’s Digital Core remains unchanged. The appropriate type of named user license is required for each individual who will have direct access to the Digital Core.

... indirect access is priced under the new model based on document types rather than named users. SAP has identified a set of document types to serve as pricing metrics, two of which (Material and Financial) have a multiplier of 20% to reflect their lower value and more frequent use. SAP will count only the initial documents that are created, as measured over a 12-month period. Read, updates and deletion of documents do not incur an additional charge.

Customers will have to purchase an annual bundle based on an estimate of expected indirect use (i.e., how many thousands or millions of documents, counted at the line item level for a number of document types, they expect to create indirectly), with the final price dependent on the negotiation of volume and customer discounts.

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