Vendor traps: SAP’s “indirect licences” trick

Failing to have the proper licences for your ERP system isn’t a good idea. If the provider finds out, it’s likely going to cost you a pretty penny to set things right. But what if you are fully licensed? Does that mean you’re safe? Not if SAP has anything to say about it given its recent “indirect licences” trick…

In this blog series, we’re taking a look at some of the most common traps Oracle and SAP use. We’re also explaining what (if anything) customers can do about them.

Today, we’re taking a closer look at a high-profile court case between SAP and global beverage provider Diageo. Diageo was a major SAP customer, so we’re wondering which customer will be next on SAP’s hit list.

SAP’s lawsuit against one of its biggest customers

In 2017, the judge in a high-profile legal battle between SAP and Diageo found in favour of SAP. The case, which centred on software licensing, found Diageo liable for more than £54 million in back-dated licence fees.

When they first implemented SAP in 2004, Diageo purchased licences for all its employees. In 2011, it connected its SAP systems (via the fully licensed SAP PI interface agent) to two systems built on the Salesforce platform. This enabled its customers to create sales orders directly.

Relying on tricky clauses in its licensing agreement, SAP argued that in addition to licensing its employees, Diageo should also have purchased SAP licences for its customers. This is in despite of the fact that those customers never directly accessed Diageo’s SAP system. They were using Salesforce licences that Diageo paid for.

The ruling sent shockwaves through the SAP community, especially since Diageo is a multinational giant with revenues of £12 billion per year. Even though Diageo had fully licensed its employees (and was clearly a high-value ERP customer), it was still under-licensed as a result of what SAP called “indirect access.”

Turning a negative into a profit

In 2018, SAP developed a “solution” to the indirect access problem it had created. Customers concerned they might be hit with expensive demands for back-licensing fees can choose to purchase indirect licences. This will cover documents made by interfaces to their SAP systems. Indirect licences (an addition to a customer’s usual licences) are purchased annually in advance. This is based upon the customer’s estimation of the number of documents they will create.

Leaving aside the obvious difficulty of making these estimations, SAP has pulled off a coup. It has successfully scared customers into purchasing additional indirect licences, while they simply continue using their SAP systems. This is a clear case of extracting more money from customers without providing any additional value.

What can you do about indirect licences?

As complex as they are, understanding your licensing options is essential. Following the Diageo case, SAP has bolstered and empowered its audit function, so SAP customers should be extremely careful to ensure they are fully licensed for their level of SAP usage.

If you’re struggling to determine whether your organisation has the proper licences, some external consultancies that specialise in licensing can provide independent audits which can help you to identify possible issues.

Don’t stand for vendor traps

If you’ve had enough of Oracle and SAP’s traps to keep you paying over the odds for poor quality support, we can help. Recently, we published a report on their most common tricks and also what customers can do to protect themselves.

In the report, we cover:

  • Why Oracle’s seemingly reasonable support SLAs don’t stand up to close inspection, which its customers discover at the most inopportune moments.
  • How SAP’s track record of providing new features and functionality for supported products doesn’t quite match its promises.
  • What customers can do to protect their interests against the barrage of tricks employed by Oracle and SAP, including how to save at least 50% on annual support contracts while receiving a higher level of service.

And much more.


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