The Complexities of SAP Optimization & Licensing

SAP optimization and licensing is challenging due to its wide range of options and flexible models. The software includes various modules that cover different aspects of business management—spanning thousands of products, over 20 user license types, and more than 100 engine metrics.

Businesses must navigate different software, licensing structures, pricing models, and deployment options while closely tracking license usage to remain compliant and avoid unnecessary costs. However, SAP’s system measurement tools, designed to show license consumption, do not assist in optimizing license selection or reducing expenses. As a result, many organizations struggle to align their license inventory with actual usage, leading to over-licensing and excessive spending.

Additionally, SAP licensing includes indirect and digital access, adding further complexity. Indirect access refers to SAP software usage through third-party applications, while digital access involves interacting with digital content via SAP. If these metrics are not properly managed, they can result in unexpected additional costs.

To avoid unnecessary costs, our licensing experts have compiled five key tips to help you optimize your SAP licenses. Implementing these strategies can lead to significant cost savings and a more efficient SAP environment.

Key SAP optimization tips for licensing and contracting

1. Track Named User Licenses carefully

SAP offers various user types, each with different permissions and price points. The cost difference between a Professional User license, which provides near-unlimited access, and a basic Employee Self-Service (ESS) license is substantial.

By actively monitoring employee activity and aligning it with the appropriate license type, businesses can ensure compliance while avoiding unnecessary costs.

2. Manage Indirect Access Licenses

In 2018, SAP introduced a new pricing model for indirect access, aiming for more transparency. However, understanding these changes is crucial to managing costs effectively.

SAP’s current model bases indirect access licensing on system-generated documents rather than the number of users accessing SAP via third-party applications. Organizations must proactively identify integrations requiring indirect access licenses—for example, connecting Salesforce CRM to SAP or using custom automation tools. Undocumented integrations may go unnoticed until a license audit, potentially leading to financial penalties or legal risks. A proactive approach to monitoring indirect access is essential for compliance.

3. Understand SAP Engines

SAP engines (or packages) are additional products sold separately from named user licenses. Pricing varies based on specific metrics, such as the number of employees or invoices processed.

A key consideration is that SAP audits HANA database licenses based on peak usage over the past 12 months. Even a single instance of exceeding the license threshold can trigger corrective actions. Organizations should closely monitor their engine usage to prevent unexpected costs and compliance issues. Proactive management can help avoid unnecessary expenses and identify potential licensing gaps before they become costly problems.

4. Right-size licenses & subscriptions before negotiations

Optimizing SAP licenses and subscriptions should begin 6 to 12 months before renewal to prevent last-minute decisions that lead to overpaying.

Regular License Position Assessments provide insight into actual usage versus entitlements, helping to eliminate unused licenses, reallocate resources, and adjust licensing to better fit business needs. By staying ahead of renewal negotiations, organizations can reduce costs and improve efficiency.

5. Negotiate long-term SAP S/4HANA cloud & SaaS costs

While initial SAP investment costs are important, long-term expenses—such as recurring subscription fees, usage-based charges, and price escalations—can significantly impact the total cost of ownership.

For SAP S/4HANA cloud and SaaS deployments, businesses should negotiate long-term cost structures upfront. Understanding pricing models, potential cost accelerators, and contractual commitments can help secure financial advantages. We assist in building a strong business case to optimize long-term SAP costs for your organization.