SAP user group lobbying leads to more flexible on-premises licensing policy

SAP customers can now swap on-premises licenses for other on-premises products, with some catches

SAP has made the second change to its software licensing policies within a month following a long-term lobbying effort by user groups, and while the move will give customers more flexibility, certain limitations apply.

Customers can now replace existing on-premises software licenses and associated maintenance fees with other products in SAP's on-premises portfolio, SAP said in an emailed statement on Thursday.

However, following any changes a customer makes, their maintenance bill must "at a minimum, remain the same," SAP added.

Under the new policy, customers could also partially terminate licenses and their associated maintenance fees without adding new products, but doing so may not make sense in all cases.

That's because the remaining licenses in the product family to which the terminated licenses belonged will be subject to what SAP calls "recalculation of maintenance base." The product families in question are Business Suite; database and technology including analytics; and mobile.

For example, if a customer had 100 licenses in one product family and wanted to drop the total to 90, "the 90 licenses will be valued with the list price at the time of purchasing, and then from the list price you would deduct the standard volume discount, if eligible," said Jens Bernotat, SAP vice president for strategy and business development, maintenance go-to-market and premium engagements. The resulting price would be used to calculate the maintenance payment for the 90 licenses.

If a customer had originally received a substantially higher discount on the 100 licenses, they could conceivably have a higher relative maintenance bill for the remaining 90. But in no case would a customer who terminates any licenses see their total maintenance bill rise, according to SAP.

There's a deliberate reason for grouping the products into separate families, according to the company. "SAP offers a broad variety of solutions and has customers covering all three product families as well as customers having clear focus in only a subset," it said in a statement. "We want to reflect this by a logical grouping of solutions in product families. We see this as fair because grouping all solutions together into one would lead to a recalculation of maintenance base for the overall SAP landscape a customer has, with all contracts."

SAP's move comes shortly after it announced a program under which customers could trade on-premises licenses for ones in its portfolio of cloud-based applications. However, that policy assumes "an expanded investment with cloud solutions from SAP, given the substantial added value from this new hybrid scenario," SAP said at the time.

On the whole, these changes provide customers with the flexibility they need to make strategic IT decisions, according to Bernotat. "We need to find a good balance between driving our business and our customers driving their business."

Skeptics might also say that SAP is intent on keeping its customers from straying to newer and possibly less expensive applications from the likes of Workday and Salesforce.com, while also avoiding serious losses in lucrative maintenance revenue.

User groups hailed the new licensing changes, saying they represented a successful lobbying effort with SAP.

"This is yet another step in the right direction from SAP and shows that the company is listening to our calls for flexibility," said Philip Adams, chairman of the UK and Ireland SAP User Group, in a statement.

However, SAP's actions don't go so far as to allow customers to "park" licenses they aren't using, Adams noted. "Therefore customers need to be careful and consider whether they are likely to need licenses they are not using at the moment in the future. Once licenses have been terminated they cannot be switched back on. If a customer needed those licenses in the future they would need to purchase them again and at potentially lower discounts."

However, for companies that have been hurt badly by the economy in recent years, "this policy from SAP could be very attractive, if after rediscounting the maintenance fees reduce."

SAP's "constructive cooperation" with users has delivered an "excellent result" that benefits customers worldwide," said Andreas Oczko, chairman of the German-speaking SAP User Group (DSAG), in a statement.

"Decision-makers at SAP user companies can now react accordingly to the rapid pace of change in economic conditions -- such as new or changed areas of business, fluctuations in staff headcount, or changes in the enterprise organization -- and plan their investments in SAP software more effectively. This is something we have worked on jointly for a long time," Oczko added.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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