Internal document suggests SAP's goal of simplifying licensing will be a tall order

SAP still requires 131 pages of fine print to describe software licensing rules for its products

SAP customers have made it no secret they believe the vendor's software licensing and pricing is far too complex, and a top company leader recently made a public pledge that things are changing for the better. But a recently created internal SAP document obtained by IDG News Service suggests that the company has its work cut out for it.

The document, marked "confidential," runs to 131 pages and indicates it was updated in January. Contained within is a detailed rundown of SAP's licensing policies, which on balance suggest that customers indeed face a wall of complexity when dealing with the vendor.

For example, the document lists roughly 15 named user types for SAP's flagship Business Suite alone. They include Developer, Business Expert, Professional, Limited Professional, Business Information, Employee, Employee Self-Service, Employee Self-Service Core, Business Expert Upgrade, B2B Sales, Professional Upgrade, Limited Professional Upgrade, Business Information Upgrade, and Employee Upgrade, according to the document.

SAP's wording of the descriptions is also simply too complicated and confusing for customers, said analyst Frank Scavo, president of the IT consulting firm Strativa.

Scavo cited the description for SAP's CRM Rapid Deployment Edition User licenses. These users are "solely authorized to (i) access the SAP CRM Rapid Deployment Edition and (ii) perform SAP ERP order-status checks through SAP CRM," the document states. "Access to other SAP software requires a SAP Application Business Expert User, a SAP Application Professional User or a SAP Application Limited Professional User license. The rights granted to a SAP CRM Rapid Deployment Edition User are included in the existing SAP Application Business Expert User, SAP Application Professional User and SAP Application Limited Professional User. The SAP CRM Rapid Deployment Edition User also includes the rights granted under the SAP Application Employee User."

"These rights are not easy to understand," Scavo added. "I challenge any SAP prospect to read these definitions and explain what they mean."

Overall, the document suggests that "it might be that SAP lawyers are being paid by the word," Scavo added.

SAP users have made their discontent with the vendor's licensing policies well known. Survey results released in October by the UK and Ireland SAP User Group found that 95 percent of respondents believed SAP's policies are too complex.

SAP co-CEO Jim Hagemann Snabe responded to those concerns in an interview later that month with IDG News Service.

"We now have multiple products in five categories," Snabe said, referring to SAP's range of cloud software, mobile technology, HANA in-memory database and other offerings. "That puts you in a more complex situation. What we're trying to do is come to a solutions approach."

SAP wants to roll up various products into bundles "that have high value for the customer," and simplified pricing. SAP's series of Rapid Deployment Solutions, which have been rolled out in recent years, represent this approach, Snabe added.

Snabe also cautioned, however, that users shouldn't expect a major announcement regarding license simplification "in the immediate future."

Overall, the sheer scope of SAP's licensing policies suggests Snabe was wise to set no great expectations, given how long it could take to fully unravel and simplify them, as well as retrain SAP's sales team and channel partners on a new model.

SAP has made further strides in the area of licensing simplification, and also seeks to effectively educate its customers on the topic, according to SAP spokesman James Dever.

The 131-page document is not meant for public consumption, aimed instead at "sales people who need to be knowledgeable chapter-and-verse in order to talk to customers," Dever said Thursday. SAP has provided another, public document meant for customers which is easier to grasp and runs about 25 pages including appendices, Dever noted.

Dever declined to comment on the contents of the longer document.

There's a rationale for the level of detail in SAP's licensing, Dever added. "The various types of use cases is a decision by SAP to define the value and the types of use with some precision," he said. "We're not taking a one-size-fits-all approach. That said, we're doing things that we can to make things simpler. We acknowledge it's an ongoing effort."

SAP is also getting deeper into the SaaS (software as a service) business, which tends to be sold in simpler terms via monthly subscription. "As our cloud business grows, we gain experience from that and find opportunities to simplify," Dever said.

Some significant progress has already been made in recent times, such as SAP's successfully creating a standardized set of contract templates for use worldwide, Dever added. "That's a pretty major victory for us."

There's also a fresh example of the bundling approach Snabe referred to, in the form of SAP's recently announced 360 Customer product, Dever said.

Some observers aren't seeing major change for the better just yet. "From our perspective, with some of the deals we've been working on, [licensing] hasn't been simplified at all," said David Blake , CEO of UpperEdge, an IT sourcing and consulting firm that deals frequently with SAP contract negotiations on behalf of customers.

But SAP is not the only offender in this regard among enterprise software vendors, according to Jeff Lazarto, principal at UpperEdge.

While UpperEdge's clients generally believe SAP rival Oracle's licensing policies are simpler and more transparent than SAP's, Lazarto cautioned against making a straight apples-to-apples comparison between the companies.

That because while Oracle has long provided public price lists for its products, in actual negotiations "what we typically see is that everything Oracle proposes is a custom bundle," Lazarto said. As a result, it can be difficult for customers to keep track of which product in the bundle is getting what level of discount off the list price. Oracle has also come under fire for a perception of licensing complexity, particularly with respect to its widely used database.

Meanwhile, although "SAP guards the price book like the Holy Grail, they price off of it," Lazarto said. "Oracle discloses the price list but doesn't necessarily price off of it."

SAP also "does better job of managing the sales cycle and the sales relationship" with customers than Oracle, Lazarto said. This culture has a "lot to do with executive leadership" at SAP, namely co-CEOs Snabe and Bill McDermott, he said.

However, Snabe's discussion of SAP moving to a bundled license approach over time could mean customers face the same challenges as Oracle shops in determining whether they're getting the best deal.

Bundles will also require customers to be more flexible and a "little more vanilla" in their tastes, said IDC analyst Amy Konary. "A lot of times what happens on the customer side is they'll be presented with a bundle but it doesn't meet their needs." That makes the customer the one potentially introducing more complexity if they decide to make changes in the deal, Konary said.

It will likely take a long time for SAP to phase in major changes to its licensing model, but doing so is important for both customers as well as the company, Konary added.

For one thing, complex license arrangements could expose customers to a higher risk of failing a license audit by SAP, she said. While a customer may have a few employees working on deals who do understand the details, "there are a lot of other people that come into contact with [software] that have the opportunity to misuse it inadvertently," he said.

Even for internal people or partners, licensing "should not be overly complex" as it introduces friction and uncertainty in the sales process, Konary added. "What ends up happening is a customer goes to a sales rep or a partner and asks for a quote, and they'll get a different answer from every person."

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

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Tags cloud computingIT managementCIO roleinternetOraclebusiness issuessoftwareapplicationsIDCSAPit strategyInternet-based applications and servicesJim Hagemann SnabeUpperEdgeStrativa

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Chris Kanaracus

IDG News Service
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