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Understanding Your Options for SAP Licensing 

For companies looking to invest in SAP, understanding your options with SAP license types doesn’t have to be overly complicated or stressful. The licensing model from SAP is “modular,” meaning you pay for the solutions you need (what you want to use) and how you want these solutions to be deployed, providing you flexibility in selecting the licensing model that’s best for your business.   

When it comes to choosing an SAP license, there’s no “one-size-fits-all” solution for every business. As such, it’s critical to first understand and identify what your business requirements will be – the “must haves.” The considerations below will help give you a better understanding of SAP software licensing and how to choose the best option for your business. 

Pricing Criteria for SAP Licensing 

In considering your SAP licensing options, below are some key criteria to keep in mind as you navigate the array of options.

  • Evaluate what are the business capabilities that your business needs now and also in future. 
  • What software solutions best meet these needs?  Identify what applications are best suited for your business, including other complimentary solutions. 
  • How do you want them deployed? Where will the solutions live? Do you want them on-premise or in the Cloud? And if in Cloud, which Cloud? Private or Public cloud? 
    • If you select the on-premise option, you’ll be responsible for installing, operating, and managing the software. Since you’re installing the software at your location, the license in most instances will be perpetual – you will own it but pay an annual maintenance fee. 
    • If you select the Cloud option, you have the option of deciding to choose an SAP-hosted Private Cloud or a Public Cloud, both of which are secure platforms. On an SAP-hosted Private Cloud, SAP supplies the hardware and helps you manage all your applications. On the other hand, with a Private Cloud, your users are granted access to the application subscribed, but you are charged for its use. The terminology used here is Software as a Subscription (SaaS). This is also known as “on-demand” software. Users usually access SAP applications via a web browser. SAP still administers the software, and you will be charged for service use by your Cloud host. 
  • How do you want to consume the software? SAP offers 3 options:  
    • Subscription – time dependent, usually three to five years, and it covers the subscription fee for the license and the support/maintenance fee.  
    • Consumption – you pay only on how you use the software; it’s for a specific period with no annual commitment. 
    • Perpetual – SAP is yours forever to use for a one-time fee, but you will also be responsible for an annual maintenance/support fee. 

Package License vs. Named User License

While most of the SAP licenses bought are perpetual, you are still required to have packaged licenses and named user licenses in order to obtain the right to use and ensure compliance. What exactly does that mean? 

  • Package License – Here you use all the functionality available in the application that you buy but with an agreed specified metric. For example, in the Sales and Distribution application, the metric can be the number of sales orders processed per given time or the number of contracts created. If your metrics change, so, too, can your costs. 
  • Named User License – Named user licenses are just that: these are the licenses for employees or groups of people that you have identified, along with their roles and tasks, that will be using the application(s). These named users can use multiple license models (that is, many different SAP applications). 

Understanding Your Options for SAP Licensing

There’s also the option of software rental or subscription with the licensing cost dependent on your requirements. SAP pricing can and is flexible, but actual pricing options need to be discussed with your SAP Account (Sales) Executive. At Clarkston, our team of experienced SAP consultants can help your organization better understand your options for SAP licensing.  

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Contributions from AJ Jamal

Tags: SAP