SAP Licensing Ebook by Xpandion

A Publication of Xpandion
THE COMPLETE
SAP LICENSING
EBOOK
A GUIDE FOR ACHIEVING OPTIMAL SAP LICENSING POWER
INCLUDING:
SAP Licensing Concepts: From Contract to Audit
How to Negotiate with SAP for the Most Suitable

Licensing Plan
15 Essential Customer Recommendations about
Preparing for SAP Audits
Special Topic: Indirect Use
Tools that Exist in the Market to Optimize SAP
Licensing
And Much More to Help You Control Your SAP
Licensing Audit
2014 Xpandion. All Rights Reserved.

SAP is a registered trademark of SAP AG in Germany and in several other countries.
ProfileTailor LicenseAuditor
ALL-IN-ONE LICENSE
OPTIMIZATION
SOFTWARE
everything you need to gain control over
SAP usage and licensing costs.
Utilize SAP licenses most efficiently
Determine which licenses are really needed, which best suit user
activity and which are underused, misclassified or dormant
Save substantially on licensing costs
50%-90% per reclassified licenses
15% on overall maintenance fees
Up to 50% on SAP license management resources
Be in the drivers seat while negotiating with SAP
Installed externally to SAP. No need for SAP expertise
Request A Demo
Overview
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WRITTEN BY MOSHE PANZER
Moshe Panzer has over 15 years experience as a recognized ERP expert. He has worked as
a senior ERP consultant, project advisor and project leader for large private corporations
worldwide and as development, conversions and interface manager for the Israel Ministry of
Finance.
Moshe has developed and managed large scale software integration, interfacing and
architecture, and has played pivotal roles in more than 50 complex ERP implementations in
Israel, Europe, and the US. He led the development of the largest ERP implementation in
Israel, led by the Ministry of Finance and thought to be the largest IT project in Israel. Mr.
Panzer was regional director, responsible for Microsoft-SAP solutions connectivity, and
personally developed a connector for MS-SAP. Over the years, ERP, as well as other major
companies in Israel and Europe, have called upon him to lead dozens of courses in ERP
management systems.
His technological vision is the driving force behind Xpandion's product development. In
addition to his technological expertise, he has founded and run three successful software
companies.
Moshe Panzer has a B.Sc. in Information Systems Engineering from the Technion, and a
Masters degree in Information Systems (MSIT) from Clark University. He is also on the
Board of Directors of Enshav, a non-profit organization for the safe use of the internet.
FOLLOW ME ON TWITTER.
@moshepanzer
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TABLE OF CONTENTS
1. INTRODUCTION
2. UNDERSTANDING THE SAP CONTRACT
3. NEGOTIATION THE POSSIBILITIES

4. HOW TO PREPARE FOR AN SAP AUDIT
5. PREPARING FOR AN AUDIT 15 ESSENTIAL
INSIDER TIPS & TRICKS
6. INDIRECT USE
7. SOFTWARE TOOLS FOR SAP LICENSING
OPTIMIZATION
8. FIVE LITTLE-KNOWN FACTS ABOUT SAP
LICENSING
9. CONCLUSION
WHY WE DECIDED
TO PUBLISH THIS EBOOK
SAP licensing is quite complicated.
We have the experience.
Due to our time-tested knowledge of the field, Xpandion knows that
although the information is out there, it usually lies with SAP
licensing consultants who do not like to share it publicly or for free.
Theres also much confusion about this topic, particularly since
SAP continues to buy more and more companies and because they
change their licensing terms from time to time.
After doing this for so long, were accustomed to seeing helpless
customers who just surrender to paying the same amount each
year when they renew their contracts. We see others who, after a
merger or acquisition, automatically pay more without checking first
to see if they needed to pay even an additional dime.
All of them are frustrated because there is no one out there to help
them. No one has put the knowledge, the guidelines and the rules
of thumb into one document and said to them, Just read this
before you go to negotiation with SAP and youll be all set.
Now there is. And this is that document.
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THE SOURCES
FOR THE EBOOK
The resources for this eBook are a compilation of the articles and
blog posts that weve written over the years, which have included
many different aspects of SAP licensing.
This eBook also includes recent updates and also new knowledge
that has never been written down before.
We strongly encourage you to register to our blog now (if youre not
already registered) in order to be constantly updated on the latest
information.
Register to our blog now
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WE NEED
YOUR HELP TOO
Tell Us Your Story
As SAP licensing is a bit different for every negotiation, we
encourage you to share your experience with us so we can help
others be aware of the different scenarios. Writing us back will help
us to enrich the material with YOUR experience (without your name
or data of course).
Just write us an email and tell us about your SAP licensing
experience. Other customers will thank you!
Share the Love
If you enjoy reading this eBook, help us to distribute it to more
relevant people so they can succeed in their next SAP licensing
audits too.
Let your friends know about this eBook!
Sharing is caring and passing this knowledge on to more
colleagues from other organizations will give them the opportunity
to do better at their jobs and in SAP negotiations.
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INTRODUCTION
Getting to the SAP audit affects even the best of us. We become
harried, stressed, and overburdened with the monumental task of
sorting through a huge amount of data, cross-referencing Excel
spreadsheets, and tallying up oodles of figures and costs. By the
skin of our teeth, we make it to the SAP audit, and pray that our
data is accurate. Every year, we tell ourselves: There has to be a
better way.
There is.
Progressing to a sound, safe SAP audit is more than gathering
data. Its about gathering it right. This eBook will give you the
steps from start to finish, from the philosophical to in-practice, so
you can walk into that audit feeling calm, cool and collected.
The eBook starts with explanation of the SAP contract. Since the
contract is the foundation of it all, we encourage you to read this
section thoroughly as we point out the most important issues in
which to pay attention. The contract is also your baseline for
renegotiating current licenses or purchasing additional licenses
from SAP, and hints for this are included too.
Tweet this!: Getting to a successful SAP licensing audit is about

gathering the right data. This eBook gives you the steps.
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CHAPTER ONE
INTRODUCTION
INTRODUCTION
Then we will discuss the actual SAP negotiation process, beginning
with learning how to check if negotiation is even possible, and when
it is relevant for you. Well also present a couple of situations in
which most customers go into negotiations with SAP.
The third section is hands-on. It deals with how to actually prepare
for an audit. First, we explain the complexity of classifying users to
the right licensing types. Then, we include our best tips and tricks for
you to glean from too. This section will put you in the drivers seat for
a positive SAP audit, where the leader is you.
A special chapter about indirect use is also included. Indirect use is a

topic that has become very hot recently and one that you should be
extra aware about.
Finally, well review how free and non-free licensing optimization
tools can help you to evaluate your situation, spot opportunities to
improve it, and save you money. Most SAP customers use some tool
for evaluating their situation, particularly if their licensing costs for
are high. We strongly encourage SAP customers to use a software
tool if they have more than 1,000 users and more than two SAP
systems (for example SAP ERP and SAP BI) in their organization.
We strongly encourage SAP customers to use a software tool if they have
more than 1,000 users and more than two SAP systems (for example
SAP ERP and SAP BI) in their organization.
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CHAPTER TWO
UNDERSTANDING
THE SAP
CONTRACT
UNDERSTANDING
THE SAP CONTRACT
When companies buy software from SAP, they are required to sign
a contract as they would with any other software vendor. This
contract defines a lot of issues like what the exact software is that
theyre buying and what exactly is included in the purchase.
For our purposes, the contract is also what defines the licensing
structure. As this is a practical eBook about SAP license
optimization and not a legal-oriented eBook, we will only highlight
the most important topics for our objective, which is to understand
the relevant contract parts for future negotiations.
We assume that the contract is already signed and youre a couple
of years beyond the initial purchase.
Before you continue reading, it would be best for you to get
your companys SAP licensing contract, and all of its
addendums, from the legal department.
Although companies from different industries and with different
characteristics buy software from SAP, most SAP contracts are
actually very similar. This may surprise you because you might
have thought that SAP had included special amendments for your
specific company well, they probably didnt. If special
amendments are indeed required to support special needs, they will
be included in an addendum. Therefore, always look at the contract
with all of the addendums that come with it, especially the initial
ones and any updates.
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UNDERSTANDING
THE SAP CONTRACT
How do addendums work with SAP licensing contracts? All
purchases are documented in an addendum. From the initial
licensing purchase through the follow up licensing purchases, each
change is documented in a separate addendum. This helps SAP,
because their signing process is complex, but this helps you too
because separate addendums enable you to track price changes
and the maintenance percentage throughout the years. For
example, you may discover that you paid a lot less for a
professional license type a couple of years ago than what you are
about to pay now.
Addendums can include the option for additional purchases at the
same price and at the same discount rate. It is not rare to find a
clause that says that the customer is entitled to purchase licenses
from type X at the same price up until two years after the
addendums signing date. If your company happened to require this
clause at the right time, you could become a budget hero.
UNDERSTANDING
THE SAP CONTRACT
The Foundation of SAP Licensing
SAP licensing is based on three main elements:
1. Named Users (how many and which types)
2. Software Engines (e.g. Payroll, XI)
3. The database (OEM Database) - optional
There can be additional elements, but its not so common. We will
discuss Named Users and Software Engines later in their own
sections they are the expensive elements.
The last element, the database, is an OEM database, which means
that you cant use it for any other purpose than as a database for
SAP software. You can choose between a couple of common
databases, like Microsofts MS-SQL, Oracles Database, or SAPs
own database. The payment for the OEM database is optional:
Some customers prefer to take the database as OEM so they can
buy all the licenses of the deal from one point of contact (i.e. SAP)
and some prefer to buy the database licenses externally. Either
way, the costs for the database are not very significant compared to
the first two elements.
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UNDERSTANDING
THE SAP CONTRACT
Initial purchase price
The initial purchase price is the ideal price in many cases; its the
price that the first negotiation ended with. The reason why is
because this was the only point in time when the customer didnt
have to buy SAP. They had the power to choose which ERP vendor
to go with, so they were in the best position when bargaining on
price with SAP. Later on, when buying more licenses or disputing
maintenance fees, the customer becomes captive and the decision
to continue with SAP or not isnt so easy. This is the reason that
licensing consultants will always seek to understand the initial price
of the deal and its structure.
Maintenance fee
The maintenance fee is a very important part of the contract, and is
mainly the core of SAPs revenues. Since it is enterprise software,
SAP is granting the privilege to use their software by users at the
company. After an initial period of time, which varies between three
months and a year, the customer needs to pay maintenance fees if
they would like to receive updates and fixes to their software.
On average, the price is 20% of the initial license price; in most
contracts it ranges between 17%-22%. In recent years, SAP has
raised the maintenance fee to 22% but customers are still fighting
against it.
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UNDERSTANDING
THE SAP CONTRACT
Named Users The Basics
SAP licensing parameters are based on the type and quantity of
named users. Customers can buy various types of named users
from SAP such as: "Professional named users, Limited
Professional named users, Employee named users, etc. The
types and quantities of named users that your company has
purchased are detailed in the contract.
Each named user may have a real username(s) attached to it at a
given date. That means that throughout the specified period of time,
if you purchased, say, 500 Professional type user names from SAP,
you must not exceed the maximum of 500 usernames that are
defined as Professional in your system. You can, it should be noted,
switch the username(s) attached to a named user if for example,
the user has left the company or has changed his way of using the
system.
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UNDERSTANDING
THE SAP CONTRACT
Confusing the issue are the definitions of SAP user and license
types, which are quite vague, as you can see from these short
definitions of the three most-popular SAP license types:
Professional User is a named user who is authorized to perform
operational-related and system administration / management roles
supported by the licensed software, and has also been given the
rights granted under the SAP Application Limited Professional User.
Limited Professional User is a named user who is authorized to
perform limited operational roles supported by the licensed
software.
Employee User is a named user who is authorized to perform
the following roles supported by the licensed software, all solely for
such individuals own purpose and not for or on behalf of other
individuals.
Source: SAP Licensing Guide CMP21089 (13/06)
Be advised that there are many more types of SAP Licenses than
the common Professional, Limited Professional, Employee and
Employee Self Service (aka ESS). If you need to buy licenses
from SAP, remember that there are more license types beyond the
common ones and also remember that in certain cases your local
SAP representative can tailor a special license for your situation.
Tweet this!: If you need to buy licenses from SAP know that there are
many more types than the common ones.
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UNDERSTANDING
THE SAP CONTRACT
Licensing: Named User Additional Things to Remember
In recent years SAP has been buying more and more companies
and integrating their products into its main package. Since SAP
tries to stick with the known licensing method, the license types are
divided into three basic categories:
1. Licenses for combined SAP applications
2. Licenses for individual, or separated, applications
3. External licenses for applications that were bought by SAP, but
the license types remain as they were beforehand
Licenses for Combined SAP applications
Most classic SAP customers fall into the first category.
Professional, Limited Professional and Employee are defined
as global licenses for a suite of products from SAP, including SAP
ERP, SAP CRM, SAP BI, SAP APO, and more. These are
employee-based licenses, meaning that the organization buys them
for an employee and this employee can freely use the SAP
products as long as the license type covers him; in other words, for
as long as he is doing what is covered by the definitions of the
license.
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UNDERSTANDING
THE SAP CONTRACT
Licenses for Individual, or Separated, Applications
Some SAP customers need additional licenses just to use a specific
application. For example, if a customer has a lot of external
employees that only use an SAP portal, it would be a waste to buy
global licenses. Instead, the organization would buy a license for
the portal itself and give it to each employee.
If your organization has bought a special license just for a specific
application, this would be stated in the contract.
External Licenses for Applications That Were Bought by SAP,
But the License Types Remain as They Were Beforehand
Other customers migrate to SAP after SAP buys the company or

application that they are using. This has recently happened with
BusinessObjects and Sybase customers, who before the
acquisition knew almost nothing about SAP. In some cases, current
customers who want to buy applications that were recently
purchased by SAP are also required to obey the original migrated
licenses until SAP includes them in its regular license types.
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UNDERSTANDING
THE SAP CONTRACT
Special License Types
Surprisingly, some customers use specially created license types
with names like Manager, Top-User and Safety. These arent
official SAP license types, they are invented by the local SAP
office, and you cant find definitions for them in SAP documentation.
If you have Special License Types in your organization, make sure

that they are clearly defined. An example of a good definition is
something like: The license type Top-User will be for an employee
who uses one of all the SAP systems above 10,000 dialog steps
per month. When the definition of a specially created license type
is clear, nobody can argue with it and you can even buy more
licenses of this type if your company is expanding and needs extra
licenses.
Licensing: Software Engines
Additional to the user-based licensing, there is also licensing for the
activated SAP engines (which are also called SAP packages). SAP
software engines are optional software components that the
company can choose to use in certain situations. For example, a
company could choose to use the SAP payroll engine if they have
implemented the SAP HCM module and would like to produce pay
slips using SAP software. In this case, theyd activate and
implement the SAP Payroll engine and pay for it separately.
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UNDERSTANDING
THE SAP CONTRACT
Each engine has its own unique metric that sets the pricing model
for it. The metric is based upon the objects that exist in the relevant
area. In the example above, the metric for the SAP payroll engine is
the number of pay slips that the company produces. Other
examples for metrics are the number of active employees or the
number of purchase orders that are produced using the engine. In
order to measure the metrics value, SAP has different function
modules that can be activated regardless of the SAP audit to
identify the current situation.
An important day-to-day issue to be aware of with SAP engines is
the need for alerting. Normally a company will buy a license for an
engine before its implementation and will pay for it according to
their expectations of usage. The payment would be according to
the set bar. For example, from 0 to 500,000 sales orders, 500,000
would be the paid bar, and from 500,001 to 1,000,000 sales orders,
1,000,000 would be the paid bar, etc.
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UNDERSTANDING
THE SAP CONTRACT
With ongoing business activities, nobody really notices whether the
engine value is going up above the paid bar, which can lead the
company into a situation of being non-compliant with the SAP
contract. In order to prevent this, an alerting mechanism should be
set up, to alert when the engine has reached 90% usage. This way
the company can prepare for the occurrence beforehand and
extend their licensing.
LicenseAuditor shows the usage amount of each engine and sends an

alert when the value goes above the bar.
Tweet this!: An important day-to-day issue to be aware of with SAP

engines is the need for alerting. Get the eBook.
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CHAPTER THREE
NEGOTIATION:
THE
POSSIBILITIES
NEGOTIATION:
THE POSSIBILITIES
Can I negotiate with SAP about my contract?
Heres a fact that many customers forget: SAP wants you to be
their customer. Moreover, SAP wants you to be a satisfied
customer so that your company will purchase more solutions from
SAP in the future. If you have always assumed that negotiating
SAP contracts is impossible as impossible as negotiating
contracts with a bank, an internet provider, or a cell phone
company then assume again.
SAP clients are large enterprises and no company is identical to the
other. Therefore, inevitably contracts need to be adjusted and
tailored to the specific needs of each client. Your goal is to try and
get the best deal and the most suitable contract for your
organization in terms of license types, price, payment terms,
possible add-ons and other various adjustments that can be made
to fit your organization.
Negotiating with SAP: When, Why, How and Who
SAP customers will usually refer to their contract only as a result of
an occurrence that demands changes to their SAP licensing
structure, such as an M&A (merger or acquisition of/with another
company), restructuring, purchasing a new SAP module, etc.
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NEGOTIATION:
THE POSSIBILITIES
For example, in the case of an M&A, the buyer may take over the
purchased companys contracts, but sometimes the purchased
company has many unused licenses that they dont need and the
buyer can just include them in their global licensing plan. Another
situation in which to consider contract re-negotiation, which is more
relevant to this eBook, is when facing an imminent audit.
From our customers experience, prior to implementing SAP is
definitely the optimal time for the most successful negotiations and
adjustments to the contract. This is when companies are in the best
position to negotiate, and this is also when negotiating can make
the biggest difference before actually signing the contract.
If your company has already signed the contract, the rule of thumb
is simple: The ideal time for reevaluating and improving an existing
contract is just before purchasing new or additional licenses. This is
when you have the best chance to set a good price for each current
and future license type.
Tweet this!: Prior to implementing SAP is definitely the optimal time for
the most successful negotiations and adjustments to the contract.
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NEGOTIATION:
THE POSSIBILITIES
When the decision to negotiate the contract terms is made, the best
thing to do is to hire a professional consultant, one that can really
assist in understanding the SAP contract. Contradictory to common
assumption, a Purchasing Negotiator usually does not have the
right know-how SAP terminology that is so essential for achieving
the best-negotiated agreements. Of course, price negotiation (the
Purchasing Negotiators expertise) is vital, however it is not the only
element in an SAP contract, and not necessarily even the most
important one. Companies MUST enter negotiations knowing what
also to expect in terms of SAP jargon, SAP methods of
classification, what their current licensing requirements are, and a
smart forecast of their future corporate needs.
The right person to assist in negotiating SAP contracts is a SAM
(Software Asset Management) consultant with SAP expertise. SAM
consultants bring with them the most relevant experience for
helping enterprises tailor a contract that fits both their current status
and future licensing needs. In fact, an experienced SAM consultant,
together with a proficient purchasing negotiator, can obtain the best
prices, the most suited applications and the overall best terms in an
SAP contract.
Xpandion has worked with many SAM consultants over the years.
For a list of available SAM resources in your area, send us an email
and well share it with you!
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CHAPTER FOUR
HOW TO
PREPARE
FOR AN
SAP AUDIT
HOW TO PREPARE
FOR AN SAP AUDIT
User classification is the heart of any SAP licensing audit.
Therefore, were dedicating a separate chapter to it.
Important note: We assume that youre already familiar with the
standard preparation tasks, like how to technically combine users
and change their license type using SU01. We also assume that
youre familiar with how to use T-Code SLAW and how to send the
reports to SAP. This eBook will teach you more than the routine
stuff its beyond the simple pack-and-send-to-SAP process. This
eBook focuses on the how and why to classify users to license
types and where you can make smart decisions that affect the
bottom line. If you need the basics, you can find them in SAPs
guide.
Classifying Users
Distinguishing between SAP users and determining the correct
classification for SAP users is fraught with difficulties. For example,
if a user is utilizing three different usernames in three different SAP
systems (1) a BI system for managerial reports, (2) an ERP
system for stock transfer reports, and, (3) a second ERP system for
monthly invoice approvals should he be classified as an
Employee, a Limited Professional or a Professional? Or perhaps
one of the many other license types that populate the SAP
universe?
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HOW TO PREPARE
FOR AN SAP AUDIT
Unfortunately, SAP does not supply a simple tool to quickly classify
users according to their de-facto activity. You can find such tools
only externally, outside of SAP (see the chapter on licensing
optimization tools, below). What SAP does supply is a standard
SAP program (SAP transaction SLAW) to collect and consolidate
the classifications that the customer has previously defined in all of
the organizations systems. From here, the report can be sent to
SAP for annual inspection.
The matter of assigning license types to users becomes more
crucial when we consider two issues: The cost of the licenses, and
the size of the companies involved. The difference between a
Professional user license type ( $4,000-$5,000, plus 22% annual
maintenance fee) and, say, an Employee license type ( $1,000,
plus 22% annual maintenance fee) is significant, and causes one to
think twice before assigning a user a higher-level license type. In
addition, an average SAP customer has 5,000-8,000 SAP users of
which 700 are typically replaced and another 900 change positions
(and, thus, SAP usage) each year, making user classification a
lengthy and Sisyphean task.
For all these reasons, SAP customers try to create simple, logical
ways to classify their users: Simple, in order to save time and
resources, and logical, in order to maintain the spirit of SAPs
contractual definitions. Over the years, many SAP customers have
successfully developed a number of quick and informal methods to
classify users to license types. The following are the most common
examples:
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HOW TO PREPARE
FOR AN SAP AUDIT
Classifying SAP Users by Authorizations
Organizations often begin the search for a workable classification
method by considering the classification of their users according to
their static granted authorizations. In effect, this means that if a
user is authorized to perform certain activities, he will be classified
accordingly, even if he has never actually performed these
activities. Organizations typically abandon this method rather
quickly since it is based on the assumption that users are utilizing
100% of their authorizations, when in fact most users actually use
less than 10% of their static authorizations. Having understood
that this method will not deliver accurate results and in most cases
will incur extra costs, they search for ways to classify users
according to actual authorization usage, i.e., dynamic or de-facto
authorizations.
Classifying SAP Users by Usage
Below are the three most popular usage-based, customerdeveloped methods of classification, although theyre not
necessarily the best (more on that to come).
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HOW TO PREPARE
FOR AN SAP AUDIT
Classifying SAP Users by Usage
Amount of Activity The most common method of assigning
license types to users is by their amount of activity. The more
activity a user performs in the system, the higher the level of
license type he should have. SAP measures SAP Activity by
Dialog Steps, which in practical terms are the number of keystrokes and screens that are used.
You can see these metrics, for example, in SAP Activity ST03N
(Workload Statistics). Using this method, the customer pre-sets a
scale for each license type and inspects each user according to this
scale. For example, users whose activity reaches 1,000 dialog
steps per month, will be set to Employee, those with dialog steps
totaling between 1,001 and 5,000, will be set to Limited
Professional, and so forth. The scale can be set for an entire year,
as a monthly average, or as a monthly maximum (i.e., the
maximum value for all the months in the previous year).
Number of Different Activities Another popular method
employed for classifying users to license types is according to the
number of different activities they perform. This is based on the
assumption that the more the various activities a user performs, the
more widely he is using the system and therefore should be
classified to a higher level user type.
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HOW TO PREPARE
FOR AN SAP AUDIT
As with the Amount of Activity method, here, too, the customer
pre-sets a scale. For example, if a user has up to 2 different
activities per month, the license type would be set to Employee,
and between 3 to 10 activities it would be set to Limited
Professional, etc. With this method, the scale can be set for an
entire year, as a monthly average, or as a monthly maximum.
Though it is common when classifying users with multiple
usernames in multiple systems to consider the highest value as the
users representative value, the calculation is sometimes more
complicated (mainly with BI or CRM systems) when using this
method.
Do you classify users according to Amount of Activity or
Number of Different Activities, and are about to go to an
audit? If Yes, read this:
Amount of Activity and Number of Different Activities are the most
common and quickest methods for classification, but they are also
the most debatable. The auditor can claim that the scale is too low;
Who told you that a Professional user is 1,500 dialog steps and not
1,300? If you chose one of these methods, be sure that you have a
good answer to this question beforehand.
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HOW TO PREPARE
FOR AN SAP AUDIT
A More Accurate Method of Classifying Users
Activity Group/Type of Activity This method is considered to be
the closest method to SAP contractual definitions. However, it is
also the most time-consuming to perform without automated
software.
The Activity Group method sets the license level by the type of
activity performed by the user. Generally, more important activities
require a higher-level license. For example, only Professional users
would perform activities associated with monetary transfers, while
Employee users would typically perform activities related to viewing
reports.
The Activity Group method requires a definition of groups, such as
Create, Change, and Display, and content for each group.
Then you can say, for example, that a user who utilizes activities
from Group Display will be classified as Employee, while a user
who utilizes activities from Group Change will be classified as
Limited Professional. If a user utilizes activities in two or more
Activity Groups, the license type would be set to the highest type
attached to these groups.
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HOW TO PREPARE
FOR AN SAP AUDIT
Some SAP customers include additional inspections when using
this method and may also classify users according to the number of
different activities or other conditions.
Example: Complex classification combining a few methods and conditions to

match customers SAP licensing contract. From LicenseAuditor by Xpandion.
Classifying users according to this method and other optimal

methods is of course, much easier and more logical than classifying
them according to the strict definitions of the SAP agreement.
However, performing these methods manually requires a significant
investment of time and resources, so many SAP customers use
automated tools dedicated to SAP licensing. A leading example of
such a tool is ProfileTailor LicenseAuditor by Xpandion.
www.xpandion.com
HOW TO PREPARE
FOR AN SAP AUDIT
Combining Users to Employees
Select a Method for Combining Usernames
After youre done with user classification, you then need to combine
users to employees. Unless your contract specifies otherwise, the
SAP licensing model permits employees to hold several usernames
within the organizational SAP systems, hence the importance of
combining varying usernames and linking them to the specific
employee.
For example, combine JOHNS in the ERP system and JOHNSM
in the CRM system, linking both usernames to the employee John
Smith from the finance department.
Combining usernames manually from different SAP systems is a
complicated and tedious task, which inevitably leaves a huge
margin of error. Best to manage this process via automated
optimization software.
Tweet this!: Manually combining usernames from different SAP
systems is complicated, tedious and risky. Best to automate it.
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HOW TO PREPARE
FOR AN SAP AUDIT
Remember, choosing the right method for tracking and combining
usernames can impact the total number of employees in your final
report and thus your budget. The following are the most
recommended options:
Combine usernames according to identical email

addresses. Meaning that if two user accounts have the same
email address, they will be connected to one employee record.
This is only relevant if all email addresses are maintained in all
involved systems.
Note: In many organizations, accounts used for maintenance
and IT personnel accounts hold the same email address. Be
careful to identify this scenario before making an expensive
mistake.
Combine usernames based on identical usernames across

all systems. This method works best if all usernames are the
same in all systems. Take into account that this does not hold
true in certain systems and make sure to see if the system that
you want to inspect obeys the rule of identical user accounts.
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HOW TO PREPARE
FOR AN SAP AUDIT
Using Fuzzy Logic to Match Users
When there are a lot of user accounts, it is best to consider using
fuzzy algorithms to combine usernames between different systems.
Fuzzy algorithms can find names and email addresses that are
similar to each other when there is no exact match. Of course, a
fuzzy match should be done only after the exact match passthrough and there are still unattached user accounts.
From our experience, the best way to use a fuzzy match is to
create a route of matching. For example, combining usernames by
email address, then applying a secondary method for the remaining
unclassified usernames and then by yet another (full name), and
finally, using some fuzzy algorithms as well (connect John Smith to
JohnSmith).
Unfortunately, advanced methods, particularly fuzzy algorithms, are
hard to implement manually and this can be done only by dedicated
software like ProfileTailor LicenseAuditor.
Confused? Write to us. Wed love to share

our experience.
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CHAPTER FIVE
PREPARING
FOR
AN AUDIT:
15 ESSENTIAL
INSIDER TIPS &
TRICKS
PREPARING FOR AN AUDIT:

15 ESSENTIAL INSIDER TIPS & TRICKS
This chapter is a bit different than a regular book chapter,
because we felt there isnt anything better than the real thing. Its
a collection of select tips, tricks and advice that have been
gathered from real customers who continuously pass one
licensing audit after the next, and are well prepared at all times.
These customers are continuously checking their licensing status
and constantly optimizing it according to changes that occur at
their companies.
All these tips should be carried out prior to an SAP licensing audit.
If you werent able to manage to do so this time, theres always
next years audit to be better prepared for
Tip #1: Prepare ahead of time
A successful SAP audit begins with the realization that you are
facing a process that requires time, effort and teamwork. Brace
yourself and make sure to prepare your manager for the fact that
since SAP licensing is based on complicated contracts, a
significant part of your time and attention will be demanded.
If you think that this material can help your colleagues, please be
a good friend and forward this eBook to them now.
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Tip #2: Consider previous audit inspections
Make an effort to find out the rules implemented in your
organization from previous SAP audits. If the guidelines for
classifying usernames worked well then, why not use them again?
In some cases these guidelines were approved by SAP and
therefore should certainly be considered for the upcoming audit.
Tip #3: Apply the 80/20 rule (Pareto principle)
The 80-20 rule assists to complete the inspection on time and
within budget. Organizations running several SAP systems should
determine from the very start which applications need to be
thoroughly inspected, which should be scanned briefly and which
should be completely ignored. For example, if a system is used
only by developers for the purpose of development and testing,
consider removing it from the list of systems to be inspected since
developers are already scanned in the active development
system.
After determining which systems need to be inspected in the first
place, you will realize that you have much fewer systems to
inspect thoroughly, which will reduce pressure and enable you to
complete the inspection as required.
Was this tip helpful? Tweet it! Tip #3: Prep for SAP licensing audit first
by determining which systems to inspect and which to ignore.
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Tip #4: Confer with an SAP licensing consultant
If resources allow, seek advice from a consultant who is an expert
in SAP licensing negotiation. The right consultant can guide you
through the entire process, as well as assist in defining and
understanding methods of classification.
Tip #5: Do not send invalid numbers
Resubmitting past users and license figures to SAP is either a
waste of money (if the number is higher than required) or illegal (if
the number is lower than required). Make sure to submit accurate
numbers.
Furthermore, if you need 10,000 Professional users, you should

have only 10,000 Professional users (unless you predict an
increase of users in the near future). Keep your license inventory
at the minimum required.
Tip #6: Do not go to an on-site audit alone
If you face an on-site audit for SAP licensing, make sure to arm
yourself with an SAP licensing expert and hold a detailed analysis
of your current licensing status and needs.
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Tip #7: Dont take the standard instructions for granted
If you think that following SAPs detailed instructions on how to
produce an audit report is sufficient, then think again. SAP indeed
describes how to create the report, however classifying users to
the right licensing type which is after all the essence of SAP
licensing is not addressed in the email from SAP.
Generating the licensing report according to only SAPs guide
produces an output of your current licenses, however, there is
much more to consider. For example, your licensing output
includes misclassified and dormant accounts that will all be
counted as valid licenses. Moreover, unclassified accounts will be
counted as expensive Professional license types if not eliminated.
To produce an optimal report, you need to first gather the actual
data and then combine and classify usernames. Once this is
done, you are ready to send the results.
Was this tip helpful? Tweet it! Tip #7: For your SAP licensing
audit, dont take the standard SAP instructions for granted.
Was this tip helpful? Tweet it! Tip #3: Prep for SAP licensing audit
first by determining which systems to inspect and to ignore.
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Tip #8: Ignore certain users
Several users and activities, such as SAP*, DDIC and
EARLYWATCH, are preconfigured by SAP and should be ignored.
In many SAP systems, approximately twenty users or more from
this type are created. This means that if you do not pay attention,
you are taking into account twenty avoidable users! Consider
classifying these preconfigured users as license type Test to
avoid counting them unnecessarily (for detailed SAP instructions,
see SAP note 1402837).
In addition, attempt to identify instances where users tried to
perform certain activities yet did not succeed. In certain cases, the
SAP log will indicate these attempts as actual usage of the
system, whereas with the right software you can easily distinguish
real consumption versus an attempt only. Knowing this enables
you to correctly classify users to license types by analyzing their
activity. Be aware of flaws along the process: For example, if you
count according to dialog steps, the T-Code
SESSION_MANAGER (the first screen after login) is calculated
unnecessarily, increasing the amount of activity of each user.
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Tip #9: Gather all the data
Gathering all the data literally means all the data. You should not
ignore certain users and/or license types. Xpandion experts have
witnessed many audits where during the process of collecting
data, various user types, like Communication and System were
falsely ignored. Usually, such license types are utilized for remote
connection and they should not be disregarded. Furthermore, in
many cases, users with empty license types in their user records
are mistakenly overlooked in the final report.
Follow this simple rule: if a user is registered in SAP, consider this
valid unless you have good reason not to (also, make sure your
reason is well documented in your contract).
Was this tip helpful? Tweet it! Tip #9: If a user is registered in
SAP, consider it valid for licensing unless theres a reason not to.
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Tip #10: Eliminate duplicate usernames in the same systems
Duplicate usernames tend to turn into a complicated issue in large
enterprises. Employees may have more than one username in the
same system; one being used for routine activities and one that is
dormant. In most cases, duplicate usernames are merely a
mistake, the result of employees changing usernames yet
forgetting to lock their previous ones. This means that an
employee occupies an expensive license for no real reason.
In other cases, employees submit several requests for a new
username and the requests are fulfilled repeatedly. Surprisingly,
we have witnessed numerous cases as such. These duplicate
usernames should be closed and their licenses freed.
To identify duplicate usernames, apply at least one of the
following methods:
Same email address search for users who have the same
email address, in which one is active and one is not. They are
probably duplicate users for the same employee.
Same full name carefully search for user accounts which
have the same name and check each one. You should do this
with care as there are popular names and surnames and the
same full name doesnt necessarily prove a duplicate user for
the same employee. In this case it is very important to inspect
thethis
usage
of each Tweet
of the it!
suspected
user for
accounts.
Was
tip helpful?
Tip #3: Prep
SAP licensing audit
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Our experience shows that neglecting to eliminate duplicate
accounts is the most common mistake made throughout pre-audit
processes (by 80% of our customers!).
Tip #11: Consider closing unused accounts
Inactive usernames imply that users have not entered the system
for a long time (e.g., for 6 months, 9 months, year). Unless there
is a specific reason for these usernames to be defined, yet
inactive, they should be eliminated and their licenses should be
freed (reallocated or cancelled).
Tip #12: Complete missing data in user master records
Make sure to complete user master data in all relevant SAP
systems (at least: full name, department and email address). A
clear user record is crucial in the process of identifying duplicate
accounts, enabling you to eliminate such accounts and save
valuable licenses. Completing the email address is extremely
important since email matching is the most reliable method for
locating duplicate usernames in large enterprises, and also for
attaching usernames to employees.
Tweet it! Tip #10 Neglecting to eliminate duplicate accounts is
the most common mistake made while preparing for a licensing
audit.
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this tip helpful? Tweet it! Tip #3: Prep for SAP licensing audit
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Tip #13: Analyze a sufficient amount of data
Examine three months worth of data at minimum. The more data
you analyze, the more accurate your conclusions will be. In most
cases the recommended period for analysis is one year.
Note: For the purpose of analyzing a large amount of data,
consider using a dedicated software tool for SAP licensing that
can handle this extent of data correctly and effectively.
Tip #14: Never classify users to license types according to
their granted authorizations
Although it sounds reasonable that a user with powerful
authorization roles is classified as Professional, this is not always
the case. Classifying users according to their granted
authorizations means you are classifying them based on
responsibilities rather than by de-facto usage. (continued on next
page.)
FYI, this is an important tip that most people dont know. Tweet it
now! Tip #14 for SAP licensing audit: Never classify users to
licenses according to their authorizations!
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Tip #14, continued: Never classify users to license types according to

their granted authorizations
Most employees do not use all functions granted to them. In fact, the
average user utilizes only 7%-10% of their granted authorizations!
Taking this into account, classifying users by their authorizations is not
recommended as it can be inaccurate and result in a waste of resources.
Tip #15: Do not assume that your license types are finite
Often, organizations will purchase only a few types of licenses,
whereas SAP sells various license types. If your organization has
purchased only a couple of license types, check whether other
license types can better fit your needs, which will give you a more
suitable alternative.
http://...
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CHAPTER SIX
INDIRECT USE
INDIRECT USE
This chapter deals with a topic that most customers have ignored
over the years. Recently SAP began to pay more attention to
indirect use of SAP systems. Therefore customers got a special
announcement to also pay attention to their indirect use and to
report it at their annual licensing audit.
Indirect use (also often referred to as indirect access) is a term
for SAP data use by an end user or by an application, which is not
via SAPGUI. Heres the exact definition from the SAP system
measurement guide:
13.8 Indirect Use
Named users are also upstream and intermediary technical
systems that exchange information with the SAP software
system, as well as the users of those systems, if the users
exchange information with the SAP software in dialog or
prompt mode. It makes no difference whether the software is
accessed directly or indirectly.
In most cases, the technical appearance of indirect use is entry by
an RFC (Remote Function Call) module.
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INDIRECT USE
A common example would be using a handheld PC device in the
warehouse and accessing SAP ERP to get data on materials.
Another example would be using SalesForce to update customer
records while on the screen itself the annual sales data of the
customer is fetched from the account in SAP ERP. These cases
are examples of indirect use, in which the user is using data from
SAP indirectly.
According to the SAP contract, users who indirectly access SAP

must have an SAP user license too. Although many companies do
not notice it, bringing SAP data into another application and using
it by that applications users must be considered carefully from an
SAP licensing point of view. While technically a software interface
can require only one user account to access SAP and fetch the
data, this is not sufficient for SAP licensing. In most cases, if
3,000 employees use this data indirectly online, then an additional
3,000 SAP licenses should be in place to cover this indirect use to
SAP.
How can a company be sure that theyre not under-licensed?
The answer is divided into two parts. The first part is to verify that
the current situation is OK, and the second part is to ensure that
the company remains in compliance with its SAP licensing.
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INDIRECT USE
The easiest way to do this is to carefully inspect all current RFC
access. Map each application and purpose. For each RFC access
add a row in a table:
RFC User
LegacySam
pleUser
Business Owner
(Employee in
Charge)
John Doe
Purpose
Used By
Application/
User
Indirectly
Used By
#Users
Access
accounts
data
Financial
Department
How do you monitor current RFC connections? By using the data

from SAP T-Code ST03N (Workload and Performance Statistics)
or better yet, by using automated user behavior analysis tools like
one of Xpandions tools.
Now, when the table is in place and youre monitoring all current
indirect use, apply an alert for when any new RFC use occurs
within the organization. Each new RFC usage should then be
carefully inspected and mapped or eliminated. We recommend
using an automated alerting tool for new RFC access, again,
offered in the ProfileTailor Dynamics suite.
A good automated alerting tool will enable you to inspect each
new RFC use as it occurs, and thus consistently stay in
compliance with SAP licensing.
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CHAPTER SEVEN
SOFTWARE
TOOLS FOR
SAP LICENSING
OPTIMIZATION
SOFTWARE TOOLS FOR

SAP LICENSING OPTIMIZATION
Using a tool to identify cost saving opportunities and to prepare
the data for licensing audit is highly recommended. This is
because over a certain amount of data and with many systems it
is very hard to manage the whole licensing situation in an Excel
sheet before errors start to appear. Due to the fact that each
license is very expensive, the cost of error of falsely classifying
100 employee records can be about $100K.
Furthermore, a tool gives more results than you know you need,
more savings opportunities than you think you can get, and it
does all the work in matter of hours as opposed to months, on
average.
In order to present the principals and benefits of working with an
automated tool, we will focus here on LicenseAuditor from
Xpandion both the paid and free versions.
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SOFTWARE TOOLS FOR

LicenseAuditor by Xpandion
Overview
In todays complex SAP environment, enterprises are compelled
to find a way to secure their SAP investment and manage SAP
licenses effectively. ProfileTailor LicenseAuditor is the answer for
gaining control over SAP usage and licensing costs. Using a
powerful, end-to-end solution, organizations can now utilize their
licenses efficiently, understanding which licenses are really
needed, which best suit user activities and which are underused,
misclassified or dormant. This software is especially beneficial
before negotiating annual license fees or ordering new SAP
usernames because it can optimize costs.
Benefits
Substantial saving in SAP licensing:
50%-90% per reclassified licenses
15% on overall maintenance fees
Up to 50% on SAP license management resources
Installed externally to SAP, no need for SAP expertise.
Provides clear view of licensing optimization possibilities.
Enables full customization of activity groups.
Provides both instant & previous snapshots of license usage.
Provides organizations with a simple and clear view of their
status, especially beneficial when ordering new usernames
and prior to purchasing additional licenses.
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SOFTWARE TOOLS FOR

LicenseAuditor by Xpandion
Features
Automated identification of dormant, underused, misclassified

and duplicate accounts across different systems and
applications.
Learns each users behavior patterns on a continuous basis

and recommends the best suited licensing plan accordingly.
Delivers unique methods for license inspection such as

measuring activity amount, type of usage and fully
customizable activity groups.
Enables enterprises to control both current and future SAP

usage and licensing costs.
Includes real-time graphical and statistical presentation of SAP

license utilization.
Reclassifies licenses based on actual user behavior and

license consumption, achieving maximum optimization.
Request More information

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SOFTWARE TOOLS FOR

A Free Option
After being in the market since 2007, Xpandion now offers a
completely free version of LicenseAuditor. This version gives you
the final classification for each user and also gives you a report of
users that can be eliminated because of inactivity. Although it
doesnt include the full set of reports and it does not allow you to
classify your own Z and Y T-Codes to activity groups, it can give
you a good sense of the final results. After using the free tool, it is
recommended to upgrade to the full suite of LicenseAuditor, in
order to be well prepared for your next SAP licensing audit.
The free version can be found here:
http://www.xpandion.com/Free-Tools/free-sap-licensingassessment-open.html.
Tweet this! A completely free SAP licensing optimization tool

here: http://www.xpandion.com/Free-Tools/free-sap-licensingassessment-open.html
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CHAPTER EIGHT
FIVE LITTLEKNOWN FACTS

ABOUT SAP
LICENSING
FIVE LITTLE-KNOWN FACTS

ABOUT SAP LICENSING
1. Most companies have no clue about real licensing needs
Although they are spending millions and millions of dollars, many
SAP customers do not really know what licenses they actually
have, what licenses they really need, and what they dont.
SAP is one of the most expensive software systems in the
market, yet many organizations still treat their SAP licensing like a
black box; they see it in terms of input and output without any
knowledge of how it works. We were shocked to find some
customers that felt that their SAP licensing was an invincible force
that they were powerless against.
This results in SAP customers having many misconceptions. Well
hear things like, Who are we to argue with the numbers? or Its
useless, we are small beans compared to the goliath, or We
dont have enough resources to really explore the SAP licensing
contract. Theyd rather pay the amount that the invoice says or
negotiate over the bottom line than to even question if their SAP
licensing fits their needs. It doesnt occur to them to think that
there may be a possibility of reducing their licensing quota due to
inactivity, for example.
Remember this: Youre not being forced to pay for inactive
accounts or for unjustified costs. You do have power here no
matter your companys size or budget, and youve just read a full
eBook about SAP licensing optimization use the knowledge!
Tweet this! Yes, you can negotiate with SAP over licensing. The
key is knowledge.

ABOUT SAP LICENSING
2. A Professional license type costs about 25x more than
Employee Self Service license type.
Not only do many SAP customers not understand that there is a
huge variance in the prices of different license types, but they also
think there are only a few types (Professional, Limited
Professional and Employee) when the truth is totally to the
contrary.
In reality, and in most cases, youll have a minimum of 5 suitable
license types to choose from, and in other cases, many more. We
cannot stress strongly enough the importance of knowing the
many types, otherwise you will be severely limited and
unnecessarily bound.
Why? The more choices of licensing types you have, the more
accurate your SAP licensing will be. Furthermore, if your licensing
fits you better, it will have a positive impact on your budget.
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ABOUT SAP LICENSING
3. The use it or lose it policy
Many users only use the system 1-2 times a month and do not
require expensive license types.
SAP customers need to inspect user behavior and cancel users
that arent utilizing the system. This can be done by setting a
threshold (typically three logins per month), monitoring users
against this threshold, and receiving alerts if the user isnt
reaching the threshold. If its not being reached, you know you
can take action, close the account and free up a license.
4. Combining users between SAP systems is a key factor in
reducing overall licensing costs
Customers are sometimes not aware that SAP licensing is based
on employees and not users. Combining user names to
employees between different systems can really optimize
licensing costs. Do not use email as your only source for
combining user names. Customers that take the extra step in
utilizing more sophisticated methods get better results.
In other words, you should invest your energy into inspecting the
results after youve combined user names. For instance, someone
needs to check if the user account greene was created for the
same employee as the user account green and eliminate one.
LOOK OVER THE DATA.
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ABOUT SAP LICENSING
5. 800 pound gorillas get large discounts on their SAP
license costs you can too!
SAP likes to work with large enterprises and they like to keep
these customers happy by giving them major discounts.
We discovered that even small customers can negotiate wisely, if
they identify the right time for it. The secret is to make yourself
strategically important to SAP, for example in M&A situations.
Lets say your 500 employee SAP-based company is merging
with an Oracle-based company with another 500 employees
now your company is in a position that it needs decide between
either SAP or Oracle. For SAP this means providing either 0 or
1,000 licenses. This is a strategic position for your company and
suddenly, you have the negotiating power of an 800 pound gorilla.
Always be focused on business moves that can be utilized to
improve your licensing situation.
Please Tweet! Make yourself strategically important to SAP before

going into negotiation.
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CHAPTER NINE
CONCLUSION
CONCLUSION
What now? First We hope that youre feeling more confident
about SAP licensing audits and would like to wish you much
success if youre facing one. We trust that you will be able to
improve your licensing situation by types of licenses, by the
number of each license type or by the amount of knowledge that
you gained and will bring to the process and negotiating table (if
necessary).
Second Licensing in general is an ongoing fight for
improvement. Every organization tries to keep their licensing
situation as slim as needed and not to be neither under-licensed
nor over-licensed. If youre the commander of the licensing troops
we invite you to register to Xpandions newsletter and get our
ongoing updates. We try to publish new findings as we come
across them in order to spread the knowledge, but you need to be
in the list. Register now to our email list, its free.
Third Wed love to get your comments and feedback on this
eBook. If you find missing items, errors, or if you just want to give
us your impressions, you are more than welcome to write to
marketing@xpandion.com. We would highly appreciate any and
all comments.
Last, but not least We need your help in sharing the information
that we worked so hard to create. If you feel that this eBook was
useful, please email it to at least one person. It will help us to
spread the knowledge and help your colleagues do their jobs
better.
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LEARN HOW XPANDION

CAN HELP YOU
OPTIMIZE YOUR
SAP LICENSING BY
SPEAKING WITH
AN EXPERT
Ready to be in the drivers seat when it comes to SAP Licensing? Our
specialists can evaluate your particular situation and tell you
how Xpandions solutions can help you optimize your SAP licensing.
ProfileTailor LicenseAuditor is a powerful, end-to-end solution that
requires no SAP expertise and is installed externally to the SAP
system. It gives you the right tools to optimize your SAP licensing
situation, save costs and get to your SAP audit well prepared.
Get a free demonstration of Xpandions ProfileTailor LicenseAuditor

software using custom data from your applications and your industry
to see what makes Xpandion different.
TALK WITH US!

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How to Negotiate with SAP for the Most Suitable

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WRITTEN BY MOSHE PANZER

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Tweet this!: Getting to a successful SAP licensing audit is about

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A special chapter about indirect use is also included. Indirect use is a

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Other customers migrate to SAP after SAP buys the company or

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If you have Special License Types in your organization, make sure

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LicenseAuditor shows the usage amount of each engine and sends an

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Example: Complex classification combining a few methods and conditions to

Classifying users according to this method and other optimal

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Combine usernames according to identical email