SAP attempts to calm user fears on indirect access with SAP Licensing Transparency Center

SUMMARY:

SAP indirect access continues to cause angst among customers. The formation of the SAP Licensing Transparency Center is unlikely to help matters significantly

Bill McDermott, CEO SAP - can he thread a path on indirect access?
Bill McDermott, CEO SAP – can he thread a path on indirect access?

It is no secret that SAP indirect access licensing policies have caused deep and ongoing concern among its user community. A long running sore, the topic finally came into very public view with the SAP v Diageo case, was given further air time with the Interbrew case – currently in arbitration – and finally got Bill McDermott, CEO SAP to talk about the issue at SAPPHIRENow 2017. SAP’s soothing words have done little to calm fears as news comes down that SUGEN, the uber-SAP user group that attempts to transcend the regional groups like ASUG, DSAG and UK&ISUG is recommending that members join the SAP Licensing Transparency Center.

This from UK&ISUG:

“The problem for most organisations is they have no idea whether they are correctly or incorrectly licensed. SAP’s Indirect Access whitepaper is a start and it is good to see some clarity around three of the most popular processes SAP supports, but it is by no means comprehensive. Despite SAP’s assurances it won’t ask for back maintenance payments from organisations that are under licensed, members have understandably been reluctant to speak with their account managers,” said Paul Cooper, chairman of the UK & Ireland SAP User Group. “We welcome the creation of the SAP Licensing Transparency Center and hope that it will allow our members to more openly seek clarification from SAP regarding their indirect licensing position. Licensing remains an incredibly complex topic, so it is imperative that SAP provides as much information and education to customers as possible, with working examples that they can clearly understand.”

The three processes referred to are Order to Cash, Procure to Pay and Static Read. On their face and in the white paper to which UK&ISUG refers, you’d imagine the situation is relatively straightforward. But as critics have pointed out, SAP is the only enterprise application company that seeks to obtain some kind of fee for use of what customers believe to be their data from the use of third party applications. Of course that doesn’t apply when customer use SAP owned applications. In short, customers see this as a form of unwelcome lock in.

For all the talk of ‘welcoming’ I have my doubts this initiative will work.

Late last week, the Australian SAP user group (SAUG) pushed out an announcement where it pointed out that the FIRST point of contact for customers with licensing questions remains the account executive (AE.) AEs have little incentive to play nice on this topic because indirect access means extra commission. From what I have been hearing, and despite SAP assurances that strong arm tactics in the field would not be tolerated, some SAP AEs are finding inventive ways of circumventing internal strictures. I have long held the view that SAP has the most effective sales force in the enterprise apps space so this does not surprise.

Talking about the way to access SAP Licensing Transparency Center SAUG says there are two ways to make this work:

The first way is on an anonymous basis. If you have general questions about the indirect use of SAP and the white paper does not provide enough insight, you can contact the SAP Licensing Transparency Centre via SAUG. You can do that without giving your customer name. You should keep in mind that the answer will be more general than if you ask a question providing your company name.

The second way is to mention your company name and provide some additional information. If you have any doubts about whether the new way of licensing for SAP indirect use is applied in your case, then the SAP Licensing Transparency Centre is the place you can submit a question.  The answer will be more specific and, if necessary, will be tailored to your account.

In both cases, contact Mark Baker, CEO of SAUG if you have a question for the SAP Licensing Transparency Centre.  All questions to the SAP Licensing Transparency Centre must come via SAUG.

Again, a nice idea but based upon past discussions, the chances of this initiative providing the comfort users seek I rate as slightly above zero. Anonymizing is a good idea in theory but won’t work in practice. The announcement pretty much says that. The alternative is no better than what users already have available to them.

In August, I asked SAP to respond to a Duke Law opinion that heavily suggests SAP’s indirect access licensing is illegal. This arose out of a vendor sponsored paper prepared by Barak D. Richman who specializes in “economics of contracting, new institutional economics, antitrust, and healthcare policy.” I am normally skeptical of such opinions as ‘gun for hire’ opinions are rarely worth the digital fish wrap in which they are couched. However, a customer originated thread in the ASUG forums around the same time posits:

When we received our quote for the OTC indirect access licenses we were blown away. The licensing required to get permission to import orders/payments from a third-party system was 4x more than the original purchase price for SAP.

We were told that if we implemented Hybris, we would not need to purchase any indirect access licenses.

This cannot possibly be appropriate.

That forum thread and my request for comment remain wholly unanswered.

It is perhaps interesting that the forthcoming UK&ISUG Connect conference features both Ray Wang, CEO Constellation, a long time advocate for fair licensing and Hala Zeine, SVP and chief business development officer. Ms Zeine is the architect of SAP’s current approach to indirect access topics. I find her to be perfectly reasonable and logical. But that is within the constraints of SAP’s argument which, as we know, is a point of deep contention between customers and SAP. Can we expect fireworks? I doubt it, at least not in the public domain.

Thinking back over the topics that have caused SAP customers the greatest grief, indirect access and SAP’s playbook on this feels similar to the then ongoing and intense arguments about SAP raising maintenance prices in the teeth of the last recession. It was only when DSAG very publicly picked a fight with SAP in the German press that SAP moderated what at the time was a very unpopular imposition. I suspect that this time around (as last time), SUGEN is being used as a vaguely comfortable blanket, while customers and user groups are picked off one by one.

Critics will use this latest endeavor to throw more curve balls at SAP. That’s no good for the company nor its customers.

As I said earlier in the year, indirect access is a topic that refuses to die and while SAP has tried to provide explanations to customer it believes are palatable far too many questions remain and as the company heads into its most intense sales period, those questions are bound to mean resistance among customer who might otherwise be thinking about upgrades and extensions for implementation in 2018.

I’ll leave readers with this. While SAP may consider indirect access a tough topic, it won’t go away as a point of criticism. Earlier in the year, Jon Reed and myself attempted to bring the various arguments together. At the time, we concluded:

Reed continues to make the point about the impact that IoT devices connecting to SAP systems will have on the licensing topic. The fact that multiple sources are saying that despite SAP having good product in the market, there is an unwillingness or hesitancy to work with SAP tells us indirect access is far from over as a topic of discussion. It also means SAP’s potential to attract a good piece of the market is at risk of going over to competitors.

SUGEN made two vital points: smaller SAP customers who lack the leverage of bigger SAP customers are the ones most uncertain, and mostly likely to quietly look at other options rather than Leonardo. And: for these changes to work, they must drive down to a different attitude at the account executive/manager level inside SAP – no easy feat.

We cannot comment on the extent to which SAP feels aggrieved but as Den pointed out to McDermott – if you want to lay claim as the biggest independent software maker to the enterprise, then you’ve got to accept there is a big fat target on your back. To that extent, SAP has to be far more open, transparent and well meaning in its actions for it to win the trust implied by McDermott’s claim to empathy. SAP’s leadership knows that but the extent to which it may have to give up short term margin in order to win the bigger prize remains unclear. SAP doesn’t have a good history of moderating its brand of champagne but on this topic it may have no choice.

From what I can tell, neither customers nor SAP have made any substantial progress.

Image credit - Bill McDermott via WEF, featured is a public image

Disclosure - SAP is a premier partner at time of writing

    1. Jarret Pazahanick says:

      Nice job with this Dennis and the last line sums it up “neither customers nor SAP have made any substantial progress” and have talked to some CIO’s off the record that have full SAP shops and are so frustrated at customer support and indirect licensing they have decided to not engage SAP on their upcoming LOB move to the cloud. I can imagine that Salesforce and Workday must love continuing to see SAP fumble around with fixing customer support and NOT providing any real clarity on Indirect licensing.

      I do not blame them as SAP could fix indirect licensing in 1 day if they wanted by saying “We trust our customers” and follow that up with clear and concise licensing going forward (which they have been promising for years anyways). On a side, #SUG has said that they feel most customers are compliant so guess SAP doesn’t trust their user groups either 🙂

    2. says:

      If ASUG members are in compliance then why do they need this initiative?

    3. Jarret Pazahanick says:

      Per Geoff Scott “ASUG believes, and has expressed this to SAP, that the vast majority of customers are doing everything possible to play by the established rules and are great citizens of the ecosystem” per the below:

      https://www.asug.com/news/next-steps-for-asug-members-on-indirect-access-with-sap

      But that isn’t enough for SAP to come out with a blanket statement to fix this once in for all so obviously they dont trust their customers or ASUG OR and this a big OR they not cracking down because they know the sales team is using the threat of this to sell more SAP but my take is it is hurting in ways they will never fully realize until it is to late. What customer in their right mind for example would use the new Data Hub or look at Leonardo until it is clear how SAP is going to handle the who indirect licensing discussion.

    4. says:

      Hi Dennis,

      I’ve never really been referred to as a “digital fish wrapper” before and I dare say that Prof. Richman as a tenured professor at Duke Law School, would be quick to point out that he is anything but a “gun for hire”. But…if either of those monikers is what it takes to get in front of SAP and move the tide in the direction of them understanding that what they’re doing is at the very least unconscionable, but in reality is illegal, we’ll wear your epithets proudly.

      Since the publication of the Duke Memorandum I’ve fielded dozens of calls with clients, Industry Analysts, third party SAP partners, several of my competitors, journalists, lawyers and SAP User Group Executives from around the world. I’ve also received hundreds of emails from these same people on this SAP Indirect Access fiasco. I feel like I’m at the center of an Abused by SAP Support Group.

      All of these interactions in the last couple of months have convinced of three things:

      -It is not in SAP’s best interest to continue down this path and I believe they know this. They are just dealing with a licensing concept that made sense 25 years ago and needs to get updated. They are struggling to figure out how to do that.
      -SAP will eventually find a solution to this problem but have no incentive to resolve this in the short term because they hold all the leverage in their ecosystem and they’re making a lot of money off of this in the short term.
      -SAP’s customer’s don’t have an independent body to speak on their behalf and they are not organized to speak truth to power on their own.

      The solution to getting SAP to respond lies with the independent “Fifth Estate” journalists who will prosecute the illegality of the way SAP has weaponized Indirect Access in the court of public opinion. I’m pretty certain that you will see the first such salvo on SAP’s home turf in Germany this coming Friday at http://www.wiwo.de/ .

      Thanks for keeping the light on this topic. That’s the only way it will get resolved.

      Sam Bayer
      CEO
      Corevist

      1. says:

        Thanks for that Sam – for clarity, I didn’t make direct reference to you in the manner you describe and I did say ‘normally skeptical.’ Be that as it may, Richman’s opinion remains just that until it is used as a winning argument in a settled court case. I’ve not seen any evidence of that which surprises me. I don’t think SAP holds all the leverage. Yes, they are very good at account management but that isn’t preventing SAP customers from going elsewhere or to 3PM – I have a recent case in mind that I will be surfacing shortly.

        You might like to know it is thought the Diageo decision will be overturned. If that happens then this issue goes away very quickly in some territories but not necessarily all.

        I recommend speaking with DSAG. They are the most vocal and powerful of SAP UGs.

        I’ve seen some of the so-called Fifth Estate work but find it unconvincing and pejorative.

        Have no fear of our continuing to keep this topic alive when the appropriate occasion arises. SAP knows I don’t allow commercial considerations to stand in the way of legitimate critique.

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