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Submitted by Brian Skiba on October 26, 2015
Thought Leadership

SAP License Optimization

When it comes to SAP licensing, it’s fair to say that the majority of organizations today aren’t exercising either forward-thinking or scrutiny to their spend. Audits and renewals are treated as inevitable and organizations simply wait for them to happen, adopting a ‘do nothing’ approach which ends up translating into millions of dollars of revenue for SAP. Some organizations, however, are starting to buck the trend and apply much greater levels of both proactivity and scrutiny to their ever-increasing SAP expenditure.

One example I’ve worked with recently is a global Fortune 500 company based in the Midwest region of the United States. They have more than 37,000 SAP users and sell products in over 100 countries. With a history of acquisitions and mergers, it’s fair to say their SAP licensing has become complex. Acknowledging this, and realizing that their next review with SAP could be financially ‘painful’, this company invested in Snow Optimizer for SAP® Software and a little help from Snow’s SAP licensing experts.

The initial baseline assessment of deployed SAP licenses suggested that the organization was, unsurprisingly, short in some types of license while also having a surplus in other areas. Working with Snow, the organization determined that it was short of more than 1,500 professional licenses. This represented a true-up cost of almost US $2.3 million. Using the management reports from Snow Optimizer for SAP® Software, the firm started by identifying and removing inactive SAP users. Next, it used the Snow solution’s automation capabilities to automatically manage the various license types it used, assigning cheaper SAP licenses to users who did not warrant full professional-type licenses. This had a dramatic effect on their SAP licensing costs, as you can see below:

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To help you better understand the table above, here’s a quick overview:

The first column - SAP Licenses Owned - represents the licenses that the company contractually purchased over a period of 15 years and several mergers and acquisitions. Start April 2015 is the baseline of what licenses were currently assigned to users.

The Do nothing FY2017 column represents the estimation of the number of licenses in each license category that would be needed over the next two years if no scrutiny was applied to the SAP licensing.

The Optimize FY2017 column is how the licenses would be better utilized according to actual usage recorded in Snow Optimizer for SAP® Software. This is the optimal allocation which was determined based on a nine-month period of usage history from the original baseline. The value of the exercise is best illustrated in the final Cost of Do Nothing column.  This compares what the cost would have been (Do Nothing FY2017) versus what it actually was (Optimize FY2017). 

The difference is staggering: nearly US $2.3 million saved by applying scrutiny to the SAP usage and license allocation.  Including license and maintenance costs over the lifetime of the contract, the true value of the saving will be more like US $7.5 million. That’s a 1000% return on investment in less than six months.

To learn more about why you need to be proactive and scrutinizing when it comes to managing your organization’s SAP licensing, why not speak to one of our experts today?