Categories: Founder's Blog


Sam Bayer


Indirect Access Update

As the days get shorter here in Raleigh, NC I get the sense that we are now entering the long dark winter of SAP Indirect Access discontent.  Just take a look at ASUG’s “The Latest on SAP Licensing” page.  It hasn’t had a new post for 6 months.

That’s been my biggest fear with how SAP is going to play this out.  SAP has no incentive to come to a fast resolution of this matter. Monopolies never do.

As long as the monopoly is printing money why stop the printing presses?  Monopolies also know that it takes a long time before the legal system catches up with them…if it ever does.  

Monopolies love the dark of winter.  To paraphrase the Washington Post’s slogan of “Democracy dies in darkness”…so does Capitalism.

Until the light comes.  

On July 18, 2018, the European Union fined Google a record breaking $5B antitrust fine for “abusing the dominance of its Android mobile operating system”. They also gave them 90 days to “put an end to illegal conduct…or else face additional charges of up to 5 percent of Alphabet’s average daily worldwide revenue”.

What was Google doing to run afoul of the EU Antitrust authorities?  

“Google’s parent company has unfairly favored its own services by forcing smartphone makers to pre-install Google apps Chrome and Search in a bundle with its app store, Play.”

Google has also “violated competition rules by paying phone makers to exclusively pre-install Google search on their devices and preventing them from selling phones that run other modified, or “forked,” versions of Android.”

On October 16, 2018 (exactly 90 days later), Google announced that it “will stop bundling its apps on Android phones” in the EU.

And then there was light.

But wait.  How does this apply to SAP you ask?  

For grins, let me have SAP try on the EU’s Google complaint to see how it fits:

SAP has unfairly favored its own services by forcing customers to pay an Indirect Access fee when accessing SAP ERP or S/4 Hana.

SAP has also violated competition rules by threatening SAP partners to exclusively sell SAP cloud services thereby preventing them from selling applications that are built by any third parties.

Sounds about right.

Until the light comes.

On October 2, 2018 a Berlin based organization called VOICE filed an antitrust complaint against SAP with the German Federal Cartel Office.  Based on legal opinions from the international law firm of Osborne Clarke the complaint concludes that “the SAP license terms are unlawful for so-called indirect use and that SAP misuses its strong position in the business software market”.

According to Frank Bayer (no relation to me) of the International Association of SAP Partners (IA4SP), the complaint filed by Voice “shows that many IT users are dissatisfied with SAP’s licensing system for indirect use, feel constrained and see a real threat to maintaining sufficient competition in the SAP ecosystem.”


Win, lose or draw, this antitrust action in the EU is an important step for the SAP ecosystem. Light is being shed on the state of the relationship between SAP and its ecosystem in a way that you’ll never get from the victims who feel threatened to remain silent.

Until the light comes.

The Teradata lawsuit that I blogged about on June 26, 2018 continues its tortuous path through the American legal system.

As mandated by law, SAP responded to Teradata’s claims and they took their best shot at getting the lawsuit thrown out of court.  The process will continue and the lawyers will get rich. The key thing to watch out for from an antitrust perspective is how Teradata’s lawyers respond to SAP’s rebuttal that they “had failed to even identify SAP’s power in that market”.  In other words, you can’t accuse someone of antitrust violations if they don’t hold a monopoly…aka power… in the market.  This is going to be a key, and problematic, point for the EU antitrust complaint as well.

Until the light comes.

Just for the record, I’d like to resurface the Duke Memorandum that I brought to light back in August of 2017.  Professor Barak Richman was the first to take a hard look at SAP Indirect Access from an antitrust perspective and concluded that “SAP’s conduct limits consumer choice, gives SAP an anti-competitive advantage in the ERP-accessory market, and undermines a currently competitive and dynamic marketplace for ERP accessories”.

The Duke Memorandum continues to wind its way around the world.

  • An article (in Portugese) on Brazil’s issue with SAP Indirect Access was written in early October.
  • A firm in Moscow indicated that they are experiencing SAP abuses in their local market and was interested in how US Antitrust laws applied. (no jokes about Russia being interested in things American).
  • A law student in Spain studying competition is now in possession of the Memorandum.

So what’s going to keep us warm during the upcoming long dark winter of SAP Indirect Access?

  1. Keep an eye on SAP’s ongoing efforts to normalize the legitimacy of the Document Based pricing model.  New measurement tools will be released. New case studies may be released. Further clarifications may be issued.  None of those activities means that it is legal.
  2. SAP will continue to fight the battle in the courts.  I predict that they will eventually settle the Teradata suit out of court and like Diageo and InBev, we’ll never know how it turned out.  Settling with the German Cartel authorities is going to be more problematic for SAP. We’ll have to see a ruling there. My guess is that unlike with Google, whose 80% of the Android market demonstrates undisputed market power, it’s going to be tougher to pin down SAP’s market power which will make it hard for the government to make their case.  But the EU really leans in favor of consumers…see GDPR. One thing is for sure, this is going to be as important a landmark as Diageo was.
  3. Customers will increasingly figure out that the only pragmatic solution here is to negotiate with SAP.  The market is learning that as we get closer to the ECC declared end of life of 2025, the biggest negotiating lever they have is SAP’s need to hit their S4/Hana numbers.  Needless to say, SAP’s aggressive growth targets aren’t going to be easy for them to make without a significant amount of negotiating.

In summary, I continue to believe that SAP is a great company and wants to do the right thing for their customers and shareholders.  Unfortunately, they’ve recently tilted more (way more) towards their shareholders than customers. The fact remains though that everyone in the SAP ecosystem wants/needs SAP to not only survive but to thrive.   

The current reality is that SAP would prefer we stay in the dark and at times we hate them.  

But in the immortal words of Martin Luther King, Jr; “Darkness cannot drive out darkness; only light can do that. Hate cannot drive out hate; only love can do that.”