SAP Indirect Access
SAP Indirect Access: All Your Questions Answered
Understanding the issue and what it means for you
SAP indirect access has become a hot-button issue after SAP’s recent lawsuits against clients. What does indirect access mean for mid-market companies?
Update from SAP: Click here for more information.
Why should you care about SAP Indirect Access?
UPDATE 4/23/18–SAP has at last moved forward on indirect access. Click here for more information.
It’s critical to understand your SAP indirect access situation, especially in light of SAP’s new announcement (above). If you are an existing SAP client, you may be sitting on significant financial liabilities. In addition, the indirect access terms of your contract may significantly constrain your future ability to innovate.
If you are contemplating becoming a new SAP client, there is no better time than now to negotiate your contract to limit your future liabilities and constraints on innovation.
That’s the real business impact of SAP indirect access. That’s why it matters. In this article, we’ll define critical terms, examine potential use cases that could incur indirect access, and much more. We’ve broken this article into 11 sections. Click a jump link to start reading.
1. What is SAP indirect access?
First off, a definition of terms. To understand indirect access, you need to understand what a “named user” is, since Indirect Access is defined in contrast to the definition of an SAP named user. The most up-to-date SAP System Measurement Guide (version 7.0, January 2017) defines “named user” as follows:
“A named user is an employee of a customer, of its affiliated companies, or of third-party companies authorized to access the licensed software directly or indirectly, regardless of the technical interface chosen. All employees who use the SAP software require a license and must be set up as dialog users…
“Named users primarily use the SAP software. Users from upstream or interposed technical systems require licenses as named users if they exchange information with the software in dialog or prompt mode, regardless of whether the software is accessed directly or indirectly. If redundant functions that are also available in the software are used in upstream or interposed systems that access the software, the users of these redundant functions also count as named users, even if the data is transferred to the software in background processing (that is, not dialog related).”
The document goes on to define SAP indirect access:
“Indirect access means that the user is communicating with a system upstream from the SAP software that transfers communication activities to the SAP software installation or otherwise accesses the SAP software or uses its functions.”
In other words, indirect access is the exchange of data between SAP and a third-party system that falls outside the realm of traditional named user licensing. The terms of this kind of data exchange are often vaguely defined in the company’s licensing agreement with SAP. This kind of access is called “indirect” because it is not the activity of a licensed named human user, but rather that of third-party software interacting with SAP data.
While SAP’s Measurement Guide provides some definitions, JNC Consultancy notes that companies must examine their contracts to understand what SAP indirect access means for them. Jan Cook puts it this way in the article: “Do not accept Measurement Guide definitions as contractually binding. Always refer to your contract to understand your obligations.”
SAP indirect access has always been a potential issue for companies using SAP ERP, though it has remained largely unscrutinized until now. In February 2017, a UK court ruled in SAP’s favor as the software giant sued one of its own clients, Diageo, over indirect access issues. The same month, SAP also initiated arbitration against Anheuser-Busch InBev, alleging $600 million in damages from unpaid licensing fees.
These high-profile cases have created quite a stir, both in the SAP community and beyond. They raise larger issues of monopoly power in the enterprise software market, as well as philosophical questions about innovation in the emerging Internet of Things era and how best to serve one’s customers.
In this in-depth guide, we discuss SAP indirect access and its implications in a general sense. Our immediate goal is to educate the SAP community and empower you to negotiate fair licensing costs with SAP. Our ultimate goal is to get SAP to modernize their Indirect Access policies and procedures in a way that makes sense for all parties involved. We envision an Indirect Access stance that enables SAP’s clients to innovate freely, restores fair competition into the third-party products marketplace, and provides SAP fair compensation for the use of their Intellectual Property.
2. What use cases are considered SAP indirect access?
Any software that reads or writes SAP data directly is considered to fall under indirect access. The thinking is that the third-party software takes the place of a licensed human user and creates business value for the company without the company paying for the extra licensing.
Here are a few examples of SAP-interfacing technologies that could be considered indirect access:
- A non-SAP CRM that sends and receives data about clients to/from SAP.
- A plant manager using a non-SAP mobile app to input plant maintenance data into SAP.
- A third-party auditor inputting inventory data to SAP through interfacing software.
It’s important to note that your contract is the ultimate authority on what is and isn’t considered indirect access. Every negotiated contract with SAP is different, so it’s imperative to know your contract and understand how your usage (or planned usage) fits into those stipulations.
3. Are any kinds of data interaction exempt from SAP indirect access fees?
Yes. As SAP CEO Bill McDermott stated at Sapphire Now 2017, “Static read access in third-party systems is your data, and so SAP will not charge for that.” In other words, static applications that only read data from SAP will be exempt from indirect access fees.
Though this is good news, it still leaves the most high-value applications and uses of SAP data vulnerable to indirect access fees. Applications that read and write SAP data in real time are not off the hook.
4. How does SAP deal with indirect access?
As the two recent court cases show, companies that engage in indirect access and get audited by SAP can expect to pay for that access in the form of back licensing fees and, potentially, penalties or fines. The complicating factor is that many companies’ contracts with SAP don’t specify a cost for indirect access licensing. Even worse, SAP doesn’t provide a clear definition of what constitutes indirect access.
By charging fees to companies who access their SAP systems with 3rd-party software, SAP has sent a heavily mixed message to its customers and to the 3rd-party software ecosystem which it historically encouraged. At the 2017 Sapphire Now conference, CEO Bill McDermott announced that SAP “can show greater empathy” regarding indirect access. Whether that is an adequate response to the concerns of the market remains to be seen.
5. Are SAP indirect access fees illegal?
That’s a great question. In the now-famous Duke Memorandum on SAP Indirect Access, which was commissioned as a neutral review of the situation, Dr. Barak D. Richman of Duke University argues that SAP’s conduct in regards to indirect access may violate antitrust law.
The reasoning? By waiving indirect access fees for its own applications, SAP essentially engages in illegal bundling and seeks to monopolize the market for the services which these third-party software systems provide.
Ultimately, this question will have to be answered in the courts. However, it’s encouraging to see that both English and German media have picked up on the story of Dr. Richman’s antitrust memorandum.
- Wirtschafts Woche: “Punitive tariffs” on the products of partners? — How SAP upset its customers
- Computer Weekly: SAP indirect access: Prepare for the impact on third-party applications
6. How do SAP users feel about indirect access?
We’ve set up a survey for SAP users who want to share their experiences in the indirect access journey. The survey is ongoing–you can take it here: SAP Indirect Access Survey. At the time of this writing, patterns are already emerging in the survey answers.
Generally, we see answers falling into three categories:
- Those that have already dealt with this issue and have successfully negotiated with SAP.
- Those that are still totally unaware that there is an issue (they are the most vulnerable).
- Those that are curently ensnared in the SAP indirect access net.
Here are some specific stats from the survey. For a full exploration of the responses, see this post from Corevist’s CEO Sam Bayer.
- 56% of the respondents claimed that if they went with an SAP product, SAP told them that they wouldn’t have to pay Indirect Access license fees.
- When asked how bullied they felt in their SAP indirect access negotiations, respondents averaged 8.5 on a self-reported scale of 1-10.
- 68% of the respondents said that if they could magically get off SAP completely tomorrow, with no impact to their career, they would do so.
SAP users have also shared their frustration with us In their own words. Here are some of their responses:
“You think these tactics are going to get me to buy more software from you? At this point, I wouldn’t buy lemonade from you!”
“If SAP really applies this Indirect Access uniformly, each of us would have to charge each of our clients for the invoices we send them.”
“I clearly do not believe this is legal, but I also think it will take a brave US-based company to challenge SAP on this, to really see if it is or not.”
“I am trying to look for any information that could support our refusal (to allow SAP to do a complete audit) but also what could be a good way to turn SAP down on the indirect accesses.”
These verbatim responses, as well as the ongoing survey results we receive, lead us to believe there is an untold story of angst, fear, and anger among SAP users on this issue. We hope the issue will continue to receive the coverage it deserves in business and technology media.
7. What steps can companies take to protect themselves against indirect access fees?
As Corevist CEO Sam Bayer put it in a recent blog post, the best thing you can do for now is “negotiate, negotiate, negotiate.”
As we continue to gather data from respondents to our Indirect Access Survey, we hope to equip the SAP community with bargaining power that they can use in negotiations. As the situation continues to unfold, we hope that the SAP community will come together to demand a change in this unjust policy. The more people who stand together and let SAP know how they feel, the more likely SAP will be to adjust their pricing scheme to fit the realities of a web-first world.
Historically, SAP went after customers because of “cost avoidance”. SAP always had indirect access clauses in their contracts and would always negotiate fairly for unlimited or volume-based licensing for accessing SAP. What has changed over time is that SAP is now using Indirect Access as an anti-competitive weapon, force-marching their customer base into unwanted upgrades to their newest products.
The unintended consequence of this stance is that SAP is blocking competitive third party solutions. Whether SAP intends it this way or not, their stance on indirect access fundamentally results in competitive deterrence. Under the guise of protecting intellectual property, SAP deters companies from engaging solutions that compete with SAP’s own solutions. This sets up a frustrating catch-22 for companies that need to innovate to remain competitive in their industry. For these companies, the cost/benefit analysis is difficult to compute. Escape indirect access fees, or innovate and pay the price?
8. How does indirect access affect innovation?
Evidence is anecdotal at this point, but we’re already seeing stories from midsize firms. As German business magazine Handelsblatt Global reports, one midmarket German company had “little left aside for fresh IT investment” after SAP sent bills totaling $233,000 for indirect access that had occurred long ago.
Indeed, the policy of diverting clients’ funds away from investment in new value and back into value that has already been consumed seems backward-thinking at best. If the indirect access question is not resolved in favor of SAP clients, we fully expect to see innovation severely hampered for many companies. What effect that will have on the SAP market in the long term is clear, SAP is mortgaging their future health for today’s revenues. Suing your clients and stifling their ability to innovate is not only not scalable or sustainable, but it is a going-out-of-business strategy.
As mentioned above, our recent survey indicates that 68% of SAP clients who were abused by the Indirect Access issue would immediately leave the SAP platform if they could. That’s staggering.
- Indirect access is stifling innovation for 63% of respondents to our survey. These users said that the projects under consideration became unjustifiable when they factored in SAP Indirect Access fees.
- 88% who negotiated indirect access saw significant delay and/or cost increase in their projects due to the negotiations.
- 13% reported that SAP forced them to buy a product that they didn’t want.
9. Getting help with indirect access issues
If you’re feeling overwhelmed, stressed, or frustrated about the ambiguity of SAP indirect access, realize that you’re not alone. The community is coming together to seek solutions to this issue. In fact, there are many third party tools and companies who can assist you in auditing your use of SAP software. Here are a few firms offering SAP advisory practice and licensing consulting to a global client base.
- Snow Software
- JNC Consultancy
- Cloud Optics
- SOS Success
- SAP Consultant Registry
- First Call Consulting
10. Next steps on SAP indirect access
Every company is at a different place in the indirect access journey. While the ultimate outcome will depend on your negotiated agreement with SAP, there are steps you can take to put your company in good health on this issue and to help others who are also navigating this landscape.
- Become aware and educate yourself don’t get caught by surprise.
- Take our Indirect Access survey and help us build a comprehensive picture of the impact this issue is having on real people. The survey only takes a few minutes to complete. You can find the survey here—SAP Indirect Access Survey.
- Contact your SAP Users Group and push the issue. Start conversations and ask see how people feel. Where appropriate, bring up the issue with group leadership.
- Sign up for our updates on the topic. CEO Sam Bayer keeps an industry-leading pulse on this issue and sends personal update emails to the list (see below).
11. Stay plugged in on SAP indirect access
As this issue continues to unfold, Corevist’s CEO, Sam Bayer, gathers the latest news and information and provides commentary and resources to SAP users who are looking for answers. The goal is to keep you informed so you can make the best decision for your company. Sign up for the email list today and get the information you need on SAP indirect access.