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SAP Indirect Access: Stifling Innovation?

Freedom, choice, flexibility. Everything that users and customers look for when selecting a business software, went straight out the window when SAP started enforcing Indirect Access licensing.

What Indirect Access basically means is that now software vendor SAP, is charging for access to the data stored in their system.

SAP’s justification goes: All use of SAP software requires a license – and this includes direct use (direct access) by way of a user interface delivered with, or as a part of the software; or indirectly (indirect access) through a non-SAP front-end or non-SAP intermediary software.

Well, one might say that this has been happening for a long time, however it is only creating so much furore now in 2017, as SAP has begun suing clients who violate this rule.

SAP research and consulting company, Brightworks blogged, “SAP customers do not typically find out about indirect access restrictions during the purchase point of the SAP software. Now, it (access to data stored on SAP system) is is presented as if it is copyright protection.”

Why it sucks big time

This seems to be a case of restrictive licensing being underplayed, and the fact that customers are only finding out about it now, leaves no doubt they feel the noose tightening around their necks.

In this legal article, it shows how concepts within the sales contract between Diageo and SAP, should be “clearly defined, and accurately reflecting of your intentions in terms of what they cover and what charges apply to such use and access.”

So, what we have here, is a business software provider that has been selling enterprise resource planning (ERP) software, all over the world, since 1973. Because of the widespread deployment of its ERP, many companies have built software “accessories” around SAP’s ERP network, to enable their consumers to access ERP processes directly.

At the same time, over all of this time, 40 years to be exact, a massive ecosystem of accompanying software has been built up; inviting more and more users, and more and more technology and business partners into its fold. Numerous SAP certifications have emerged, creating numerous training services, which have produced thousands of SAP certified professionals. Various SAP research and consulting companies like Brightworks and Corevist, are building around it.

As a result of this overspilling effect of a growing software “ecosystem”, today SAP’s ERP plays a role in an estimated 76% or three quarters of the entire world’s business transactions.

Now, it makes sense that SAP should be paid for the role that their technology IP plays in all of this. And customers could also play along and negotiate a fairer pricing for themselves.

Corevist calls it as it is – Illegal and Anti-competitive

But, besides freedom, choice and flexibility going out the window, customer trust is being thrown under the bus, when SAP decided to not only underplay the implications of indirect access from the beginning of the sale process, but also to force compliance of their licensing, by threatening customers with license audits.

Founder Sam Bayer of Corevist, a SAP certified partner blogged, “Many clients have been bullied into buying S4/Hana, Hybris, Ariba, etc in this manner…even though clients don’t want, and may not even use, those products.

“In addition, SAP provides proposals for their products and stipulates that there will be no additional charge for Indirect Access if the SAP products are purchased.  However, if you chose not to buy an SAP product, the Indirect Access fees are purposefully set to be prohibitively high so the client can’t afford to make the decision to buy from a third party.  As the Duke Memorandum clearly spells out, this practice is simply illegal.”

Bayer directly calls out what SAP is doing as illegal, and his company sponsored a legal memorandum, the Duke Memorandum, to point out that SAP’s conduct is anti-competitive.

SAP TechEd Barcelona

This journalist is now in Barcelona, and there isn’t much mention of SAP’s new licensing model, probably because the topic has already made it rounds during SAP events earlier in the year. But, a question was broached during the media Q & A, about transparency of pricing, and SAP Cloud Platform’s CTO and President Bjorn Goerke, hesitated to comment.

But he did say this, at last: Of course, we are trying to make sure that both SAP and customers are trying to have transparency about how they use the data, the licenses they have and how they can access the data. We recently changed our licensing terms around indirect usage, which gives customers more flexibility in how they can actually access from outside, data residing in their systems.

He also pointed out that (the licensing model) is still a work in progress, and seemed to allude to a new model being needed for SAP’s IoT solution.

SAP’s thinking about indirect access and what’s next

Goerke also said, “SAP’s IP is platform-based. SAP’s portfolio is broad enough that usually, we are going for the value that we deliver. In the end, pricing is functional, (it is) the value we can deliver for customers in terms of cost savings, in terms of value creation.

“But especially in the platform space, we are seeing now, ‘What is it that we are actually selling? Is it resources? Is it open source capabilities that we support on top, which is a very different value proposition at a different price point?’, than you can achieve if you build your own capabilities or innovations like HANA, for example, where there is very enormous intellectual property in the software product itself, that SAP has delivered.

And I think that’s definitely the broad range of scenarios that we need to go through and are currently going through the more we go into the platform.  It’s also a move from upfront licensed software upfront, to subscription, to pay-per-use pricing, which will at some point in time in the future, be a relevant model that we need to support, because that’s what customers will kind of more and more demand – where you get flexibility in how you consume resources, how you consume systems, you want to scale up or down – and of course, these things will similarly kind of show up in commercial requirements, sooner or later as well.”

There is a thorough analysis of SAP’s new licensing whitepaper, here.

What can we do in the meantime?

Bayer opined that a plausible solution is for SAP to become more explicit with their Indirect Access policies, and more reasonable in the fees that they charge.

“They should also police the illegal manner in which Indirect Access is being used in the field.  There is recent precedence in the SAP sales world where they have behaved illegally and SAP has instituted better Executive Management oversight.

“I believe a dose of this oversight is also required with the Indirect Access situation.” Bayer also strongly believes that this new licensing policy ultimately limits customers’ choice, and their ability to innovate.

In closing, EITN feels that all of this is quite sad to watch – because short term shareholder goals once again take precedence over building what should be the world’s largest and best software company.

 

 




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