SAP License Parking – A mixed bag of goodies

Although by no means commonplace, in some cases where contractually permitted, enterprises can suspend the use of some SAP licenses by ‘parking’ them and deferring the corresponding annual maintenance fees. In the event this is allowed, the decision to do so should not be taken lightly.

While license suspension or parking reduces short-term cash flow obligations in the form of maintenance payments to SAP, it generally does NOT rid the enterprise of that obligation in the longer term.

Put simply, at best it just pushes out the deferred maintenance obligation for payment another day. Although we are starting to hear more people talking about it, in reality SAP license parking is a relatively unusual practice for several reasons:

• SAP rarely permits this capability contractually due to the steadily growing stream of support maintenance revenue from its customer base.
• Economically, the reactivation of the parked license triggers a true-up of the deferred maintenance, and that can be a substantial cost. At some point, it is cheaper to buy new licenses rather than pay the deferred maintenance.
• SAP has been introducing alternatives to parking for customers to better match the customer’s evolving needs. Enterprises that have a license parking/suspension provision in their contract generally have a series of restrictions placed on them and a clear series of triggers that reactivate those licenses.

They also have a clear process for how they can reactivate the licenses should they need them. Under the “No harm asking” philosophy, enterprises could approach SAP and ask for an amendment to their contract agreement that will allow license suspension/parking.

Clearly, SAP does not have to grant this request, and it would only likely be considered in the context of a much broader strategic view of SAP usage over a longer period of time.

Parked licenses and company acquisitions

In a scenario where SAP licenses have been acquired through the purchase of another organization, the acquirer may ultimately need to repurchase whatever the acquired company was using in full, and true-up the parked licenses to the new metrics as part of the cost of the acquisition. Should the surviving entity decide NOT to use any of the parked licenses of the acquired company, then it should legally avoid the true-up costs of reactivation.

As part of the acquisition due diligence process, aacquiring organizations would be well advised to check existing SAP contracts (of the company they wish to acquire) to see if they contain any suspension or parking provisions that had been previously negotiated, and what events would cause a reactivation of these licenses.

An alternative to SAP license parking

A global policy change from SAP in 2013 introduced an alternative to license parking which may be more appropriate, but also has some significant potential drawbacks. SAP refers to it as “usage rights abandonment”. In this case, the customer gives up the rights to ever use the software licenses again, and in return the customer should see a reduction in their annual maintenance costs. In practice, SAP recalculates the annual maintenance charges based on the remaining licenses but adjusts where volume discounts at purchasing influenced the overall maintenance number.

The biggest downside of this strategy is that once a company has abandoned usage rights for a particular license class (i.e. Limited Professional), SAP will not sell further licenses of those type back to the user. Understanding your current true requirements and your projected needs over the next few years becomes imperative.

A third way

An alternative to either license parking or rights abandonment is to consider ‘horse trading’ one type of SAP license for another. This is potentially the most advantageous way forward, but there is an important requirement: you must fully understand your usage and requirements as they stand today. To do that, you will need the transparency offered by solutions like Snow Optimizer for SAP Software.

Snow Optimizer for SAP Software can ensure that an organization optimizes its SAP licenses, by providing various analyses which identify and isolate named SAP users that are obsolete, duplicate or wrongly assigned. It gives an exact understanding of an organization’s SAP baseline inventory and entitlements enabling them to optimize SAP expenditure and entitlements.

Book a meeting today to discuss your SAP optimization requirements.