How to Optimize SAP Licensing and Reduce Costs with Smarter Solutions

SAP is still one of the heaviest among global enterprise software systems, with applications for everything from logistics to finance. However, SAP licensing has become increasingly complex, particularly for organizations that are evolving, digitally transforming, or redefining their business operations.

Most, if not all, companies in the USA and Canada are either overpaying for their SAP licenses or failing to maximize the money spent. Mismatched license types, the lack of insight into user behavior, and surprise audits can result in unexpected costs, or even worse, penalties. With a proper approach and appropriate tools, however, it is perfectly feasible to tame this licensing beast and save a significant amount on SAP without compromising performance.

This piece outlines a systematic and pragmatic strategy for optimizing SAP licenses, providing practical guidance from TotalTek, a provider of SAP consulting services and application management services (AMS).

What the SAP Licence Model is and how it works

However, before we delve into how to optimize, you need to understand how SAP licenses work. SAP generally provides two primary types of permits:

1. Named User Licenses

Assigned to individuals who interact with SAP systems.

2. Package Licenses

Based on metrics such as the number of orders processed, volume of data, or production output.

SAP also distinguishes between different user types, including Professional, Limited Professional, and Employee users, among others. Each comes with varying permissions and costs.

Misclassifying users or failing to monitor usage trends can result in:

• Over-licensing, where you pay for capabilities users don’t need.
• Under-licensing can trigger fines during an SAP audit.

Step 1: Conduct a Comprehensive License Assessment

The first step toward cost reduction is complete transparency. You need to understand:

• What licenses you own
• Who is using them
• How often and for what functions

A license usage audit involves:

• Pulling user data from SAP tables like USR02 and UST12
• Cross-referencing activity logs with user roles
• Mapping roles to license types

Whilst this exercise can be laborious to perform manually, SAP also offers tools (including SAP’s License Administration Workbench (LAW) and SAP’s Solution Manager) that can help measure your license.

This evaluation can be automated and enhanced by third-party tools and SAP consultants, thereby reducing or eliminating human error.

2: Match License Types to What Users Actually Would Do

The second step, after gaining visibility, is to improve the utilization of user licenses. For instance, a user with a Professional license frequently logs in just once a month to access reports, an act that an Employee license can accomplish much more inexpensively.

Key recommendations:

• Reclassify users based on actual activity
• Use role-based access controls to limit unnecessary authorizations
• Regularly de-provision inactive users.

This step alone can yield significant savings. A study by Snow Software (2021) revealed that organizations that optimized user licensing achieved up to 30% savings on their annual SAP expenditures.

Step 3: Implement Ongoing License Governance

License optimization isn’t a one-time fix. Business needs evolve, and users move between departments or leave the organization altogether.

Here’s what effective license governance should include:

• Quarterly or bi-annual license reviews
• Integration of user provisioning with HR systems
• Automated alerts for inactive or low-usage accounts
• Pre-audit checks before SAP’s license measurement period

This continual discipline helps avoid overuse and compliance issues ahead of SAP’s frequently unexpected audits.

Step 4: Elevate Your SAP Support to Something Smarter with Application Management Services (AMS)

In many cases, internal SAP resources are already overwhelmed with the day-to-day activities of end-user support and don't have the time or resources to manage licensing proactively. This is where Application Management Services (AMS) can give them the edge.

By outsourcing support and license governance to an AMS provider like TotalTek, organizations can:

• Offload system monitoring and compliance checks
• Receive ongoing usage reports and optimization suggestions
• Access cross-functional expertise for both functional and technical SAP support

AMS providers also help avoid technical missteps that could trigger license overuse, like inadvertently enabling indirect access through third-party apps (a common cause of unplanned licensing costs).

Step 5: Mitigate the Risk of Indirect Access (Digital Access)

SAP introduced Digital Access licensing to address the rise of third-party and automated interactions with its systems. This model charges companies based on the number of documents created by external applications, such as sales orders initiated through a CRM system.

To mitigate risk:

• Identify all third-party systems interacting with SAP
• Monitor document creation points and workflows
• Assess whether Digital Access may be a more cost-effective option than Named User licenses in your environment.

Others remain in the traditional licensing model, while some transition to Digital Access. It is not possible to have a "unified" logging; you should choose one logging system that fits your needs and requirements. A SAP consulting service with Digital Access specialty can help you model both the scenarios and select the most budget-friendly variant.

Step 6: Ready for the Move to SAP S/4HANA

Navigating the licensing with SAP S/4HANA Many organisations in North America are exploring or in the process of migrating to SAP S/4HANA, and this too has its licensing subtleties. While you’re migrating, it’s a good time to:

• Reevaluate license allocations
• Remove dormant accounts
• Reassess contract terms

Additionally, SAP S/4HANA licenses are based on FUEs (Full Use Equivalents), which differ from legacy models. Understanding this change is crucial to preventing cost escalations during the transition.

Partnering with an experienced SAP AMS and consulting team ensures smoother migration and better licensing alignment during the process.

Why Industry-Specific Expertise Matters

SAP licensing is not just about technical software usage; it’s deeply tied to your business operations. That’s why it’s critical to work with consultants who understand your industry.

For instance:

• In manufacturing, license usage may spike during seasonal cycles, requiring flexible allocations.
• In logistics, third-party integrations (like fleet tracking tools) often introduce indirect access risks.
• In government and defense, user access must align with strict regulatory controls.

TotalTek supports SAP clients across various verticals, including food manufacturing, logistics, naval defense, and maritime engineering, helping tailor licensing strategies to meet operational needs.

The Role of PMO Consulting in SAP Cost Management

Beyond AMS, Project Management Office (PMO) consulting can offer strategic support during licensing transitions, especially during digital transformation projects.

PMO consultants help:

• Create cost-effective SAP roadmaps
• Plan for future license needs
• Ensure licensing decisions align with business goals

Integrating licensing into your broader project planning avoids last-minute surprises and budget overruns.

Real Results: A Snapshot of SAP License Optimization Outcomes

Organizations that invest in more innovative SAP license management often see:

(Sources: SAP Insider, Snow Software, Gartner Reports)

Smarter SAP Licensing Starts with a Smarter Partner

SAP’s licensing landscape is intricate and fast-changing, but optimizing your licensing strategy doesn’t have to be overwhelming. The key is consistent visibility, industry-specific guidance, and support from experienced professionals who know how to navigate the nuances.

Whether you're managing legacy SAP systems or transitioning to S/4HANA, the right strategy can significantly reduce costs and improve long-term ROI.

Partner Smarter, Spend Smarter

Optimizing SAP licensing isn’t just about trimming costs; it’s about making better decisions for your organization’s future. By combining transparent license audits, governance, and industry-aligned consulting, you can turn SAP licensing from a financial burden into a strategic advantage.

At TotalTek, we work with businesses across North America to support SAP strategy, and AMS, with a focus on real results, not vague promises.

Let’s Talk SAP Strategy

Visit www.totaltek.com to learn more about our SAP consulting services, application management support, and how we help companies reduce licensing complexity—without compromising growth.

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