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SAP adjusts pricing in a digitalised world

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As digital transformation takes off, the strict definition of a system user is becoming blurred – and companies are faced with having to buy software licences for users who might only have intermittent access.

To help companies better manage their licensing, SAP is changing its indirect pricing model on some products.

Hala Zeine, senior vice-president of the SAP portfolio and commercialisation strategy, tells IT-Online that the way customers use software has changed.

“Ten to 15 years ago, a software user would be the person sitting in front of a computer. And there would be relatively few of them.

“At the beginning of the 2000s, this number grew: people were a lot  more tech-savvy and a lot more people were able to access the system. And now, in the digital age, they are using it in newer ways.”

Today, Zeine says, companies are opening their supply chain systems up to suppliers, who are able to interact directly, configure their own product sets, and create orders without the need for further intervention.

Feedback from users showed SAP that the traditional licensing regime in procurement and order management systems was no longer suited to the way these systems are being used, Zeine says.

“So SAP decided to adjust and modify the pricing to keep up with how these systems are used now,” she says.

Today, many companies have their own portals that give their suppliers and customers access to their internal processes, often running on SAP systems. These third-parties are able to create orders, fulfil orders or generate invoices in realtime.

So these third parties are users, Zeine says, but their use of the system isn’t predictable – so the current methods for licensing users are not always relevant.

Catering to these new use models, SAP has introduced new pricing indirect licencing, where the customer is billed according to the number of orders logged on the system rather than the number of users accessing it.

“This makes pricing a lot more predictable and a lot more consistent,” Zeine explains. “We think it will offer customers a lot more value, measured by outcomes. Therefore, our pricing model for the Procure-to-Pay and Order-to-Cash scenarios in ERP will now be based on orders, a measurable business outcome for any business.”

Meanwhile, indirect static read access reinforces that a customer’s data belongs to them, she add. “Just because the data was in the SAP system, does not mean you should pay to view it when it is outside the SAP system.

“Indirect static read is read-only that is not related to a realtime system inquiry or request and requires no processing or computing in SAP system. Indirect static read will now be included in the underlying software license, so it’s free of additional charge when a customer is otherwise properly licensed.”

SAP will engage individually with customers to determine their new pricing structure from today.

Zeine would not be drawn on whether the new pricing regime will prove more cost-effective for customers, but stresses that it will certainly be more predictable. “We’ve done a lot of testing on different price points, and it is more predictable.”

Customers had a lot of input into the new pricing structure, she adds. “It was a collaborative effort that was undertaken globally. We have received input from user groups in all the geographies, and the South African user group was an active participant in the process.”

Reg Barry, member of the AFSUG board, comments: “SAP have just formally announced the revised indirect licensing approach at Sapphire in Orlando.

“This is a direct result of SAP customers that have through the various user groups, the African SAP User Group (AFSUG) being one of them, raised this with SAP at the annual SUGEN alignment session with SAP senior representatives in Germany towards the end of 2016.

“We are extremely excited with the outcome of this topic and believe this showcases how the various user groups can influence SAP to the benefit of all its members.”

The indirect licencing model rolls out today for procurement and ordering systems, but this is just the start, Zeine says

“The Internet of Things (IoT) is definitely the next area to consider,” she says. “There are so many differnet touch points and processes are created not just by humans but by devices, which also update the systems.”