SAP License Audits

Introduction – Why Every CIO Must Understand SAP Audits

SAP license audits are a fact of life for enterprises running SAP. Every CIO must grasp that an SAP audit is not just a compliance checkpoint – it’s often a strategic revenue tool for SAP. Vendors like SAP use audits to identify compliance gaps and drive additional sales, particularly around contract renewals or new offerings.

This guide serves as your playbook for taking control of the audit process. It arms you with insider knowledge to manage audits proactively, turn the tables on SAP’s tactics, and use the audit as leverage for your organization’s benefit.

Redress Compliance, as a seasoned advisor in this space, has helped many CIOs transform audit pressure into strategic advantage – and this guide distills those insights into practical steps and checklists.

Why SAP Audits Happen

SAP audits typically occur because SAP contractually reserves the right to verify you’re using the software within the limits of what you purchased. However, there’s often more at play than routine compliance. SAP’s audit notifications have a knack for coinciding with sales opportunities.

In practice, an audit often foreshadows a push for new licenses or cloud subscriptions. CIOs should approach each audit with a healthy skepticism about the timing and motive.

Common triggers for an SAP audit include:

Indirect access suspicion: If third-party systems or interfaces access SAP data without obtaining the necessary licenses, SAP may conduct an audit to investigate this “indirect usage.” This is one of the most notorious triggers – SAP looks for data being pulled or pushed by non-SAP applications (such as a CRM, e-commerce site, or custom app), which could result in additional (often unlicensed) SAP usage.
Rapid user or usage growth: A sudden spike in SAP user count or transaction volume can raise flags. If your organization quickly added hundreds of SAP users or dramatically expanded use of a module, SAP may suspect you’ve outgrown your license entitlements.
Unlicensed product use: Using SAP modules or components that weren’t originally licensed (for example, turning on an SAP engine or functionality that wasn’t in your contract) will draw audit attention. SAP’s systems can detect when new modules are active and might trigger an audit to ensure you’ve paid for them.
Mergers & acquisitions or organizational changes: Major business changes often lead to consolidating SAP systems or extending SAP access to new entities. SAP often audits after mergers or acquisitions, assuming that the combined entity may be using more licenses or different license types than originally agreed upon.
Missed or irregular self-measurements: SAP customers are expected to run license measurement tools (such as USMM) regularly or as stipulated in their contract. If you delay or skip a yearly measurement submission, SAP may initiate a formal audit. Gaps or anomalies in the data you submit (via SAP’s License Administration Workbench reports) can also trigger an audit inquiry.

Underlying all these triggers is SAP’s knowledge that an audit often results in additional revenue. Knowing why audits happen allows CIOs to preempt issues. For example, if you plan a major expansion or integration, anticipate the audit and tighten up compliance beforehand.

The SAP License Audit Process (Step-by-Step Overview)

Understanding the audit lifecycle helps you stay in control at each stage. An SAP audit follows a predictable sequence of steps from initial notice to final resolution.

We outline these steps below (and recommend visualizing them in a flowchart or infographic for your team’s awareness):

Audit Notification: SAP’s License Management or Global License Audit and Compliance (GLAC) team sends a formal audit notice to your organization. This typically comes via email to your SAP contract contacts or CIO, indicating that an audit will commence. The notice typically outlines the scope, which includes the systems and license types to be audited, and provides a timeline. Enterprises are typically given 30 to 45 days to prepare their data for the audit. This stage may include a kickoff call to set expectations, but more importantly, it marks the start of the clock ticking for your internal preparation.
Data Collection: In this phase, you are asked to measure and collect your SAP usage data. Your SAP Basis or IT team will run SAP’s standard measurement tools on all in-scope systems. This involves executing the USMM transaction (User Measurement Tool) in each SAP system to gather user counts and classification, as well as usage metrics for engines or packages. After running USMM in each system, the results are consolidated using LAW (License Administration Workbench). LAW aggregates data from multiple systems, eliminating duplicate user counts across systems to produce a unified compliance report. Essentially, SAP is asking you to perform a self-audit and submit the results.
SAP Analysis: Once you submit the LAW consolidation file (and any other requested data) to SAP, the ball is in their court. SAP’s audit team (GLAC) analyzes your usage data against your entitlements (the licenses and quantities you’ve purchased per your contracts). They’ll look for variances – for example, more named users in a certain category than you have licensed, or use of an engine (like SAP HANA, SAP Payroll, etc.) exceeding the licensed metrics. They often cross-check multiple data points. If something appears to be incorrect, SAP may request clarifications or additional information at this stage.
In some cases, if the data suggests major compliance issues, SAP might escalate the audit from a routine review to an “enhanced audit.” In an enhanced audit, expect deeper scrutiny. SAP may request detailed user lists, logs of external interfaces (to identify indirect access), or even conduct interviews with your team about system usage.
Findings & Clarifications: After SAP completes its analysis, it will present preliminary findings to you. This typically occurs in a report or meeting where SAP identifies any compliance gaps it believes exist. For example, they might say, “You are under-licensed by 100 Professional User licenses” or “Your use of SAP Payroll exceeds your licensed employee count by X.” At this stage, the findings are not set in stone – it’s a discussion phase. SAP will invite you to review and clarify the results. This is your chance to explain any anomalies or provide additional information. Perhaps some users counted are actually inactive or duplicates; maybe a high usage metric was due to a one-time event or a test system. CIOS must engage here, ask questions, and correct any misinterpretations. Treat this as a two-way dialogue, not a verdict.
Negotiation & Settlement: This is where the audit turns from fact-finding to a commercial conversation. If SAP’s findings show shortfalls (areas where usage exceeds licenses), SAP will propose a resolution – almost always involving you purchasing additional licenses or services. At this point, a savvy CIO shifts into negotiation mode. Rather than simply accepting SAP’s proposal, you can negotiate: perhaps you’ll purchase some licenses but not the full amount they claim, or you’ll opt to transition to a different license model that covers the gap (for example, adopting SAP’s Digital Access license to handle indirect use instead of dozens of individual user licenses). You may be able to negotiate credits or discounts, especially if a renewal or new deal is forthcoming. The goal in this stage is to resolve the compliance issues in a manner that minimizes costs and aligns with your IT strategy. This could mean signing a settlement agreement, adjusting your contracts, or even bundling the settlement into a broader SAP contract (like adding it into a planned upgrade or enterprise agreement).
Resolution & Prevention: Once an agreement is reached, it’s formalized. You may receive an audit closure letter or an addendum to your SAP contract reflecting any new purchases or compliance adjustments. Internally, document what was resolved – specifically, which licenses were added or reclassified – and ensure your team implements any necessary changes (for example, reclassifying those 300 users to the proper license type or disabling the unlicensed module until it is procured). Crucially, this final step should include establishing controls to prevent the same issues next time. Smart organizations conduct a “post-mortem” on the audit: What caused the shortfall? How can we avoid it? Perhaps it leads to new internal policies, better internal license management tools, or planning for an alternative licensing model (e.g., moving to an enterprise license agreement that covers indirect usage). The audit may be over, but the continuous improvement cycle begins.

Visual Tip: Many CIOs find it helpful to create an internal infographic outlining these steps to educate stakeholders (such as IT, procurement, and finance) about the audit timeline. By visualizing the process from notice to negotiation, your team will understand where proactive effort is most needed (especially in the early data collection and analysis steps, where you control the inputs SAP will see).

Core Audit Risks & Red Flags

Not all compliance issues are created equal. Certain areas consistently appear as risks in SAP audits.

CIOs should be aware of these red flags ahead of time and monitor them continuously:

Indirect access: This is the elephant in the room for SAP licensing. Indirect access occurs when non-SAP systems or external users interact with SAP data or functions (for example, a third-party reporting tool querying the SAP database, or a customer portal updating SAP records). Traditional SAP licensing is user-based, which doesn’t account well for these scenarios. SAP auditors actively hunt for indirect usage because it can require additional licenses (or SAP’s newer solution, Digital Access licenses). It’s a gray area that has caught many companies off guard, resulting in large compliance claims. Red flag: If you have interfaces feeding data into SAP or pulling data out to other systems, each of those could represent indirect usage. This risk is high-impact – the audit can claim you owe licenses for potentially hundreds or thousands of external users or system transactions if not properly licensed.
Misclassified user types: SAP offers different user license types (Professional, Limited Professional, Employee, Developer, etc.), each with different price points and permissions. A common audit finding is that too many users are classified in a lower category when their actual usage demands a higher category. For example, suppose many users were set up as “Employee” (a low-level license) but have roles that allow broad access. In that case, SAP may reclassify them as “Professional” users in the audit results. The cost difference is significant. Red flag: If your user license assignments haven’t been reviewed in a while, there’s a risk that people’s roles have changed over time, but their license type hasn’t. Auditors will spot these inconsistencies. Misclassification can inflate compliance gaps, because SAP will price the gap at the expensive license type. Always ensure users have the appropriate license type for their actual usage to avoid any unpleasant surprises.
Expired or unmeasured systems: Sometimes, test, training, or sandbox systems aren’t regularly measured or are thought to be out of scope – until SAP asks for data and finds users on them. Also, if you’ve sunset an old SAP system but it hasn’t been fully decommissioned, it may still contain user accounts or data that contribute to license usage. Red flag: Incomplete deactivation of old systems or forgetting to run measurements on non-production systems can lead to overstated license usage. Ensure that all instances (both production and non-production) are either properly measured or clearly excluded by agreement with SAP, and clean up any obsolete systems.
Over-deployed engines or packages: Beyond user licenses, SAP sells “engines” or package licenses measured by specific metrics (e.g., number of employees for SAP HR, number of orders for SAP Sales and Distribution, database size for SAP HANA, etc.). A core audit risk is using more of these metrics than you paid for. For instance, if your SAP Payroll license is for 5,000 employees and you now have 6,000 on SAP, you’re 1,000 over the limit. Or you licensed eight cores of a database but actually deployed 12. SAP will also audit these technical metrics. Red flag: Monitor usage of all SAP engines against their license metrics. Growth in business transactions, employees, or data volume often means you’ve exceeded original license parameters. These can result in big compliance fees because engine licenses are often pricey.
License metric misunderstandings: SAP’s product catalog is complex. Some licenses are based on the number of users, others on revenue, and others on records or CPU cores. It’s easy for companies to misunderstand or lose track of how each license is measured. For example, an ERP package might allow up to X named users, whereas a CRM package might be based on the number of customers in the database. If you apply a metric incorrectly, you might think you’re compliant when you’re not (or vice versa). Red flag: Any ambiguity in how a license is counted is a serious concern. Always clearly define license terms in your contracts. During audits, SAP will use its interpretation (which might maximize your usage count). Knowing the exact definition and having documented interpretations can prevent SAP from over-counting. Never assume; always verify how each license is supposed to be measured and keep evidence of your understanding.

Being aware of these risk areas allows CIOs to focus their compliance efforts. Think of these as your “watch list” – areas to double-check before an audit and to continually manage as part of your SAP governance.

Pre-Audit Preparation & Internal Self-Auditing

The best way to win an audit is to start long before it begins. Smart CIOs view SAP license management as an ongoing task, not a one-time annual scramble. By preparing in advance, you can identify and resolve issues on your terms, rather than under the pressure of an audit.

Here’s how to fortify your organization before an official SAP audit notice arrives:

Inventory all SAP systems and licenses: Begin with a clear record of every SAP system you have (production, development, test, sandbox, etc.), along with the licenses purchased for each. Map which licenses (and what quantities) are tied to which systems or business units. This inventory prevents surprises – you’ll know exactly what SAP could audit and what you’re entitled to use.
Run internal license measurements (USMM/LAW): Don’t wait for SAP’s auditors to tell you how you’re doing. Schedule regular internal audits (e.g., quarterly or biannually). Use SAP’s USMM tool on each system to gather user and usage data, then consolidate with LAW just as SAP would. This internal exercise allows you to identify any compliance gaps in advance. If the LAW report shows you’re over on a license type, you can address it proactively (either by true-up purchasing, reassigning licenses, or cleaning up data) before SAP comes knocking. Treat these internal runs as drills for the real audit.
Review all contracts and license definitions: Pull out your SAP contracts and documents that define your license metrics. Ensure you understand the fine print – what exactly constitutes a “Professional User” under your agreement? How is “Indirect Static Read” defined (for indirect access)? If you have enterprise or package licenses, what are the exact use rights associated with them? Knowing these definitions enables you to measure yourself accurately and, importantly, to dispute any SAP claims that go beyond the contract. Create a reference guide for your team summarizing these definitions.
Clean up user accounts and data: One of the simplest pre-audit fixes is to clean up user accounts and data. Well before an audit, purge or lock inactive users in your SAP systems (employees who left, or test accounts no longer needed). Ensure each active user is assigned the correct license type in the system user master. Remove duplicate user IDs (the same person with two accounts can double-count usage). When you run measurements after cleanup, your numbers will be more accurate and lower. Similarly, review usage logs for anomalies – e.g., a technical user consuming a large amount of resources might require a different license type. This hygiene can drastically reduce apparent usage without any impact on operations.
Verify license allocations in each system: Sometimes, users have broad access in one system that is not being used. For example, a developer might have access to production but never actually use it. Ensure that high-level access (which might trigger a higher license type) is truly needed. If not, restrict roles or adjust the user’s license classification accordingly. By optimizing roles and authorizations, you ensure you’re not “over-licensing” someone due to an unnecessary permission.
Document integration points and indirect use: Create an architecture diagram or a list of all third-party systems that interface with SAP. Note what data they exchange and how (via APIs, file exports, etc.). This is crucial for indirect access management. With this documentation, you can assess if your current licenses cover those interactions or if they pose a risk. For instance, if a non-SAP e-commerce platform is creating sales orders in SAP, you should determine if that is allowed under your licenses. Knowing all integration points means an SAP claim of indirect usage won’t come as a surprise. If needed, you can take action – perhaps by implementing an SAP-provided, license-compliant interface or negotiating a Digital Access license in advance for those documents.
Train your team and establish internal policies: Ensure that your SAP Basis team and IT asset management personnel are familiar with the dos and don’ts. For example, establish a policy that prohibits adding a new SAP module or external interface without conducting a licensing check. Make it standard to review licensing impact as part of any SAP project or update. Educate procurement and technical teams about common audit triggers (like those we listed earlier). An informed team will avoid steps that inadvertently create compliance issues.

By investing time in internal self-auditing and cleanup, you dramatically reduce the risk of a nasty surprise during an official audit. Think of it as fixing the roof while the sun is shining.

It’s far better to discover a license shortfall yourself (when you have time to consider options) than to have SAP discover it and present you with an invoice. Pre-audit preparation puts control back in your hands and turns the official audit into more of a formality.

Responding to the Audit Notice

No matter how well you prepare, the day may come when an email from SAP’s audit team lands in your inbox. How you respond in those initial moments can set the tone for the entire audit. Maintain a calm, professional, and strategic approach.

Here’s how a CIO should respond once an SAP audit notice arrives:

Acknowledge the notice promptly and professionally by responding to SAP to confirm receipt of the audit notification. Thank them (courteously) and state that your team will cooperate within the agreed timeline. This sets a collaborative tone. However, avoid giving too much detail or committing to dates that are too soon. Simply acknowledge and ensure you understand who the point of contact on SAP’s side is going forward.
Clarify the scope and methodology: It’s perfectly acceptable—and wise—to ask SAP for clarification upfront. For example, inquire about which systems and time periods are in scope, as well as the methodology or tools they expect to use. You might say, “To ensure we provide the most accurate data, could you confirm which SAP installations and license types will be audited, and any specific data you require beyond the standard USMM/LAW report?” Getting this in writing helps avoid scope creep. It also signals to SAP that you are detail-oriented and will hold them to the defined scope.
Negotiate the timeline if needed: SAP’s standard notice might give 30 days to collect and submit data. If you feel that’s not enough (perhaps your landscape is complex or key staff are unavailable), don’t hesitate to request an extension before the deadline passes. Provide a reasonable rationale, like “We are currently undergoing an internal reorganization of our IT team, and to ensure we deliver accurate data, we request an additional 2 weeks for the collection.” Often, SAP will agree to a short extension. It’s better to ask early than to rush and submit bad data.
Prepare your data first, before SAP sees it: Upon notice, mobilize your internal audit response team (IT asset manager, SAP Basis lead, relevant application owners, and procurement/legal liaisons). Run the measurements internally and scrutinize the results before sending anything to SAP. This internal dry run allows you to identify issues. For instance, if LAW indicates 50 excess Professional users, you can investigate the reason. Perhaps some users were misclassified – correct that and rerun it. Essentially, don’t hand over data you haven’t vetted. If something looks off, you may even choose to note it in your submission (e.g., “We observed an anomaly in System X user count and are investigating; preliminary data provided for now”). Controlling the narrative is easier when you know exactly what’s in the data.
Engage legal and procurement advisors early: An audit might seem technical, but it has legal and financial implications. Notify your legal counsel that an audit is underway, and loop in your procurement or vendor management team. They can help interpret contract clauses (such as what you are obligated to provide or how the audit should be conducted according to the contract). If you work with external licensing advisors (such as Redress Compliance or similar experts), inform them at this stage as well. Early involvement of these stakeholders means you have support to push back if SAP overreaches in its requests or if a dispute arises later. It also ensures any negotiation down the line is aligned with your broader IT procurement strategy.
Maintain a single point of coordination: Internally, designate an audit response lead (often an IT asset manager or a senior procurement manager). All communication to and from SAP’s auditors should funnel through this person (with CIO oversight). This prevents mixed messages or SAP circumventing your process by directly pinging a technical staff member. The audit lead can ensure responses are reviewed, consistent, and strategic. For example, if SAP requests additional data, the audit lead can evaluate whether it’s within scope and coordinate a proper response rather than having someone send data offhand.
Stay factual and don’t volunteer extra info: In communications with SAP, answer their questions and provide required data, but do not volunteer more than necessary. For example, if they ask for users and license types in System A, provide exactly that – not a full export of every user’s activity or details about other systems. Keep your answers precise. The tone should be cooperative but businesslike. Everything you share should be curated and needed. Oversharing only gives auditors more angles to question you on.

By responding thoughtfully to the audit notice and orchestrating the process on your terms, you demonstrate control and preparedness. SAP’s auditors will realize you’re not an easy target for a quick sale, but a well-advised enterprise ready to engage properly. That first impression can influence how aggressive or lenient they are as the audit unfolds.

How SAP Calculates Shortfalls (and How to Challenge Them)

When SAP’s audit team identifies a compliance gap, they will quantify it in stark terms: usually as a list of missing licenses and a hefty price tag attached. Understanding how they arrive at those numbers is crucial for a CIO to challenge and negotiate effectively.

SAP’s “list price” approach: SAP auditors typically calculate license shortfalls using official list prices (the full price per license or usage unit, with no discounts) and backdated maintenance fees if applicable. This means the initial bill they present is often shockingly high. For instance, if they determine you are using 50 more Professional User licenses than owned, they’ll multiply 50 by the full list price of a Professional User license, then often add maintenance at ~20% per year for the time you were under-licensed. The result is a number no customer ever actually pays in real-life deals – it’s a starting anchor for negotiation.

Aggregation by license type: SAP will group usage by license classification and module. If some users were misclassified and should have been a more expensive license type, SAP assumes the worst-case scenario: all those users need the pricier license. For example, suppose you have 1,000 users all tagged as “Employee” licenses (a less expensive license), but the audit reveals that 500 of them engage in activities that require a “Professional” license. SAP might claim you are 500 Professional licenses short. At list price, that’s a massive cost. However, this is where you can push back and refine the numbers. Often, not all of those 500 users truly need full professional-level access. Many could be light users who were slightly misconfigured. By re-evaluating roles and usage, you might determine that only 200 of them need Professional licenses, and the other 300 can be adequately covered by a less expensive license type with some adjustments.

Example: SAP’s audit report might say: “500 Professional User licenses short”. Your analysis shows 300 of those users actually only use limited functionality suitable for an Employee license. By formally reclassifying those 300 users as Employee users (and possibly adjusting their access permissions to match that role), the shortfall of Professional licenses decreases to 200. The cost difference is dramatic – if a Professional license list price is five times that of an Employee license, you just reduced the compliance cost by around 60%. In negotiations, this kind of counter-analysis is gold, forcing SAP to acknowledge a much smaller gap.

Engines and packages calculation: When it comes to engines (like SAP modules measured by metrics), SAP will calculate overuse similarly. If you licensed a package for up to 1,000 orders and you processed 1,500, they’ll claim an extra 500 orders worth of licensing is needed, often suggesting you buy an additional block or a higher-tier license. They will price it as if you buy it standalone now (again, potentially at list price). Your job is to examine how they measured that usage and whether it’s accurate. Maybe that 1,500 count included test orders or duplicates. Or perhaps your contract allows a certain margin of error or an average rather than a peak count. Always verify SAP’s counting method.

The logic behind SAP’s math: SAP’s goal with these calculations is not only to recoup what they see as lost revenue, but also to create a negotiating anchor. By starting with a high “audit exposure” figure, they set a psychological reference point. They know most customers will negotiate that down, but it initially frames the discussion in SAP’s favor. Recognize this tactic – the first number is not final. It’s often inflated by using the highest prices and by a strict interpretation of data.

How to challenge the numbers:

Demand transparency: Ask SAP to provide the detailed breakdown of how they arrived at the shortfall. Which users, which licenses, which measurements, and which contract clauses are they using? You have every right to see the evidence. Often, this request alone makes SAP more careful; if a number was rough, they might revise it when pressed to show their work.
Reconcile with your records: Compare SAP’s data with your own usage logs, user lists, and contract entitlements. If SAP indicates that you deployed 10 extra SAP ERP user licenses, map those to the actual usernames or system IDs and verify if they were properly counted. It’s common to find discrepancies – for example, a user counted twice across systems, or licenses that you actually purchased but SAP missed in their entitlement database.
Highlight edge cases: Perhaps some “usage” was due to a test or a temporary spike. Document those instances and present them as outliers that shouldn’t count toward a permanent license need. SAP might not automatically exclude them, but if you demonstrate that it was a one-time event (for example, a mass data load by IT), you can negotiate that it doesn’t make sense to purchase licenses for it.
Use contract language: If your agreement includes provisions regarding usage measurement or specific exclusions, reference them. For example, some contracts allow read-only access by third-party systems without a license – if SAP counted that as indirect usage, you can push back, citing the contract.

The key is not to take SAP’s compliance calculation at face value. Treat it as an opening bid. By dissecting their assumptions and providing a reasoned counter, you not only reduce the immediate exposure but also show SAP that you’re a customer who big numbers won’t cow. That sets the stage for a more balanced negotiation.

Negotiating Audit Findings Strategically

When SAP presents its audit findings and that eye-popping compliance gap, the unprepared might feel they have no choice but to pay up. But experienced CIOs know that an audit is the beginning of a negotiation, not the end.

This is where you switch hats from compliance to strategist. You have leverage, too – perhaps more than you think. SAP wants to maintain the customer relationship and sell you more in the future, so they are often open to discussions. Here’s how to negotiate your way to a better outcome:

Challenge methodology and assumptions: Do not hesitate to question how SAP arrived at its findings. If they assumed every user with a certain role needs the highest license type, push back with your own analysis (as discussed in the previous section). For instance, “We believe your classification of all our power users as Professional is not accurate; we’ve identified many who can be classified under a different license once we adjust their access. Let’s revisit that calculation.” By respectfully challenging the findings, you invite SAP to reconsider and show that you’re not going to accept claims without validation. Often, SAP will engage in a review, and some findings can be revised or dropped.
Use indirect access defense tactics: If indirect usage is part of the findings, this is a complex area where you can push back hard. First, review your contracts for any language regarding third-party access or “indirect static read” (which, in some cases, is permitted without additional licensing). If SAP’s claim goes beyond the contract, make that clear: “Our understanding is that the interface to our e-commerce system is covered under the named user licenses for the users initiating those transactions.” You can also negotiate a cap or specific resolution for indirect usage. SAP now offers Digital Access licenses (which count documents like Sales Orders regardless of the user). Perhaps instead of back-charging for indirect use, you negotiate to purchase a forward-looking Digital Access package at a reasonable discount, thus legalizing those connections without the retroactive penalty. The key is to contain the indirect access issue – left unchecked, it can balloon. Insist on a fair approach, such as only licensing the specific data records created rather than every user of the third-party system.
Request proof of impact: A strong negotiation stance is to ask SAP to demonstrate the real commercial impact of the alleged shortfall. This flips the discussion from “you broke rules” to “show me how this hurt SAP or exceeded what we intended to use.” Often, auditors will claim a shortfall based strictly on numbers, but if, for example, half of those “extra” users were inactive or only used the system one day, is it truly a license failure? Posing questions like, “Can SAP provide evidence that these 50 users were actively using functions beyond their license level, and not just idle accounts?” can weaken SAP’s position on moral grounds. It sets the stage for you to be willing to comply, but only for genuine overuse, not technicalities.
Bundle the audit settlement with broader negotiations: One of your strongest cards is that SAP typically audits with a broader perspective in mind – often with a renewal or upsell in mind. Turn that around by making the audit part of a larger conversation that benefits you. For example, if you are due for a license renewal or considering an expansion like RISE with SAP (SAP’s cloud subscription service) or S/4HANA migration, use the audit to your advantage. You might say to SAP, “We’re open to discussing a move to S/4HANA Cloud next year. Let’s address this compliance issue in the context of that transition.” This could lead to SAP offering concessions, such as forgiving some audit fees, if you commit to a new deal. Conversely, be wary if SAP tries the classic tactic: “If you move to RISE, we’ll make the audit findings go away.” That can be tempting, but evaluate it carefully – is switching to RISE or another big purchase truly beneficial for you, or just a convenient (and costly) way out of the audit? Only agree if it aligns with your strategy, and negotiate the terms of that new deal thoroughly (including discounts, extended rights, etc.). In any case, integrating the audit discussion with other pending negotiations often unlocks more flexibility. SAP account reps may have leeway to reduce audit charges if it means closing a larger sale.
Leverage unused licenses and trade-offs: Many large SAP customers have some shelfware – licenses purchased but never used. During audit negotiation, you can propose a license swap or reallocation. For instance, “We’ll agree to purchase the 50 needed HR user licenses, but in exchange, we want to convert 100 of our unused CRM licenses to SRM licenses where we actually have a need.” Or, “We’ll settle this indirect usage by buying a digital access package, but we’d like to return an equivalent value of our unused developer licenses.” These kinds of trade-offs can be a win-win: SAP books revenue for something you genuinely need, and you get to clean up your license portfolio without net-new spending on everything.
Negotiate pricing and terms aggressively: Remember that initial audit bill with list prices? Treat it as irrelevant once you’re in a negotiation. Bring it back to your last negotiated discount levels or better. For example, if your last SAP purchase came at 50% off list price, any new licenses you agree to now should be at least that discounted, if not more (given the unplanned nature). Additionally, negotiate maintenance: ideally, new licenses from an audit settlement should start maintenance immediately, rather than being backdated (you can argue that you weren’t receiving support for unowned licenses in the past, so backdating maintenance is not logical). Push to waive any “audit fees” if they try to charge for the audit process itself (some contracts allow SAP to charge audit costs if non-compliance is found – try to get that waived in exchange for cooperation or purchases). Essentially, you are now in a procurement scenario – use procurement best practices. If needed, pit the audit resolution against other options: “If the costs are too high, we might consider third-party support or limiting our SAP footprint.” That can encourage SAP to be more reasonable.
Document any agreed resolutions thoroughly: When you settle, ensure it’s documented in detail. If SAP agrees to an exception or a special deal (like giving you credit for certain licenses, or a one-time discount to resolve the audit), get it in writing in the final agreement or an email at a minimum. Verbal assurances during negotiations mean nothing later. Additionally, part of negotiation involves setting future protections. Ask for an audit clause in the future – for example, “SAP will not audit again for X years” or at least not audit the same area that was just resolved. You might not always get that, but it’s worth trying, especially if you made a significant purchase.

Throughout the negotiation, maintain a firm but professional demeanor. Convey that you intend to resolve any genuine compliance issues, but you are committed to ensuring the resolution is fair and aligned with your company’s interests. SAP sales teams often step into the audit process at this stage – because now it’s about money. Use that to your advantage by making it a broader commercial discussion, not just a penalty payment. And remember, everything is negotiable. The audit outcome is not a take-it-or-leave-it ultimatum; it’s a starting proposal that you have every right to refine.

Post-Audit Controls & Prevention

After weathering an SAP audit and negotiating a settlement, many CIOs breathe a sigh of relief. But the work isn’t over – the period immediately following an audit is the best time to fortify your defenses so that next time, you’re even more prepared (or possibly avoid certain findings altogether).

Consider the audit you just finished as a valuable lesson and impetus for improvement.

Here’s how to integrate audit learnings into your ongoing operations:

Conduct an audit debrief: Gather your team (IT, asset management, procurement, and any external advisors) and review what happened. Identify the root causes of any compliance gaps. Were inactive users not cleaned up? Unfamiliarity with license terms? A particular integration nobody tracked? Create a report or, at the very least, take notes on the findings and resolutions. This debrief should inform an action plan to prevent recurring issues. It’s also useful to brief senior management on the outcome and the steps being taken to strengthen compliance – showing that you turned a risk into a governance improvement.
Implement continuous license management: Rather than treating licensing as an annual task, integrate it into your regular IT operations. Assign someone (or a team) the responsibility for ongoing SAP license compliance monitoring. This could involve monthly checks of user counts, quarterly LAW consolidations internally, or real-time monitoring using tools. The goal is to identify any upward trends or anomalies as early as possible. If you notice that the number of active users exceeds your license count, you can take immediate action (true-up, reallocate, or restrict). Continuous management ensures that there are no surprises when the next official audit occurs.
Maintain a living entitlement repository: Keep an up-to-date catalog of all your SAP licenses, contracts, and the rights each provides. This repository may be a simple spreadsheet or a module in a Software Asset Management (SAM) tool. Include details like: license type, quantity purchased, metric, current deployment usage, contract expiration/renewal dates, and any special terms. Whenever you purchase additional licenses or retire existing ones, please update this repository accordingly. It will be your single source of truth. Not only does this help during audits, but it also aids in planning new projects – you instantly know if you have spare licenses or need more.
Automate and tool up where possible: Consider investing in tools or services to help manage SAP licenses. There are SAM tools (Snow Software, Flexera, Voquz, Aspera, and others) that specialize in SAP license analysis. These can provide reports on user activity, detect indirect usage, and even optimize license assignment suggestions based on real usage patterns. While tools have a cost, they often pay for themselves by identifying unused licenses or preventing an overage that would cost millions. Automation can also send alerts if someone creates a user and forgets to assign the proper license type, for example. If a tool isn’t in the budget, even utilizing SAP’s own newer analysis tools (like SAP’s License Management Cockpit or specialized reports) can be helpful.
Strengthen governance around changes: Integrate license compliance checks into the change management process. For example, if a new interface to SAP is proposed, a sign-off is required that indirect access has been evaluated. If HR is onboarding 500 new employees into the SAP HR system, include a step to assess whether you have sufficient HR user licenses. Essentially, make “license impact assessment” part of the checklist for any major system or business change involving SAP. This procedural safeguard makes compliance an ongoing consideration rather than an afterthought.
Train and inform business units: Often, unintentional non-compliance happens outside of IT’s direct view – perhaps a department starts using SAP in a new way or purchases a cloud service that interfaces with SAP. Regularly educate stakeholders in the business about the basics of SAP licensing. They don’t need to know all the details, but they should be aware of the need to consult IT before undertaking any action that may involve SAP usage. A little awareness goes a long way. For instance, if people know that connecting a new app to SAP could have license implications, they’re more likely to involve the right teams early.
Audit your auditor (periodically): It may sound ironic, but consider having a third-party or an internal audit team periodically review your SAP license compliance status. Think of it as a mock audit. They might use SAP audit scripts and mimic SAP’s approach to identify any issues that arise. This independent check can validate that your internal efforts are on track and might find something you overlooked. Better you find it than SAP does.

By instituting these post-audit measures, you not only reduce future risk but also often find optimization opportunities.

Many companies, in tightening their license management, discover that they can actually save money – for example, by reallocating licenses from inactive users to new ones instead of purchasing more, or by identifying modules that can be retired because they’re not in use. In sum, make license compliance part of your organization’s DNA.

The goal is to reach a point where an SAP audit is no longer a concern – because you already have continuous compliance visibility and control.

CIO Audit Readiness Checklist

For a busy CIO or IT executive, having a quick checklist is useful to ensure nothing falls through the cracks when dealing with an SAP audit.

Here’s a concise SAP Audit Survival Checklist to keep handy:

✅ Confirm the audit scope in writing: Don’t proceed until SAP clearly states which systems, time frames, and license types are under review. Make sure both parties have a mutual understanding of what’s in scope. This avoids scope creep and surprises later.
✅ Prepare and verify data before submission: Run SAP’s measurement tools internally and verify the outputs. Clean up obvious issues (inactive users, misclassified users) before giving data to SAP. Double-check that the LAW consolidation is accurate (no duplicate users are counted, and all systems are included). Essentially, know your compliance position cold before SAP does.
✅ Cross-check findings with contract definitions: When SAP provides preliminary findings, cross-reference every point with your contract entitlements and definitions. If SAP says “these users need this license,” verify what your contract says about that license. If you interpret it differently, that’s grounds for dispute. Do not assume SAP’s interpretation is correct.
✅ Control communication and narrative: Centralize all audit-related communication through a designated point person. Any data you submit should be accompanied by relevant context, if necessary. For example, if you had to include a system that’s being decommissioned, mention that fact. Shape the narrative by highlighting where you know you’re compliant or where a certain finding might be misleading up front.
✅ Engage stakeholders early: Make the audit a team effort. Involve legal advisors to parse contract obligations, involve procurement to strategize negotiation, and brief the C-suite if the potential exposure is significant (so they understand the game plan and support it). If you have an external licensing consultant, ensure they are prepared to support you with data analysis or negotiation tactics. Early stakeholder alignment means fewer internal hurdles when decisions need to be made quickly during negotiations.
✅ Document every step and communication: Keep a log of actions taken – when you ran internal measurements, what you cleaned up, and when data was sent to SAP. Save all emails and correspondence with SAP’s audit team. If there are meetings or calls, take minutes and email them to yourself or the team as a record of the meeting. This documentation is invaluable if disagreements arise or if a similar issue comes up in a future audit. It also helps institutional memory, so if personnel changes, the next person can pick up the thread.
✅ Treat findings as starting points, not final demands: If SAP’s report says you owe X of something, approach it as one potential solution. Formulate alternative solutions: consider using 50 licenses of License B instead of 100 licenses of License A, which addresses the need differently, etc. Go into the negotiation with options in hand. Have your “ideal outcome” and “acceptable outcome” defined, just as you would for any contract negotiation. And always be willing to question and counteroffer on the audit findings.
✅ Integrate audit lessons into IT strategy: After resolving the audit, take what you’ve learned and feed it back into your IT and procurement roadmap. For example, if user growth drove the shortfall, plan license expansions ahead of growth next time (perhaps at a cheaper, pre-negotiated rate). If indirect access is a significant issue, consider budgeting for a transition to SAP’s digital access model or architecting a more license-efficient solution. Use the audit to inform future projects – turning a reactive situation into a proactive plan.

This checklist can be reviewed at any time you suspect an audit might be forthcoming (or immediately after one occurs). It ensures you cover all bases and respond in a methodical, confident manner. Pin it up in the IT war room if needed – it’s your quick guide to staying one step ahead of SAP’s auditors.

Executive Takeaways – How to Stay Ahead of SAP’s Audit Playbook

For a CIO or executive who doesn’t need all the nitty-gritty, here are the high-level takeaways to remember when it comes to SAP license audits:

Audits are inevitable – be ready: If you use SAP, assume you will be audited regularly. This mindset ensures you allocate resources to continuous compliance. Audits shouldn’t be “fire drills” – they should be expected events that you’re prepared to handle with routine processes.
SAP audits serve SAP’s interests: Always remember, SAP’s goal in auditing is often to generate revenue or push strategic product adoption. Recognizing this motive allows you to view their “findings” through a strategic lens. It’s not just about compliance, it’s about negotiation. Don’t take the audit personally; treat it as a business negotiation from the start.
Your own data is your best defense: Enterprises that know their actual SAP usage intimately will always have the upper hand. Maintain detailed, accurate internal records of usage. When SAP comes with an audit claim, you can respond with “According to our data, the situation is actually X, not Y.” Being able to counter with facts and figures (that SAP can’t easily refute) flips the power dynamic.
Most compliance issues are negotiable: There is almost always flexibility in how you can resolve an audit finding. Whether it’s reclassifying users, swapping licenses, or striking a larger deal, you have options beyond just cutting a check for the exact ask. CIOs who approach audits creatively can often settle in ways that involve minimal net-new spend or even improvements to their license estate.
Leverage timing and broader deals: Tie audit resolution to your advantage by aligning it with larger contract discussions. If an audit is scheduled to occur just before a support renewal or a procurement cycle, utilize that timing. Likewise, if you’re planning to evaluate SAP’s competitors for certain solutions, subtly letting SAP know that during an audit negotiation (without overtly threatening) can make them more conciliatory. Essentially, make the audit just one piece of a bigger relationship puzzle – one where you have other pieces to play.
Keep compliance and sales separate in discussions: SAP may blur the line between “you must pay this to be compliant” and “here’s a great new product you should buy.” Savvy CIOs separate the two. Insist on resolving the compliance discussion based on facts, then talk about any new purchases on their own merit. By disentangling these, you avoid being upsold under duress. If you do decide to do a new deal to settle the audit, ensure you’ve independently validated that deal’s value.
Invest in audit readiness as insurance: Resources spent on license management, whether it’s hiring experts, buying tools, or dedicating staff time to it, often yield a huge ROI by preventing overspending in audits. It’s akin to an insurance policy – a modest cost to avoid a massive unplanned bill or a poor contract you’re stuck with for years. Executive support for a strong software asset management practice is crucial.

Staying ahead of SAP’s audit playbook means viewing audits not as a threat but as a manageable part of the SAP lifecycle. With the right preparation and mindset, CIOs can turn audit scenarios into straightforward exercises and even opportunities.

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fredrik.filipsson

Fredrik Filipsson is the co-founder of Redress Compliance, a leading independent advisory firm specializing in Oracle, Microsoft, SAP, IBM, and Salesforce licensing. With over 20 years of experience in software licensing and contract negotiations, Fredrik has helped hundreds of organizations—including numerous Fortune 500 companies—optimize costs, avoid compliance risks, and secure favorable terms with major software vendors. Fredrik built his expertise over two decades working directly for IBM, SAP, and Oracle, where he gained in-depth knowledge of their licensing programs and sales practices. For the past 11 years, he has worked as a consultant, advising global enterprises on complex licensing challenges and large-scale contract negotiations.

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