The Hidden Cost of Poor SAP License Recycling
Many enterprises keep buying new SAP licenses even when a pool of existing licenses sits idle. This hidden inefficiency — often called shelfware drains IT budgets.
In large SAP environments, it’s common to find that 10–20% of named-user licenses are assigned to people who no longer work at the company or to duplicate accounts.
These dormant licenses still incur annual maintenance fees, meaning the organization is paying upkeep for software access that nobody is using.
Such poor license recycling leads to unnecessary overspend. Every time a new employee needs SAP access, if the default action is to purchase a fresh license, costs balloon while perfectly good licenses from former staff remain unused.
SAP (like most software vendors) will readily sell you more licenses, but internal governance is needed to challenge this “buy new” reflex. By reassigning and recycling what you already own, you can avoid bloating your contract.
License recycling is perhaps the most underutilized optimization lever in SAP software asset management. It directly prevents overspending on new licenses and reduces ongoing support costs, all without having to negotiate anything with SAP.
Reallocating licenses also strengthens compliance governance by providing clearer visibility into who is using what, which is invaluable preparation for audits. SAP’s contracts generally allow license reassignments as long as you document and manage them properly – but it’s up to customers to enforce this internally.
In the sections below, we outline how to establish a structured process for reclaiming and reusing SAP licenses, enabling you to maximize utilization and stop buying licenses you don’t truly need.
Read our comprehensive guide to SAP License Optimization Strategies: Cut Costs Without Cutting Value.
What Is SAP License Reallocation and Recycling?
SAP license reallocation means reassigning an existing license from one user (or system) to another.
For example, if an employee leaves or a project ends, you can reallocate the SAP user license that was assigned to them to a new hire or another area in need, instead of purchasing a new license.
SAP license recycling is the practice of recovering licenses from offboarded employees or retired systems and returning those entitlements to a central license pool for reuse.
Essentially, it’s about continuously harvesting unused licenses and putting them back into circulation within your organization.
Key benefits of license reallocation and recycling include:
- Avoiding unnecessary purchases: By reusing existing licenses, you prevent spending on new licenses whenever possible.
- Improving utilization: You get full value from the licenses you’ve already paid for, increasing overall SAP license utilization rates.
- Reducing shelfware: Recycling curbs the accumulation of shelfware (licenses paid for but not used), which in turn lowers wasted maintenance fees.
- Strengthening audit readiness: A well-documented recycling practice means you always know how many licenses are in use vs. owned. This visibility puts you in a better position for SAP compliance audits and true-ups.
For example, a company with 5,000 SAP users established a rigorous recycling program and reallocated 300 licenses that had belonged to former employees.
This move saved approximately $750,000 in avoided license purchase costs and reduced maintenance fees by about $165,000 per year that would have been spent on those extra licenses. This illustrates the scale of savings possible by simply utilizing what you already have.
Read about how to right-size licenses, Rightsizing SAP User License Types: How to Cut Costs by Matching Users to Actual Usage.
How to Identify Reallocatable Licenses
The first step in license recycling is finding out which licenses can be reclaimed. You’ll want to pinpoint idle users and unused systems that represent recyclable license capacity.
Here’s how:
- Monitor User Activity: Use SAP’s admin tools to flag inactive user accounts. For instance, run user reports (SAP’s USMM or audit reports) and the User Information System (transaction SUIM) to list users who haven’t logged in for the last 90, 120, or 180 days. Identify dormant SAP accounts. Then cross-check those names with HR records to see if those individuals have left the organization or changed roles. In many companies, HR’s offboarding list will reveal employees who had SAP access but are no longer with the company – each of those accounts is a candidate for license reclamation.
- Review Retired or Decommissioned Systems: Identify any SAP modules, engines, or entire systems that are no longer actively used in production. For example, maybe you decommissioned a legacy ECC system after migrating to S/4HANA, or you turned off an old CRM or SRM module. Licenses tied to those retired systems (both user licenses and engine licenses) might be sitting idle. If you had purchased specific licenses for a module or a set of users on that system, you can potentially reclaim those entitlements. Flag them as “reallocatable” because they can be used elsewhere or marked for termination at your next renewal.
- Validate License Entitlement and Rules: Confirm that your SAP contract permits reassigning licenses (most standard on-premise SAP named user licenses do allow reallocation when a user leaves or no longer needs access). Check for any restrictions – for example, some technical or developer licenses may be user-specific or have limited transfer rights. Also, ensure you’re not reallocating licenses in a way that violates compliance (e.g., if certain user licenses were part of an audit settlement, handle those with care). In general, as long as you remove the license from the original user (making them unable to use SAP) before assigning it to someone new, you stay compliant. Always document the change so you have an audit trail of who had which license and when.
Checklist: To identify reclaimable licenses, make sure you:
- Generate reports of inactive SAP users (e.g., no login in 90+ days) and list any decommissioned systems or modules.
- Cross-reference the inactive user list with HR’s employee exit records to catch recently departed staff.
- Confirm your contract allows reallocation (it typically does for named users) and note any license types that are non-transferable.
- Exclude or handle with caution any technical accounts or developer licenses that might not be transferable under your policies or license terms.
By systematically identifying these candidates, you’ll have a clear view of all SAP licenses that can be potentially recycled.
Building a License Recycling Process
Identifying idle licenses is only half the battle – you need a repeatable process to reclaim and reuse them. Building an internal license recycling workflow ensures that whenever someone leaves or a system is retired, the license doesn’t slip through the cracks.
Below is a process framework that connects HR, IT, and SAM (Software Asset Management) teams:
Process Steps:
- Offboarding Trigger: When an employee with SAP access is leaving, HR or the manager informs IT/SAM as part of the offboarding checklist. This trigger could be an automated notification from the HR system to the IT asset management team. (For example, the HR department’s exit workflow in Workday or SuccessFactors should include a step to alert the SAP license administrator.)
- Account Deactivation: The IT or SAP Basis team promptly locks or disables the user’s SAP account (typically within 24 hours of the employee’s departure). Early deactivation prevents any unwanted access and clearly marks that user’s license as free for reuse. A good internal policy is to require SAP access removal by the employee’s last working day.
- License Reclamation: Once the account is deactivated, the SAM or license management owner removes the license assignment from that user in your records and adds one unit back to the central license pool. In practice, this could mean updating a license tracking spreadsheet or a SAM tool to increment the count of available licenses of each type. Essentially, you return that license to the pool of entitlements that can be allocated elsewhere.
- Reassignment: When a new hire joins or a new project team needs an SAP user license, check the central pool first. Allocate from the pool of recovered licenses to fulfill the requirement. Only if no appropriate license is available in the pool should you consider buying a net-new license. This step prevents “license creep” by ensuring new demand is met with recycled licenses whenever possible. (An internal policy might mandate that all new SAP access requests must be met with existing license stock unless explicitly approved for purchase.)
- Reporting: Track and review the license pool usage regularly. For example, the SAM team can review a monthly report of how many licenses were reclaimed, how many were reused, and how many remain free. This reporting keeps management informed of the savings and helps ensure the process is working. It can also highlight if licenses are consistently remaining unused (indicating you might even consider terminating them to cut maintenance costs).
Best Practice: Wherever feasible, automate the recycling workflow. Integrate your HRIS, IT service management, and SAP user administration so that an HR offboarding event automatically triggers an IT task to deactivate the SAP user and update the license inventory.
Many organizations integrate these steps using identity management tools or custom scripts. The goal is to make license reclamation a standard, automatic part of offboarding, just like turning in a laptop or revoking building access.
Read about SAP license swaps, SAP License Swap & Trade-In Programs: How to Turn Unused Licenses into Real Value.
Checklist: To establish a robust recycling process, ensure you:
- Maintain a central license pool record (in your SAM tool or an internal database) that shows all available (unassigned) SAP license entitlements ready for use.
- Automate notifications – for example, set up the HR system to automatically alert IT/SAM whenever an employee exit is processed.
- Assign an owner – designate a SAM manager or team responsible for managing the license pool and executing reallocations. Everyone should know who to contact for license adjustments.
- Update policies – incorporate license reclamation into your IT asset management policies. (E.g., “Upon employee termination, SAP access must be removed and the license returned to the pool within one business day.”)
- Schedule regular reviews – conduct a monthly or quarterly review meeting to assess the license pool status, ensuring no recovered license goes unused for too long, and adjust the process if needed.
With this workflow in place, your organization creates a continuous loop: offboard, reclaim, reuse. Over time, this will dramatically reduce the need to purchase new SAP licenses except when truly necessary.
Quantifying the Financial Impact
Building a license recycling program has a very real financial payoff. Every license you recycle is one less license you have to buy new, and it also reduces your annual support costs.
Let’s break down the impact:
- Upfront Cost Avoidance: Suppose an SAP named-user license (such as a Professional user license) costs roughly $3,000. If you reclaim and reuse 100 such licenses instead of buying them new, you avoid $300,000 in purchase costs. Similarly, recycling even 10 or 20 licenses can save tens of thousands of dollars that would otherwise be spent on new licenses. This is direct budget savings for the IT or procurement team.
- Annual Maintenance Savings: SAP typically charges about 22% of a license’s price per year for support and maintenance. Using the above example, avoiding $300,000 in licenses also means avoiding about $66,000 per year in maintenance fees (since 22% of $300,000 is $66,000) that you would have paid on those additional licenses. And remember, maintenance is paid every year – so the savings compound over time. Reclaiming licenses also gives you the opportunity at your next renewal to possibly terminate support on licenses you truly aren’t using, which directly cuts costs from the support bill.
- Value Recovery: It might help to present these numbers in terms of value recovered from your existing assets. For instance, if your team reclaimed 50 licenses, you effectively “unlocked” approximately $150,000 in value that had been sitting idle (plus about $33,000/year in support savings). Presenting it this way highlights that the organization is getting more value out of sunk investments.
Below is a quick reference table illustrating the savings from recycling various quantities of SAP user licenses (assuming ~$3,000 per license and 22% annual support):
| Recycled Licenses | Purchase Cost Avoided | Annual Support Saved (22%) |
|---|---|---|
| 10 | $30,000 | $6,600 |
| 50 | $150,000 | $33,000 |
| 100 | $300,000 | $66,000 |
| 300 | $900,000 | $198,000 |
Strategic Tip: Highlight these savings to finance leadership as recovered value and cost avoidance.
When the CFO sees that a license recycling initiative freed up hundreds of thousands of dollars, they are more likely to support investing in the processes and tools (automation, SAM software, etc.) that make it possible.
In other words, demonstrate that effective license management is not merely an IT hygiene task but a significant cost efficiency lever for the business.
Governance and Roles
To sustain license recycling long-term, you need strong governance and clear ownership.
Treat license reallocation as an ongoing operational process with assigned roles, rather than a one-time cleanup.
Here are the key stakeholders who should be involved and what they’re responsible for:
| Stakeholder | Role in License Recycling Process |
|---|---|
| IT / SAP Basis Team | Monitor SAP user activity and lock or remove inactive accounts promptly. Enforce the technical steps of de-provisioning users. Provide regular reports on user logins and system usage to SAM. |
| HR Department | Trigger the process by notifying IT/SAM of employee departures (ideally via an automated HR offboarding workflow). Also, coordinate on timing so that license removal aligns with the employee’s exit date. |
| SAM / IT Asset Management | Own the license inventory and pool. Update the license allocation records when users leave or join. Manage the reassignment of licenses and keep documentation of all changes for compliance purposes. Also responsible for internal license audits and optimization analyses. |
| Finance / Procurement | Oversee software spending and realized savings. Track the cost avoidance achieved through recycling. Support policy enforcement by requiring justification for new license purchases (e.g. verifying the pool is exhausted). Also adjust budgets or maintenance contracts based on the reduced license needs over time. |
Governance framework: Establish regular checkpoints to keep the recycling program on track. For example:
- Monthly inactive-user audits: IT and SAM should review SAP usage at least monthly to identify newly inactive accounts and initiate license reclamation.
- Quarterly license pool review: Conduct a quarterly meeting (involving ITAM and finance) to review how many licenses have been reclaimed, how many redeployed, and how much value has been saved. This is also a good time to reconcile license counts with SAP’s records and ensure nothing is out of compliance.
- Dashboard and reporting: Create a central dashboard or report that tracks metrics such as total licenses owned, active users, free licenses in pool, licenses recycled quarter-to-date, and dollars saved. Share this with CIO, CFO, or other leaders to reinforce the program’s impact.
Most importantly, make license recycling a standard policy and KPI within IT operations.
It shouldn’t depend on one person to remember to clean up after users; it should be institutionalized.
For instance, include in your IT asset management policy that “All SAP licenses for departed employees or unused systems must be reclaimed and documented”.
By having clear roles and regular governance in place, you ensure that license recycling happens continuously and consistently.
Common Pitfalls & How to Avoid Them
Even with a good plan, some common pitfalls can hinder your SAP license recycling efforts.
Here are four frequent issues and how to prevent them:
- Pitfall 1: No central ownership of license management. If no one is clearly in charge, the task of reclaiming licenses can fall by the wayside. Fix: Assign a dedicated owner (e.g., a SAM manager or a procurement team lead) to be responsible for the license recycling process end-to-end. This person or team should have the mandate to enforce policies and coordinate between HR, IT, and finance.
- Pitfall 2: HR offboarding delays lead to lost recovery opportunities. Sometimes, IT isn’t notified promptly when an employee leaves, resulting in SAP accounts left active for months. Fix: Integrate and automate the handoff between HR and IT. Ensure HR’s process includes immediate notification to the IT/SAM team for any departures. Even better, use an identity management system so that when HR marks someone as leaving, their access revocations (including SAP) are triggered automatically.
- Pitfall 3: Reassigned users receive the wrong license type. Without guidelines, you might blindly assign any free license to a new user, which could be overkill or non-compliant. Fix: Validate the new user’s functional needs before reallocation. If the person replacing a departed user doesn’t need the same level of access, assign them a more appropriate (possibly lower-cost) license type and downgrade the freed license if possible. Always match users to the correct license category based on their job role to avoid compliance issues or waste (for example, don’t give a full Professional license to someone who only needs occasional inquiry access).
- Pitfall 4: License pool tracking done manually (or not at all). Relying on spreadsheets or memory to track available licenses can lead to errors or missed opportunities. Fix: Utilize tools to automate tracking. Many SAM solutions or SAP’s own License Administration Workbench (LAW) can help consolidate license data and identify available capacity. Even a simple internal database or dashboard is better than a static spreadsheet. Automation will alert you when licenses become free and can even flag duplicate or inactive accounts, making the recycling process much more reliable.
By anticipating these pitfalls and implementing the fixes, you can avoid the typical failures that cause license recycling initiatives to stall. The theme is clear: assign ownership, integrate processes, maintain accuracy, and always align the license type with actual usage.
Practical Example – Implementing License Recycling in Practice
Consider the case of a global retail company that decided to tackle SAP shelfware through automation.
They integrated their HR offboarding system with IT service management so that whenever an employee left, an automated workflow would lock the user’s SAP account and mark their license as available.
The SAM team set up a license pool and established rules that new SAP access requests must draw from this pool first.
In the first year of running this program, the retailer recovered about 1,000 SAP user licenses that had been tied up in departed users and outdated systems.
By reusing these licenses for new hires and projects, they avoided approximately $2.5 million in new license purchases. Additionally, by removing truly excess licenses from maintenance, they reduced their annual support costs by roughly $550,000.
These savings were significant enough that the company’s leadership took notice. License recycling became a standard part of IT governance. The CIO started receiving quarterly reports highlighting how many licenses were reclaimed and the cumulative cost avoidance.
With finance and executives on board, the recycling process gained full support and visibility. This practical example shows that, with the right processes, even a large enterprise can turn a lax license situation into a robust cost-saving program.
5 License Recycling Tactics to Remember
- Integrate HR offboarding with license reclamation. Tie your employee exit process directly into IT actions so no SAP license removal is missed.
- Maintain a central license pool for reassignment. Keep track of all freed licenses in one place and check this pool before approving any purchase.
- Automate tracking through SAM or SAP tools. Use software to flag inactive users and update license counts, reducing manual effort and error.
- Review inactive users every quarter. Schedule regular audits of SAP user activity to continuously capture and recycle unused licenses.
- Treat recycling as a KPI for IT cost efficiency. Make reclaimed licenses and cost avoidance a visible metric – this builds accountability and shows IT’s contribution to saving money.
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