Introduction – The Two Faces of SAP Licensing Risk
SAP licensing risk comes in two forms, and both can be costly. Many organizations focus on avoiding under-licensing, but overspending on licenses can quietly erode value just as much.
SAP environments evolve constantly – through mergers, new system implementations, or changing user roles – and these changes can cause licensing drift.
In fact, many companies find themselves over-provisioned (paying for shelfware) in some areas and under-provisioned (exposed to audits) in others.
Treating SAP license management as a one-time compliance task is dangerous. It’s not enough to pass an audit once; you need ongoing optimization. For an overview, read our overview guide, SAP Licensing Risks & Penalties: What’s at Stake in Non-Compliance.
The real goal is to stay continuously in balance – fully compliant without paying for unnecessary “shelfware.” This requires visibility into usage and entitlements at all times, not just when SAP comes knocking.
Under-Licensing – The Audit Exposure Risk
What Is Under-Licensing? Under-licensing means your SAP usage exceeds your purchased license entitlements – you have fewer or lower-tier licenses than needed.
It creates an immediate compliance risk (unlicensed usage).
Common Causes of Under-Licensing:
- Misclassified usage: A common mistake is assigning users a lower-cost license type (e.g., “Employee Self-Service”) even though their activities require a higher-tier Professional license. Similarly, indirect use via third-party systems (interfaces, APIs) might not be properly licensed, creating hidden usage.
- Untracked growth: Adding new modules, new users (from acquisitions), or new integrations can quickly push usage beyond entitlements. If you aren’t auditing internally, these expansions can create license gaps unnoticed.
Consequences of Under-Licensing:
- Huge unplanned costs: If an SAP audit finds you under-licensed, you’ll be billed for missing licenses at full list price, plus 2–3 years of back maintenance (~22% per year). This can easily reach seven figures. You may also have to urgently buy additional licenses on SAP’s terms to close the gap.
- Contract risk and SAP leverage: A severe license shortfall can violate your SAP agreement. Even if it doesn’t trigger legal action, SAP will use the compliance failure as leverage to pressure you into buying more or accepting unfavorable terms.
Example: One manufacturer misclassified 80 power users as “Employee Self-Service” users. SAP’s audit hit them with a €400,000 true-up bill, plus two years of maintenance fees, to rectify the shortfall.
Checklist – Detecting Under-Licensing:
- Run internal SAP measurement reports (USMM/LAW2) at least quarterly to catch compliance issues early.
- Review user transaction logs for mismatches between assigned license types and actual usage. (Are any “limited” users performing activities that require a full Professional license?)
- Monitor interfaces and external applications for indirect usage of SAP data, and ensure all external access is properly licensed or accounted for.
Over-Licensing – The Hidden Cost of Shelfware
What Is Over-Licensing? Over-licensing means you’ve paid for more SAP licenses than you actually use. It often stems from deliberate overbuying “to be safe,” or from failing to retire unused licenses, resulting in shelfware (licenses delivering no value but incurring cost).
Common Causes of Over-Licensing:
- Fear-driven overbuying: Fear of audits or future growth can lead companies to over-purchase licenses “to be safe.” SAP reps often encourage buying a cushion of extra licenses as insurance, which often go unused.
- Inactive accounts not reclaimed: Users who left the company or changed roles may still have licenses assigned. Without a process to promptly remove or reassign these, they remain idle and wasted.
Consequences of Over-Licensing:
- Quiet budget drain: You pay maintenance (≈22% annually) on every license, used or not. Unused licenses (“shelfware”) thus siphon money year after year – funds that could have been invested elsewhere.
- Weakened negotiating position: Over-licensing can hurt your leverage in future deals. If SAP sees you’ve already overpaid and have lots of spare licenses, they’ll be less inclined to offer deep discounts or flexible terms when you actually need licenses.
Example: A retail company found 500 user licenses allocated to ex-employees. Over three years, they paid over €300,000 in maintenance fees for this software.
Checklist – Detecting Over-Licensing:
- Compare active vs. licensed users to your total licensed users every month.
- Flag users inactive for 90+ days and reclaim their licenses.
- Conduct annual “license recycling” exercises – reclaim unused licenses and eliminate shelfware before the next maintenance renewal.
Read about Indirect access – Indirect Access Risk Scenarios in SAP: What Triggers Charges & What You Can Do
The Financial Impact of Each Risk
Under-licensing often triggers a sudden, one-time expense (audit true-up), whereas over-licensing causes a quiet, continuous drain.
The table below compares each scenario:
| Risk Type | Typical Trigger | Financial Impact | Long-Term Consequence |
|---|---|---|---|
| Under-Licensing | Actual usage exceeds entitlements | Audit true-up penalty = missing licenses at list price + back maintenance fees | Multi-million € exposure potential in a single audit |
| Over-Licensing | Purchasing more licenses than needed (fear or mismanagement) | Ongoing 22% annual maintenance on idle licenses | Continuous budget waste with no return |
The Psychological Trap – Fear vs. Control
It’s common for SAP customers to swing to the over-licensing side out of fear. The logic is understandable: “If we buy more licenses than we need, we’ll never get caught short in an audit.” However, this is a psychological trap, and SAP’s sales teams know how to exploit it.
SAP’s Tactic (Fear): SAP salespeople often leverage audit anxiety to sell extra licenses “just in case.” This tactic often drives companies to overbuy licenses.
Reality (False Security): Buying licenses as “insurance” is a false security. It doesn’t guarantee compliance – you could still be misusing licenses or falling afoul of indirect usage rules despite having extras. Meanwhile, you’re paying maintenance on all those surplus licenses, trading one risk (audit fees) for another (wasteful spend).
The Smart Fix (Data & Control): Replace fear-based decisions with data-driven license management. Base new license purchases on actual usage and growth trends, not worst-case scenarios, and maintain clear visibility into usage so you stay in control instead of reacting out of fear.
Checklist – Avoiding the Fear Trap:
- Base purchases on verified usage and growth trends grounded in data. Don’t accept “you might need more” claims without evidence.
- Implement an approval workflow for adding licenses – require that any request for additional SAP licenses is justified with usage metrics and reviewed by a central team (with a licensing expert involved).
Read what SAP audit penalties can be, SAP Audit Penalties Explained: How Non-Compliance Can Cost Millions.
Striking the Balance – How to Stay Compliant Without Overspending
You can’t eliminate all SAP license risk, but you can strike a healthy balance.
The aim is to always have enough licenses for actual usage (compliance) and no more than you need (cost efficiency). Reaching that equilibrium takes proactive effort, but it pays off with fewer audit surprises and minimal waste.
Key Practices to Balance Compliance and Cost:
- Regular internal audits: Conduct internal SAP license audits at least twice a year to catch under-licensing issues before SAP does.
- Reassign inactive licenses: Make it standard practice to reclaim licenses from departing employees or users who haven’t logged in for 90 days. Reassign these to new users or back into a license pool.
- Validate user roles periodically: Regularly verify that each user’s license type matches their actual role and usage. If someone’s job changes, update their license accordingly.
Governance – Continuous License Optimization Framework
Long-term balance between under- and over-licensing isn’t achieved by luck – it requires a structured approach and active governance. Implement a continuous license optimization framework with clear processes:
- Discovery: Regularly collect and analyze SAP usage data (user logins, transaction counts, interfaces, etc.). The goal is to get an accurate picture of how every license is being used (or not used).
- Validation: Compare usage data against your license entitlements to spot discrepancies. Ensure every activity is covered by a license, and identify any areas of shortfall or surplus.
- Optimization: Act on what you find. Fix under-licensing by reallocating existing licenses or making targeted purchases on your terms (instead of during an audit fire drill). Fix over-licensing by retiring or reallocating unused licenses, or downgrading users to cheaper license types where appropriate.
- Governance: Establish governance to ensure this process is ongoing. Define how often to run checks, how to handle exceptions, and who approves changes. This ensures license management is a continuous, accountable process.
5 Ways to Stay Balanced Between Under- and Over-Licensing
- Run internal SAP audits more frequently than SAP does. Don’t wait for SAP’s yearly audit cycle – perform your own compliance checks proactively.
- Reassign, don’t repurchase. Before buying new licenses, look for unused licenses in your current pool that can be reallocated to meet the need. It’s cheaper to reuse what you have than to buy more.
- Align license monitoring with HR processes. Make sure that when employees join, leave, or change roles, there’s a procedure to adjust their SAP license status accordingly. This prevents unused licenses from accumulating and avoids license mismatches.
- Validate new purchases against real needs. Every time someone wants to acquire additional SAP licenses or add users, they require justification based on actual usage data or other solid business needs. This practice keeps your license count honest.
- Leverage shelfware reports before renewals. Ahead of annual maintenance renewals or true-up negotiations, run reports to identify any shelfware. Use those insights to eliminate unused licenses so you don’t pay maintenance on them again.
