Optimize costs with SAP’s cloud licensing model

Jan 10, 2025

As SAP moves to cloud-based software, it has formalized its licensing model. Traditionally, SAP customers could purchase licenses based on the number of users or the type of functionality they required. Now, they move more towards a subscription model. It is managed by the customer, and usage is measured instantly and continuously. This formalization impacts how you manage user permissions and, in turn, their licensing costs. While it offers flexibility and scalability, licensing also becomes more complex. Preventing rising costs is one challenge; compliance is another. This article covers the ins and outs of SAP’s Cloud licensing approach. And it tells you why you might want to hire experts to help you manage the transition.

What’s ‘new’ in SAP licensing? 

SAP’s formalized licensing model for SAP Cloud is a different beast than the classic “Named User” model that many organizations are used to. Before, licenses were tied to the number of users in the system. Different user types dictated the costs. Under this model, licensing is based on “Full Usage Equivalents” (FUEs). FUEs reflect actual access and authorizations within the system. Now, businesses are charged for user permissions, even if those permissions aren’t actively used.

Software as a service (SaaS) lets users scale and configure licenses to their needs. Think of it as moving from a single Netflix account with low resolution to a shared account with high definition. The Cloud model, just like the good old on-premise SAP, lets businesses tailor SAP access by roles and authorizations. Manage it well and it may save costs. But there are many pitfalls for those who get it wrong.

Why SAP changed its licensing model

These are the main reasons SAP changed its licensing:

Complex and potentially costly 

A tricky challenge of this model is that even minimal access to a higher-cost authorization level can result in paying for an advanced license. For example, if a user has both “Self-Service” and “Advanced” permissions, the system uses the higher, more expensive “Advanced” license to calculate costs. Even a small change can tip the balance and create a significant impact, as it may ultimately affect a large number of users. So, companies must carefully monitor each user’s authorizations and assign only the necessary permissions, while establishing a clear process for maintaining and updating these authorizations.

The model divides users into four main categories for the production environment and one for the development environment:

Good to know: these licensing rules apply to all clients in the system, not just the main productive client (for production purposes) or the customizing client (for development purposes).

Without close monitoring, companies may over-allocate access rights. Their complex, overlapping roles make it often hard to map permissions to actual needs.

Risks of mismanagement 

Outdated permissions

If employees move departments or change roles often, permissions are not always updated. That’s a main driver for inconsistent user and permission management. With no Joiners/Leavers process in place, this can quickly lead to a rapid increase in licensing expenses. 


Compliance violations

Without a clear structure, you may fail to meet compliance rules – especially in heavily regulated industries. This could expose your businesses to fines or other legal consequences. 


Increased security risks

Unrestricted access increases the risk of data breaches and fraud. Unauthorized users with access to sensitive info are a liability. This is especially true when permissions are not actively monitored. 

The role of expert guidance 

If you are used to simpler, static licensing models, SAP's formalized dynamic model can be overwhelming. What you need is an effective authorization strategy. That’s where specialized expertise is invaluable.  

A consulting firm with expertise in SAP licensing can offer you tailored support. Throughout the process, they can assist you with: 


  1. Initial assessment: Experts can check permissions, analyze user roles, and define a baseline for your organization's needs. By understanding your company's roles and their access needs, you can assign licenses better and avoid high costs. 
  2. Authorization strategy design: A key part of optimizing SAP licensing is to design an authorization strategy. It must align with real-life user needs. This makes sure only necessary permissions are granted, reducing unnecessary expenditures. 
  3. Implementation and ongoing support: Managing authorizations is not a one-off, it requires ongoing oversight. Consulting firms can implement best practices, automate role assignments (e.g., via Microsoft Entra), and audit compliance regularly. 
  4. Cost optimization: Consultants can identify users with excessive permissions. Your company can lower their SAP licensing costs by adjusting these authorizations. This will reduce your FUE counts. 

Tips for adapting to SAP’s Formalized Licensing Model 

SAP provides tools and guidelines to manage authorizations. But an effective strategy requires more than technical fixes. Here are some practical tips for businesses adapting to the formalized model: 


Request a STAR Report

The S/4HANA Trusted Authorization Review (STAR) gives you an overview of the quick wins. It also simulates how many FUEs you would need in production if you implemented them. 


Use SAP's reporting tools

SAP has built-in reports like USMM and Object Analyzer to help you analyze your current licenses and adjust them. These tools can highlight discrepancies between assigned permissions and actual needs. 


Review permissions regularly

Check permissions often, especially after role changes, to avoid extra license costs. That way you avoid paying unnecessary FUEs. 

Get expert support today 

Finding your way around in the SAP's licensing model needs more than technical knowledge. It requires a strategic approach, tailored to your unique business needs. Poor licensing management can quickly cause rising costs and compliance issues. Doing it right avoids headaches for both finance and IT departments. 

If you are looking for a reliable partner in this transition, delaware has your back. We can help with the assessment, strategy, implementation, and maintenance. And we can streamline your SAP authorizations to ensure compliance and control licensing costs. 

Ready to get started? Or you simply have questions about SAP licensing?  Reach out to our SAP expert team to discuss how we can help. 

related content