SAP license fees are due even for indirect users, UK court says

Beverage firm Diageo could be on the hook for an additional £55 million in license fees because it gave Salesforce users access to data held in an SAP system

SAP's named-user licensing fees apply even to related applications that only offer users indirect visibility of SAP data, a U.K. judge ruled Thursday in a case pitting SAP against Diageo, the alcoholic beverage giant behind Smirnoff vodka and Guinness beer.

The consequences could be far-reaching for businesses that have integrated their customer-facing systems with an SAP database, potentially leaving them liable for license fees for every customer that accesses their online store.

"If any SAP systems are being indirectly triggered, even if incidentally, and from anywhere in the world, then there are uncategorized and unpriced costs stacking up in the background," warned Robin Fry, a director at software licensing consultancy Cerno Professional Services, who has been following the case.

London-headquartered Diageo, an SAP customer since 2004, pays annual license and maintenance fees for use of mySAP Business Suite based on the number of named users. From around 2011 or 2012, according to court documents, Diageo introduced two new systems, "Gen2" and "Connect," built on Salesforce.com's software platform. Gen2 lets Diageo sales staff track customer visits and calls, while Connect allows Diageo customers to make and track orders.

Both parties agree that those systems access Diageo's mySAP installation through SAP Exchange Infrastructure (SAP PI), for which the company pays an additional license fee.

What's in dispute was whether the SAP PI license fee alone is sufficient to allow Diageo's sales staff and customers to access the SAP data store via the Salesforce apps, or whether, as SAP claims, those staff and customers had to be named as users and a corresponding license fee paid.

On Thursday, the judge sided with SAP on that question.

That could spell bad news for a lot of companies according Fry, the licensing consultant.

"Any business using SAP is now exposed to substantial SAP penalties and ongoing maintenance charges unless they obtain licenses not just for their internal users but also their customers and suppliers. The danger arises where there is any flow of data from the systems via customer portals to individual customers -- even indirectly," he said.

"Although the ruling only has U.K. applicability, SAP's license agreements are effectively harmonized globally; any corporate needs to take notice and see that SAP's licensing reach goes far beyond use just within the internal business," Fry said.

The term "indirect access" could cover consumers using a website to check prices, place orders or track deliveries if any of the information has been generated by, or delivered through, SAP software, he warned.

Asking for payment is one thing, but calculating the amount due is another matter, and one that's proving problematic in the Diageo case.

SAP put a precise figure on the license fees for indirect access via the Salesforce integration: £54,503,578 (US$ 67.8 million).

For Diageo, that's a huge bill -- on a par with the total amount it paid SAP for all services between May 2004 and November 2015, which the parties put at between £50 million and £61 million.

Unable to determine how many customers had accessed mySAP through the Contact system, or to identify a category of named user in the contract that would cover the use by sales staff of mySAP through the Gen2 system, the judge deferred the calculation to a later stage of the trial.

Other businesses may not want to wait for the judge to do the math.

"Business are signing up to an open-ended direct debit which they can't withdraw from. It's really not surprising that many are now choosing the certainty and low cost of Google and Amazon Web Services," concluded Fry.

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