Court Rules in Favour of SAP in £58M Claim for Indirect Access

In what could be viewed as a test case, a court has found in favour of SAP UK in relation to an indirect access case against the drinks supplier Diageo GB.

If you don’t understand what indirect access is, you are probably not alone and this case could probably give you a view on this!

SAP, along with many top tier enterprise vendors such as IBM, Oracle and Microsoft, like to ensure that all interactions with their software is correctly licensed and recognised commercially. This is called ‘indirect use’ and ‘multiplexing’ amongst other terms across the industry. What this means is if a number of users / devices through a third party application or services access the benefits of another software application these all need licensing. Confused?! Let’s look at the case….

According to Computer Weekly in this the case, it appears that Diageo had been running SAP within their organisation from around 2004, but in 2012 Diageo introduced two third party systems to assist in automating order processes:

–         Diageo Connect allowed customers to place orders online rather than through a call centre

–         Diageo Gen2 allowed their sales staff to use an iPad to access customer data

The structure of the service was primarily accessed through Salesforce.com which accessed data held within an Oracle Database platform and interacted with SAP XI (Exchange Infrastructure), SAP PI (Process Integration) and mySAP ERP.

Diageo’s argument that the SAP PI licensing was a ‘gatekeeper’ to other SAP licensing options, but SAP’s argument was that each Diageo customer needed to be licensed under the ‘Named User’ basis. This amounted to approximately 5,800 additional named users that were deemed to be under licensed. The judge in the case agreed with SAP noting:

“I reject Diageo’s submission that SAP PI is a ‘gatekeeper’ licence for gaining access to the SAP suite of applications and database. [There is] a separate basis of pricing for the SAP PI software engine and adapters, which applies even where there is a named user licence for mySAP ERP… Therefore, it is clear that it is an addition, rather than an alternative, to authorisation under a named user licence. Only named users are authorised to use or access the mySAP ERP software directly or indirectly. Named user pricing is the only basis on which the mySAP ERP software was and is licensed to Diageo. 

In my judgment, there is no applicable named user category for the Connect customers… They do not have access to source or object code. They do not have access to the functionality provided by mySAP ERP in support of the wider operation of Diageo’s business. They access business process functions and information from the database for the purpose of ordering products and managing their own personal accounts only.”

The reason indirect access is complex is twofold; the interpretation of what is deemed indirect and how to calculate is not made clear coupled with a set of user types that don’t match the specific indirect requirements. This is made clear in the judgement above in that whilst there has been licensing compliance breach, the Professional User based licence that SAP are asking Diageo to adhere to was not echoed by the judge.

So in real terms the SAP demand of £54,503,578 in licence fees and an additional £3,955,954 in interest, fees for back support and maintenance, and an injunction don’t look like they will be deemed as ‘reasonable’, but this is subject to the determination of the court at a later date.

The bad news is that this case will inflame and exacerbate any further indirect use cases and could result in SAP progressing this across multiple customers. This now means that all end users need to ensure their SAP licensing is compliant and a specific understanding of the impact of indirect licensing needs to be maintained and understood by a number of C-level representatives: CEO, CFO and CIO amongst others.

The good news is that SCC has a number of software related advisory services that inform, manage, mitigate and remediate risks for the lifecycle of software across numerous vendors including SAP.

Contact SCC to help you optimise your SAP usage and increase your efficient processes around Adobe software procurement strategy through our SCC Software Asset Management services.

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