Featured Article from Software Licensing

The specifics of software licensing can often be frustrating and confusing, as demonstrated by the recent court case of SAP v. Diageo. Specifically, in instances of indirect access to a software product, customers can all too easily run afoul of licensing and compliance agreements, resulting in fees, fines and in the worst-case scenario, time wasted in litigation.

As we recently discussed, Diageo ended up in trouble after some 5,800 of its users accessed SAP’s (News - Alert) ERP software indirectly through a third-party application, in violation of their licensing agreement. The mistake was a costly one, ending with Diageo paying SAP UK more than $67 million in fines and compensation. Diageo is far from unique when it comes to indirect software licensing violations, and according to Flexera Software, the problem is more widespread and complex than most software manufacturers and customers realize.

Software companies typically license their products based on a variety of metrics, including a fixed count of processors in a server, a specific number of users or devices or based on the number of simultaneous users in some cases. However, customers often find themselves unintentionally and unknowingly in violation of these complex contracts by exceeding the agreed upon number of users, devices, etc. One of the points of confusion, according to Flexera, is over what constitutes a “named user.”

In the Diageo case, the company had thousands of “indirect” users who were accessing the SAP database through customer-facing applications on the Salesforce.com (News - Alert) platform. The apps were using a licensed SAP Process Integration interface to connect to SAP’s database, but the license didn’t technically cover the indirect users going through Salesforce. The U.K. court ultimately ruled that indirect users were different than the “named users” covered through Diageo’s licensing agreement, and the company suffered the financial consequences.

The case is a cautionary tale for all companies accessing SAP through an indirect license model. Fortunately there are ways to mitigate the risks of indirect access to SAP and other popular software platforms, using solutions like those offered by Flexera. The company offers its FlexNet Manager for SAP Applications, designed to optimize customers’ SAP named user licensing by finding idle users, identifying duplicate users and assigning optimal license types for each user based on usage data.

Software licensing and optimization management is critical to staying on top of compliance and agreement mandates, and particularly so in cases of indirect access. Companies connecting to SAP and other popular platforms via third-party interfaces and APIs need to be mindful of the rules surrounding indirect access and indirect users to ensure they achieve and maintain compliance with their licensing agreements.