The Licensing Brief

This week: How one lawsuit rewrote the rules of SAP licensing

If you work anywhere near SAP licensing, procurement, or IT governance, you’ve probably heard “Diageo” mentioned in the same breath as “indirect access.” Nearly a decade after the ruling, the SAP UK Limited v Diageo Great Britain Ltd case is still one of the most consequential software licensing disputes in enterprise IT history and it’s worth revisiting as history tends to repeat

The Backstory

Diageo, the drinks giant behind Johnnie Walker and Guinness, had licensed SAP’s mySAP ERP software since 2004 to run its manufacturing, supply chain, financial reporting, and HR operations. Between then and November 2015, the company paid SAP somewhere between £50 million and £61 million in license and maintenance fees, priced by the number of “Named Users” authorized to access the system.

The trouble started when Diageo added two systems on top of its SAP environment:

• Connect — a customer ordering platform
• Gen2 — a sales tool letting field reps pull customer data via Salesforce on an iPad, which looped back into the SAP database

SAP’s Argument

SAP claimed that even though these customers and systems never logged into SAP directly, they were still “accessing” the software indirectly through the connected systems and therefore required licensing. SAP filed suit in October 2015, seeking:

• £54,503,578 in license fees
• £3,955,954 in interest
• Plus back support and maintenance fees, and an injunction to inspect Diageo’s systems directly

Diageo countered with the now-famous “gatekeeper” defense: that SAP’s integration layer (PI) merely passed data through and didn’t constitute genuine “use” of the ERP software itself.

The Ruling

The court sided with SAP on liability, rejecting the gatekeeper defense. The judge found that “use” under the licensing agreement covered any application or manipulation of the software  including data flowing through Connect and Gen2 even when end users never touched an SAP screen.

One small win for Diageo: business customers and sales reps checking order status or account info didn’t need the highest “professional user” tier, since that usage was narrow and self-service.

Diageo didn’t appeal, suggesting a private settlement so the final financial outcome was never disclosed.

The Aftermath: SAP Digital Access

The industry backlash was strong enough that SAP rolled out a new digital pricing model, giving customers two paths:

ModelHow it’s priced

Direct/Human AccessTraditional model priced on named human users

Indirect/Digital AccessPriced on transaction/document volume processed by third-party apps, bots, or devices regardless of human login

SAP used license audits (run through the aptly if awkwardly named SLAW transaction- SAP License Audit Workbench) as a one lever to push customers toward S/4HANA. In 2019, it sweetened the deal with the Digital Access Adoption Program (DAAP), offering time limited incentives to convert to the document-based model.

The Takeaway

For any organization running SAP, understanding indirect access isn’t a legal footnote, it’s a multi-million-dollar question. The Diageo case remains a cautionary tale: adding integrations, middleware, or customer facing apps on top of an SAP core without understanding how they’re classified under your licensing agreement can get expensive, fast.

Looking ahead: SAP is now working through how to price AI credits proof that licensing complexity isn’t going anywhere.

Until next time, The Licensing Brief