England and Wales · 2017
When does an integration need additional software licences?
In SAP UK v Diageo Great Britain, a new customer portal led to a fee dispute over the ERP system behind it. What should you check when your product reaches another vendor’s platform through an API or middleware?
At a glance
SAP UK v Diageo Great Britain · [2017] EWHC 189 (TCC)
Users
- The clause
- Under this agreement, indirect access also required a user licence.
- The court’s conclusion
- Connect customers used SAP through the portal.
Not using SAP’s own interface did not rule out additional fees.
Connection
- Diageo’s position
- The SAP PI integration licence covered access.
- The court’s conclusion
- It did not replace user licences.
Connecting the systems was a separate element of the contract’s pricing.
Price
- SAP’s claim
- £54.5 million in licence and maintenance fees.
- The court’s conclusion
- Additional fees were due; the amount remained to be assessed.
The amount claimed was not awarded in this judgment.
A new portal under an existing licence
Diageo added two Salesforce applications to its SAP environment: Connect for customers and Gen2 for staff. Its mySAP ERP agreement dated from 2004. The dispute concerned whether that agreement covered the new use. Judgment, paragraphs 1–8.
- ConnectThe customer places an order in the Salesforce portal.
- SAP PIIntegration software carries the request and response between systems.
- mySAP ERPThe underlying system processes and completes the order.
Simplified from paragraph 79 of the judgment.
- Court and date
- High Court, Technology and Construction Court, England and Wales. Mrs Justice O’Farrell, 16 February 2017.
- Scope of this note
- The first-instance decision on licence scope and entitlement to additional fees under SAP’s agreement with Diageo.
- Outcome
- Use through Connect and some Gen2 roles was not licensed. SAP was entitled to additional fees, with the amount left for a separate assessment. Paragraph 91; paragraphs 102–105.
How the court read the licence
Who uses the system behind your interface?
The Named User definition included indirect access through another system. The court read “use” as working with or manipulating mySAP ERP and “access” as gaining visibility of, or a connection to, it. This was an interpretation of the contract’s wording, not a test of whether customers had SAP accounts. Paragraph 28; paragraphs 77–79.
Diageo argued that the same customers had previously ordered through a call centre without SAP requiring licences for them. The court’s answer was that a licensed Named User, the operator, had entered the order. With Connect, customers submitted it themselves and needed the licence under this agreement. Paragraph 80. For a SaaS team, moving to self-service is a reason to check whether the population attracting fees changes.
Some exchanges were asynchronous, but the court found that timing did not change the analysis of these interactions. Paragraph 81. The practical lesson: moving a sync to an overnight schedule does not itself resolve the licensing question. Check the operations and the contract terms.
What does the connection fee cover?
SAP PI was charged by monthly message volume. That charge supplemented Named User pricing rather than replacing it. Paragraph 6; paragraphs 45–49. For your own integration, check the right to connect, the permitted operations and the price of their volume separately. “API included” is not enough to settle these points.
How is an unlisted user role priced?
No existing category in the schedule fitted Connect customers. That did not make their use free. The additional-fee clause referred to Diageo’s current pricing and, where no relevant price existed, SAP’s price list. The court applied that fallback. Paragraph 82; paragraphs 89–91. Agree a rate for external users before launch.
One integration, different roles
For Gen2, the court looked at each group separately. Sales representatives did not access SAP when preparing visits using colleagues’ reports, but did when entering tags for returned kegs. Access was not established for several other groups. Paragraphs 98–99. Review specific workflows rather than assuming that everyone in your product uses every connected system.
What to agree before promising a fixed price
This is my review framework for a SaaS team or studio connecting a third-party service. Complete it with your technical lead and use it to brief the supplier.
| Question | Describe | Agree |
|---|---|---|
| Who gets access? | Employees, customers and partners; their roles and operations. Identify automated processes separately. | Permitted user categories, entities and territories. The right to serve your own customers through the third-party system. |
| What may they do? | Reading, creating and updating data; exports, caching and stored copies. | Permitted workflows, restrictions and the process for adding functions. An available API does not by itself grant these rights. |
| What attracts a fee? | The charging unit, expected volume, repeated operations and test environments. | Included usage, overage rates, reporting and price changes. Who bears the cost: you or your customer. |
| What changes as you grow? | New customers, a group company, another region or a replacement integrator. | When a new licence or written consent is required, the supplier’s response time and the fallback if the extension is refused. |
If the customer buys the external system’s licence, ask for the terms they rely on and the permitted integration scope. Your contract should identify who obtains the supplier’s confirmation, who covers additional supplier invoices and how delivery dates and fees change if rights are missing. A breach of the customer’s warranty about the necessary rights may give grounds for a claim against them; the warranty itself does not extend the supplier’s licence.
If you pay for the third-party service, build its restrictions into your product model. For example, before pricing subscriptions for a thousand companies, check that the service terms allow that many customers. Review any restrictions on internal business purposes or service bureau use.
What to send the supplier for approval
- The completed table above.
- A connection diagram: the systems involved, who controls each one and which data moves between them.
- A volume estimate: normal usage and growth, with a worked example under the proposed pricing.
Ask for confirmation in a document that can actually amend licence scope under your agreement. A support reply confirming that the API works answers a different question. For the remaining subscription terms, see the SaaS contract guide.
Applying this case to a product today
SAP v Diageo interprets a particular agreement under English law. It does not establish that every API, data exchange or third-party interface requires a separate user licence. The integration rights and price depend on your documents and the actual operations.
In April 2018, SAP announced a new model for indirect access based on creating documents of nine types. It did not automatically change existing agreements: customers could retain their terms or agree to switch. SAP, ERP Pricing for the Digital Age, pages 4–7.
SAP’s current explanation of Digital Access for SAP S/4HANA counts newly created document items of those types; reading, updating and deleting are excluded from that metric. SAP Learning. Under Diageo’s agreement, even viewing order history through Connect amounted to SAP access. Paragraph 74; paragraph 79. First establish which model applies to your contract.
The practical lesson for a founder is to review the economics and permissions for a new feature together. Where your customer promise depends on a third-party service, understand its terms before you sign.
Launching an integration for customers?
I can review the supplier’s licence against your proposed use and customer agreement. Start with a connection overview, the third-party terms and a list of user roles.
Sources
- SAP UK Ltd v Diageo Great Britain Ltd [2017] EWHC 189 (TCC): agreement and claim at paragraphs 1–8; user definition at paragraph 28; SAP PI at paragraphs 45–49; Connect at paragraphs 74–91; Gen2 roles at paragraphs 98–102; assessment of fees at paragraphs 105 and 110.
- SAP: ERP Pricing for the Digital Age, April 2018: the new charging model and transition options for existing customers, pages 4–7.
- SAP Digital Access and SAP Learning: Understanding Subscription Licensing: the supplier’s descriptions of other charging models, separate from the agreement considered by the court.
Sources checked .