Diageo is an international producer of alcoholic beverages, whose family of well-known brands includes Smirnoff, Johnnie Walker, and Guinness. In 2004, Diageo contracted with SAP to license SAP’s mySAP Business Suite, which Diageo then subsequently integrated with Salesforce software using SAP’s PI integrator software. This situation is known as indirect access, which arises when data being generated by one ERP software is utilized by another software, usually a third-party system. Here, Diageo was using third-party software (i.e. Salesforce software) to manage the operations of Diageo sales and service representatives, which allowed Diageo to manage their customer visits and calls, and to record information from these visits and calls. This system also allowed customers to manage their business accounts and place orders directly rather than go through Diageo’s call centers.
Unfortunately for Diageo, SAP demanded license fees based on the parties’ license agreement, asserting that the terms of the license did not allow indirect access to or indirect use SAP’s software. More specifically, SAP claimed that by allowing Diageo’s customers access to SAP data — albeit through Salesforce software — Diageo owed SAP license fees commensurate with the additional users. Diageo reasonably, although ultimately failed, to argue that SAP’s integration software was a “gatekeeper” to the SAP data, with the Court finding that there was “a separate basis of pricing for the [integrator] software” as contemplated in the software license.
Second, the license metrics involved with the contemplated users, both current and future, must be negotiated and plainly stated. The ERP customer must clearly understand how it can use the software in accordance with the pricing scheme, and how the customer will be charged for use that is outside the fee schedule.
Lastly, during ERP license negotiations, it is imperative to consider the future direction of the business and potential uses of the ERP software. Many license agreements last for a number of years, and if an ERP customer is constricted by a restrictive license agreement, the customer may have to pay much more in future license fees that it did not previously contemplate.
Assuming Diageo does not mount a successful appeal, its case represents a cautionary tale regarding ERP customers fully contemplating and negotiating in plain terms the scope of the license.