Case Study – Rise with SAP Advisory – Brazilian Consumer Goods Manufacturer Trims RISE with SAP Costs by 25% and Avoids $5M in Penalties
Industry:
Consumer Goods Manufacturing | Location: São Paulo, Brazil | Employees: 12,000 | Annual Revenue: $5.2 Billion
Background:
A leading Latin American consumer goods company, running SAP ECC for its core ERP (finance, supply chain, and production), had a primarily on-premises landscape.
Facing SAP’s 2027 end-of-support deadline for ECC, the firm began evaluating RISE with SAP to transition to S/4HANA Cloud.
Challenges:
- Escalating Costs: SAP’s initial RISE proposal was a five-year, $30 million subscription – far above the company’s budget. The bundled cloud infrastructure came at rates likely padded with hefty markups.
- Licensing Complexity: Moving to RISE meant adopting SAP’s Full User Equivalent (FUE) model. The client struggled to map 3,500 existing SAP users into FUE categories and feared over-buying licenses. There was also concern about indirect access fees from third-party systems (e.g., a distributor portal accessing SAP data).
- Sales Pressure: SAP pushed for a quick commitment before quarter-end with a “one-time” discount. The account team also reminded the client of an ongoing audit, implying that compliance issues could result in penalties if they didn’t sign RISE.
- Compliance Risks: SAP’s audit preview indicated a potential $5 million penalty for unlicensed indirect usage (e.g., the e-commerce site creating SAP documents). This looming exposure added anxiety for the CIO and CFO.
How Redress Compliance Helped:
- Independent License Review: Redress Compliance, acting as an independent advisor, conducted a comprehensive license and usage audit. They quantified the client’s actual SAP usage and translated it into FUEs, finding SAP’s proposal overestimated needs by ~15% and included cloud services the client didn’t need.
- Optimized Deal Scope: Redress recommended a tailored contract approach. They advised negotiating a smaller RISE scope, focusing on essential S/4HANA modules, while keeping certain non-critical systems on-premises or on third-party cloud hosting. The team helped the client push back on unnecessary components in SAP’s bundle (like excess SAP BTP capacity).
- Competitive Benchmarking: Using global benchmarks, Redress showed the initial offer was overpriced compared to peer deals. Armed with these facts, the client confidently countered SAP’s pricing.
- Negotiation Strategy & Advocacy: Redress acted as the client’s advocate in all discussions with SAP. They challenged SAP’s sales tactics and kept the negotiation focused on facts and business value. Redress also orchestrated a credible alternative scenario – the client was prepared to purchase S/4HANA licenses outright and use a local cloud provider if SAP didn’t improve terms. This leverage forced SAP to substantially revise its offer.
- Compliance & Flexibility: Redress negotiated inclusion of SAP’s Digital Access license in the contract to cover known third-party integrations and secured a waiver of the $5M audit claim. They also built in future flexibility by capping annual price increases and adding an exit clause to avoid vendor lock-in down the road.
Outcome and Impact:
- Initial SAP Offer: 5-year RISE contract at $30M total; one-size-fits-all scope; unresolved audit exposure.
- Final Negotiated Deal: 5-year RISE contract at $22.5M (25% lower); rightsized scope tailored to actual needs; audit penalty eliminated. SAP provided credit for the client’s existing ECC licenses and agreed to a 5% cap on renewal increases, plus flexibility to reallocate user licenses as needs evolve.
- Financial Savings: The client saved $7.5 million on subscription costs and avoided a $5 million compliance penalty, resulting in a total of $12.5 million in benefits.
- Risk Mitigation: All known compliance gaps were addressed through contractual resolutions, thereby eliminating audit risk. The company gained peace of mind, migrating on its timetable without fear of unexpected fees.
- Strategic Value: With a leaner, well-negotiated contract, the company can proceed confidently to S/4HANA Cloud. They preserved the ability to leverage existing infrastructure for certain workloads and gained leverage for future negotiations. “We regained control of our SAP roadmap,” the CIO noted. Funds saved can now fuel innovation instead of unwarranted licensing costs.
Read about other Rise with SAP Case Studies.
Client Quote:
“Redress Compliance was our secret weapon in the SAP negotiations. Their independent insight exposed hidden costs and pushed SAP into a deal on our terms. We saved millions and averted a compliance disaster while gaining a more flexible agreement,” said the CIO.
Call to Action: Is your organization exploring RISE with SAP? Before signing anything, get a second opinion.
Contact Redress Compliance for a complimentary RISE with SAP assessment and explore potential savings, risk reductions, and customized terms tailored to your needs.
Read about our Rise with SAP Contract and Licensing Advisory Services.
