Background and Challenges
An 18,000-person high-technology manufacturing company based in California was running legacy SAP ECC 6.0 on-premise. The company had been evaluating a major Enterprise Resource Planning (ERP) modernisation effort for three years as it sought to improve operational efficiency, reduce technical debt, and migrate towards cloud-based infrastructure. Like many large enterprises, the company had received multiple proposals from SAP—all centred on RISE with SAP.
SAP's RISE with SAP proposition promised a complete package: managed hosting, pre-configured S/4HANA software, implementation services, and ongoing support—all delivered through a single subscription contract. The total five-year cost was estimated at approximately USD 95 million.
However, after detailed evaluation by both the IT and procurement teams (with guidance from Redress Compliance), the company identified several strategic and financial concerns with the RISE model:
- Lack of infrastructure control: RISE places all infrastructure in SAP's public cloud partner ecosystem (AWS, Azure, or Google Cloud). The company would forfeit direct control over compute, storage, networking, and disaster recovery.
- Vendor lock-in: The all-in-one RISE contract tied licensing, hosting, and implementation into a single five-year subscription with limited exit provisions.
- Inflexible capacity planning: RISE pricing is typically based on committed compute capacity. The company would be paying for sustained capacity even during off-peak periods.
- Fixed timeline: RISE implementations follow a prescribed timeline. The company had legacy systems, custom applications, and parallel-run requirements that might demand a slower, phased approach.
- Limited negotiation scope: SAP's RISE offers very little room for customisation or negotiation of terms; it is a published offering with fixed contract terms.
Solution: Hybrid Hosting with Tier-2 Provider
Rather than accept RISE, the company pursued an alternative strategy that retained control and flexibility while lowering total cost of ownership:
| Component | Approach | Benefit |
|---|---|---|
| Perpetual S/4HANA licences | Purchased S/4HANA licences outright using SAP's conversion programmes from existing ECC entitlements, instead of RISE subscription | Preserved investment in existing licences; organisation owns its roadmap and migrates at its own pace with no subscription ticking clock |
| Hybrid infrastructure | Retained approximately 40% of workloads on-premise in existing data centre; migrated remaining 60% to a Tier-2 cloud provider (not RISE, but a separate contract with a dedicated SAP-certified cloud hosting firm) | Reduced cloud costs through negotiated rates; maintained control over on-premise infrastructure and phased migration timeline |
| Independent cloud contract | Negotiated separate cloud hosting contract with defined SLAs (99.9% uptime), capacity terms, and exit provisions—independent of SAP software licensing | Flexibility to change cloud providers, renegotiate terms, or shift workloads back on-premise without software licensing consequences |
| Phased migration | Planned a 24-month phased migration with parallel-run periods for high-risk processes, rather than the RISE prescribed timeline | Reduced implementation risk; allowed time for staff training, system validation, and legacy system decommissioning |
Governance and Migration Approach
The company established a dedicated programme governance structure:
- Steering Committee: CFO, CIO, COO, and external SAP advisors met monthly to review budget, risk, and schedule.
- Technical Architecture Board: Reviewed infrastructure choices, security controls, and integration patterns for the hybrid setup.
- Business Process Owners: Led the detailed design of S/4HANA processes, mapped legacy customisations, and approved migration sequencing.
- Implementation Partner: A global systems integrator delivered the configuration, development, testing, and go-live execution.
The phased migration plan was structured around business cycles and system interdependencies:
- Wave 1 (Months 0–6): Finance, materials management, and planning processes. Retained on-premise for months 0–3, then tested on-cloud with parallel-run to ensure accuracy.
- Wave 2 (Months 6–12): Sales, distribution, and demand planning. Migrated after Wave 1 stabilisation.
- Wave 3 (Months 12–18): Production, manufacturing, and quality management. Final critical processes.
- Cutover (Months 18–24): Parallel run period, fine-tuning, legacy system shutdown, and knowledge transfer to operations.
Results and Outcomes
Financial Results:
- Five-year TCO: USD 76 million (vs. RISE estimate of USD 95 million) — a 20% reduction.
- License cost: USD 8 million (perpetual purchase, no annual subscription).
- Cloud hosting (Tier-2 provider): USD 18 million over five years (vs. RISE's ~USD 32 million for comparable capacity).
- Implementation and professional services: USD 12 million (systems integration partner).
- On-premise infrastructure maintenance: USD 6 million (existing data centre operating costs for retained workloads).
- Internal team and training: USD 32 million (allocated to five-year payroll and capability-building).
Operational Results:
- System uptime: 99.92% (exceeding the contracted 99.9% SLA).
- Migration execution: All three waves completed on schedule; zero critical production incidents post-go-live.
- User adoption: 87% of staff trained and certified on S/4HANA within 18 months of go-live.
- Legacy system retirement: ECC 6.0 fully decommissioned 24 months post-go-live; no fallback required.
- Performance improvement: Month-end close cycle time reduced from 15 days to 6 days; inventory turns improved by 12%.
RISE vs. Hybrid: Key Decision Factors
The company's analysis revealed several decision factors that tilted the evaluation away from RISE:
| Factor | RISE with SAP | Hybrid Hosting (Redress Solution) |
|---|---|---|
| Five-year TCO | USD 95 million | USD 76 million (20% lower) |
| License model | Subscription (annual renewal risk) | Perpetual (capital purchase) |
| Infrastructure control | None (SAP-managed) | Full (hybrid: on-prem + independent cloud contract) |
| Migration timeline | Prescribed by SAP (typically 12–15 months) | Custom phased approach (24 months, aligned to business cycles) |
| Exit flexibility | Limited (locked into 5-year contract) | High (separate licensing, hosting, and implementation contracts) |
| Negotiation scope | Minimal | Full (each component independently negotiated) |
| Uptime SLA | 99.9% (RISE standard) | 99.9% (plus independent audit by third party) |
Lessons for CIOs Evaluating RISE with SAP
1. RISE is not one-size-fits-all. Large, complex organisations with significant legacy infrastructure and process customisation often find that a hybrid approach offers better control, flexibility, and cost efficiency than the all-in-one RISE package.
2. Separate your contracts. By unbundling licensing, hosting, and implementation, the company retained negotiation leverage and exit flexibility. SAP's aggressive RISE pricing is partly enabled by the lock-in effect of bundled contracts.
3. Challenge the timeline. RISE assumes a compressed, prescribed migration timeline. If your business requires a phased, slower approach (common in heavily customised environments), the cost and risk of adapting RISE to your timeline may exceed the cost of a custom hybrid approach.
4. Evaluate total infrastructure cost. RISE bundles compute, storage, and networking into a single cloud bill with limited transparency. Many organisations discover post-contract that RISE is more expensive than anticipated because the pricing model is based on sustained utilisation, not peak or average demand.
5. Retain on-premise optionality. Even if you migrate to cloud, maintaining some critical workloads or backup infrastructure on-premise can provide insurance against cloud service disruptions, cost escalations, or unexpected regulatory requirements.
6. Get external advisory early. SAP is highly incentivised to present RISE as the only viable option. Engaging independent advisory from the outset—before SAP's formal proposal—allows you to frame the evaluation in your terms and identify alternative approaches.
Frequently Asked Questions
Yes. S/4HANA is available as a perpetual on-premise licence and can be hosted on any SAP-certified infrastructure including hyperscalers (AWS, Azure, GCP), Tier-2 SAP-certified cloud providers, or your own data centre. RISE is one option, not the only option. This manufacturer purchased S/4HANA licences outright using SAP's conversion programmes and hosts on a Tier-2 provider, achieving 20% lower TCO than RISE.
Tier-2 SAP-certified cloud providers are hosting companies certified by SAP to run SAP workloads but not part of the hyperscaler trio (AWS, Azure, GCP). They often offer more competitive pricing, dedicated SAP expertise, customised SLAs, and more flexible exit terms. Examples include companies like Lemongrass, Syntax, and regional providers. In this case, the Tier-2 provider delivered 99.9% uptime SLAs with financial penalties and flexible exit clauses.
Yes. SAP offers conversion programmes that allow organisations to apply existing ECC licence entitlements toward S/4HANA perpetual licences. This protects your existing investment and avoids paying twice for similar capabilities. The key is negotiating the conversion terms, as SAP's standard conversion ratios may not always reflect the full value of your existing entitlements. Independent advisory helps ensure you receive maximum credit.
SAP's standard mainstream maintenance for ECC ends in 2027. Extended maintenance is available through 2030 at an additional fee (typically 2% annual increase on the maintenance base). This gives organisations a safety net to continue running ECC while completing their S/4HANA migration. The extended maintenance option should be confirmed in writing as part of your SAP contract to avoid uncertainty.
The primary risks are: (1) SAP may not extend the same promotional pricing available through RISE for perpetual licences, requiring stronger negotiation; (2) you assume responsibility for infrastructure management, security, and updates rather than having SAP manage them; (3) you need internal IT capabilities or a trusted hosting partner to manage the SAP landscape. For organisations with existing infrastructure and strong IT teams, these risks are manageable and often outweighed by the benefits of control, transparency, and lower TCO.
Want similar results? Get independent analysis of RISE vs. hybrid infrastructure approaches.
Buyer-side advice only. No vendor relationships. Real numbers, real options.
Related Resources
Get insights on enterprise software licensing and negotiation
Subscribe to the Redress Compliance newsletter for independent analysis of vendor negotiations, contract terms, and cost optimisation strategies.