California Tech Manufacturer Rejects RISE with SAP and Moves to Hybrid Hosting with Tier-2 Cloud Provider
Industry: Manufacturing | Location: California, USA | Employees: 18,000
Background & Challenges:
A California-based high-tech manufacturer running SAP ECC (ERP Central Component) faced pressure to modernize its ERP landscape ahead of SAP’s 2027 support deadline.
SAP’s RISE with SAP offering, a bundled cloud subscription including S/4HANA Cloud, was heavily promoted as the “transformation-as-a-service” path.
However, the manufacturer’s IT leadership grew concerned that RISE’s one-size-fits-all approach would limit flexibility.
Their SAP ECC system was deeply customized for manufacturing processes, and the company wanted a hybrid cloud strategy to gradually leverage cloud benefits without fully abandoning on-premises systems. “RISE sounded like an all-or-nothing proposition,” the CIO explained. “It required us to surrender control of our infrastructure and accept SAP’s timeline and terms. We weren’t willing to lose that flexibility.”
Key concerns included potential vendor lock-in, lack of direct control over infrastructure, and uncertainty over long-term costs. The firm also had an existing data center and a trusted hosting partner, making them skeptical of handing everything to SAP’s managed cloud.
Solution – Hybrid Hosting with a Tier-2 Provider:
Rather than signing onto RISE with SAP, the manufacturer opted for a hybrid hosting strategy using its own data center plus a Tier-2 cloud provider.
They negotiated a new contract with a regional SAP-certified cloud hosting partner (a “Tier-2” provider) to host certain SAP environments, while keeping critical production systems on-premises. This approach lets them modernize on their terms.
For example, to begin the transition, non-production and development S/4HANA systems were set up in the cloud, while live ECC production remained stable on existing hardware.
The hybrid setup was enabled through SAP Business Technology Platform (SAP BTP) connectivity and cloud connectors, ensuring seamless integration between on-prem and cloud components.
Critically, the company purchased S/4HANA licenses outright (traditional perpetual licensing) instead of the RISE subscription model.
This preserved their investment in existing ECC licenses by using SAP’s conversion programs to S/4HANA at their own pace. “We wanted to own our roadmap,” noted the IT Director. “We can optimize costs and performance by maintaining control of our licenses and choosing where to run our systems – on-premises or in the cloud. We’re not paying a premium for an all-inclusive package we don’t fully use.”
The direct licensing also meant the firm could negotiate cloud infrastructure terms separately. The procurement lead reported that by dealing directly with the Tier-2 cloud host, they secured better infrastructure pricing and transparent cost visibility (something they would forfeit under RISE’s bundled pricing).
The contract with the cloud provider was tailored to the manufacturer’s needs. It featured robust SLA protections, including 99.9% uptime commitments for SAP applications and financial penalties if service levels were unmet.
The company also insisted on flexible exit clauses to re-balance workloads on-premises or to another cloud in the future without heavy penalties. Meanwhile, their SAP agreement was amended to ensure continuity: they kept standard support for ECC through 2027 and have the option of extended maintenance until 2030 if needed (at the standard 2% per year fee).
This safety net allows them to run ECC until their S/4HANA migration is complete in the hybrid environment. They also negotiated to carry over unused SAP license value into future purchases, protecting them from shelfware waste.
Throughout the transformation, the manufacturer involved both IT and business stakeholders. The CIO’s team implemented a governance plan to decide which systems to move to the cloud versus stay on-prem, evaluating factors like latency for factory operations, data sensitivity, and cost.
Some manufacturing execution interfaces remained tied to the on-prem ECC instance to ensure real-time shop-floor connectivity.
At the same time, new initiatives (like advanced analytics and prototyping of IoT integrations) were launched in the cloud environment via S/4HANA and SAP BTP services, demonstrating tangible innovation without RISE.
“We proved we could modernize without the ‘RISE’ umbrella,” the CIO said. “We stood up S/4HANA in a cloud sandbox and even started using SAP’s Business Technology Platform for analytics, all while our core ECC kept running. This hybrid approach lets us transform incrementally, which is huge for a manufacturing business that can’t afford disruption.”
Results & Outcomes:
The company transformed on its terms by rejecting RISE with SAP and embracing a hybrid cloud strategy. They avoided RISE’s subscription lock-in and maintained control over their IT landscape. Equally important, they realized cost efficiencies by leveraging existing licenses and competitive cloud hosting rates.
The Tier-2 cloud provider delivered personalized service and flexibility that a hyperscaler or SAP’s centralized cloud might not provide, accommodating custom backup schedules and on-demand scalability during quarter-end production spikes.
The manufacturer’s SAP operations team reports improved system performance after migrating dev/test systems to the cloud (thanks to modern infrastructure), and they gained experience with cloud tools without risking the core business processes.
Perhaps most significantly, the company has a clear path to S/4HANA that aligns with its business readiness. Once thorough testing is complete, they plan a phased go-live for S/4HANA (in the cloud data center), while legacy ECC components will be retired gradually.
This avoids a rushed “big bang” migration. The IT director reflected, “The hybrid model de-risked our S/4 journey. “We can pilot new capabilities in S/4HANA Cloud and only switch over when confident.
There’s no ticking clock forcing us before we’re ready.” In summary, the transformation-driven approach allowed the manufacturer to modernize its ERP environment, preserve flexibility, and save on costs – all without the constraints of a RISE with SAP contract.
Results Summary:
- Maintained Flexibility: Kept infrastructure control and avoided vendor lock-in by using a mix of on-premises and cloud hosting (not possible under RISE’s all-in subscription).
- Cost Savings: Achieved an estimated 20% lower total 5-year TCO versus the proposed RISE deal by reusing existing licenses and securing competitive cloud rates. The company pays only for the cloud resources it needs, with full cost transparency.
- Customized Support & SLAs: Extended support for ECC through 2027 (with options through 2030) without penalty, and obtained strict SLA guarantees (99.9% uptime) from the hosting provider, ensuring system reliability and accountability.
- Gradual S/4HANA Adoption: They began the S/4HANA migration on their own schedule. They adopted S/4HANA and SAP BTP early in cloud-enabled innovation (e.g., real-time analytics) while core processes remained uninterrupted on ECC. This phased approach mitigated risk and empowered the internal team with new skills.
