Contents
Key takeawaysThe four deployment modelsWhy the model matters mostWhat we have seenThe conversion creditFUE and indirect accessAnswering the account teamContract terms to ask forWhat to do nextFAQS/4HANA runs under four commercial models with different rights at term end. The choice between them shifts more money than any discount negotiated inside the chosen one, so price all four, including the cost of leaving, before SAP's default becomes yours.
- Four models, two kinds of rights. On premises and hyperscaler hosted perpetual licenses survive a dispute, while RISE and GROW subscriptions end usage rights at term end.
- RISE is the opening offer. SAP presents RISE first whatever your infrastructure strategy, which tells you SAP's preference and says little about your fit.
- Price the exit first. On a subscription, the cost of leaving at renewal sets the ceiling on what SAP can ask, so it belongs in the first business case.
- The conversion credit is negotiable. SAP publishes conversion rules, but the credit in your contract is set in the deal and tracks how credible your alternative is.
- Count FUE from usage. Size the FUE pool from measured authorization and transaction data, because the contracted named user count reflects old purchases.
- Settle indirect access and infrastructure separately. Both are valued at SAP's number once they sit inside a RISE bundle, so price them on their own first.
What are the four SAP S/4HANA deployment models, and how is each licensed?
The four models are on premises perpetual, RISE with SAP private cloud, GROW with SAP public cloud, and perpetual licenses hosted on a hyperscaler. They differ in what you hold, what survives when the term ends and where the cost concentrates. Treat the choice as a rights decision first and a cost decision second.
| Model | What you hold | At term end | Where the cost concentrates |
|---|---|---|---|
| On premises perpetual | Owned licenses plus support | Rights survive; support is optional | Infrastructure and internal operations |
| RISE private cloud | Subscription to a bundled managed service | Usage rights end | FUE pool, escalation and the bundle |
| GROW public cloud | Subscription to a standardized service | Usage rights end | Standardization limits and extension routes |
| Hyperscaler hosted perpetual | Owned licenses on rented infrastructure | Rights survive; hosting is separable | Infrastructure contract, negotiated separately |
On premises perpetual
You buy S/4HANA licenses outright and pay annual support on the license base. Your own team or a partner runs the systems in your data center. If you stop paying support, you lose updates and SAP's help desk, but you keep the right to run the software you licensed.
RISE with SAP private cloud
RISE bundles S/4HANA Cloud, private edition (now marketed by SAP as SAP Cloud ERP Private) with infrastructure and SAP's technical managed services in one subscription priced per Full Use Equivalent. When the subscription ends, so does your right to use the software.
SAP's service use descriptions set 1 FUE as 1 advanced use user, 5 core use users, 30 self service users or 0.5 developer users.
GROW with SAP public cloud
GROW, launched in March 2023 for midsize companies, sells S/4HANA Cloud, public edition as a standardized multitenant service. You extend it through key user tools and side by side apps on SAP Business Technology Platform while the core stays unmodified. As with RISE, usage rights stop at term end. Our RISE against GROW comparison covers the fit question in detail.
Hyperscaler hosted perpetual
You keep perpetual licenses and run them on AWS, Microsoft Azure or Google Cloud under your own infrastructure contract. SAP's rights and the hosting are two separate agreements, so you can renegotiate or move the hosting without reopening your software rights. You carry the operations work yourself or buy it from a partner.
S/4HANA Negotiations: The Discount Is Dead. The Tier Is the Deal.
Why does the deployment model matter more than the discount?
Across the S/4HANA deals we advised, the deployment model moved more money than any single term negotiated inside it. Once the model is set, the remaining negotiating points are FUE sizing, escalation caps and bundle scope. Each of those matters, but none of them changes the shape of the commitment you have made.
Subscription models end usage rights at term end, while perpetual rights survive a dispute. If you hold perpetual licenses and disagree with SAP, you have a running system and an argument. On a subscription, the same disagreement comes with a deadline. Neither position is automatically correct, yet only one of them usually gets priced.
What happens when the term ends?
On a subscription, the cost of disagreeing with SAP at renewal includes the cost of migrating your ERP under time pressure. On perpetual licenses, the dispute is limited to support. You can renegotiate support, reduce it, or move to third party support while the system keeps running.
This matters most in year four of a five year term, when renewal talks start. Whatever it would cost you to leave at that point is roughly the ceiling on what SAP can ask for at renewal. That is why the exit belongs in the first business case.
A worked example: pricing the exit into a RISE proposal
Say SAP proposes RISE at $2,400,000 a year for five years. Your ECC licenses end under the conversion, so leaving later means buying new perpetual licenses and running a migration. The figures are hypothetical, and they assume your running cost after leaving (support, hosting and operations) roughly matches the subscription.
| Line | Calculation | Amount |
|---|---|---|
| Annual subscription | Proposal | $2,400,000 |
| Renewal with a 9 percent uplift | $2,400,000 x 1.09 | $2,616,000 a year |
| Cost of accepting the uplift over a second term | $216,000 x 5 | $1,080,000 |
| Cost of leaving: new perpetual licenses | Assumed quote | $6,000,000 |
| Cost of leaving: migration and rehosting project | Assumed quote | $2,500,000 |
| Total cost of leaving | $6,000,000 + $2,500,000 | $8,500,000 |
In this example, any renewal uplift worth less than $8,500,000 over five years, or $1,700,000 a year, is cheaper to accept than to escape. That is about 71 percent of the current fee. Without a renewal cap, the exit cost sets the ceiling on the renewal price, and SAP can estimate it as well as you can.
How the answer changes with your situation
- Heavily modified ECC with a large custom code base. GROW rarely fits. The real choice is RISE against perpetual on your own or hyperscaler infrastructure.
- Midsize company with mostly standard processes. GROW is a credible option, provided you accept SAP's release cadence and the limits on extensions.
- Existing hyperscaler commitment and an in house SAP Basis team. Hyperscaler hosted perpetual deserves a full price, because it keeps your infrastructure spend under a contract you already negotiate.
- Exiting your own data centers with a thin operations team. RISE is the obvious fit, but price it against a partner managed service on a hyperscaler before you accept the bundle.
RISE migration cost analysis
How to count FUE, size the infrastructure share and model migration cost before you accept a RISE proposal.
Get the white paper →What have we seen in S/4HANA deployment decisions in 2024 and 2025?
Across roughly 25 to 35 SAP S/4HANA migration and licensing engagements in 2024 and 2025, SAP opened with RISE in nearly every cycle. That held regardless of the customer's infrastructure strategy, existing hyperscaler commitments or operating model. Four patterns came up repeatedly.
- The default was rarely treated as a decision. RISE is SAP's strategic vehicle, and presenting it first is the account team's job. The cost appeared when the buyer treated the opening proposal as the shortlist.
- Conversion credits varied by double digit percentages between comparable deals. The spread in how existing perpetual license value was credited tracked how live the buyer's alternative was, not anything about the systems being converted.
- Exit economics were modeled in fewer than half of first proposals. This held even though the subscription models end usage rights entirely at term end.
- Measured FUE sizing and indirect access reviews were routinely skipped. Both are cheap to do early. The contract shows what was bought years ago, while measured authorization usage shows what people use today.
Why we disagree with choosing the platform first and pricing it later
The usual advice is to settle the target architecture with your systems integrator, then hand procurement the job of getting the best price. We disagree with that order. SAP negotiates hardest against a decision the customer has already made. Once the architecture is fixed, procurement has nothing left to trade except the discount.
The better course is to price at least two models in full and keep the second one credible until signature. That means a real hosting quote, a sized project plan and a named decision date, so the account team can see the alternative is funded.
On a subscription, what it would cost you to leave is the ceiling on what SAP can ask for at renewal.
How is the S/4HANA conversion credit calculated, and how negotiable is it?
SAP publishes conversion rules, but the credit that lands in your contract is set in negotiation. It is usually the largest single number in a conversion, so treat it as an open commercial term from the first meeting.
What SAP's conversion policies say
SAP's own 2020 briefing on S/4HANA conversions describes three routes. Confirm the current terms with your account team, because SAP revises these policies and the deal paper overrides the briefing.
| Route | What it does | Credit basis | Existing licenses |
|---|---|---|---|
| Product conversion | Swaps classic products for S/4HANA equivalents one for one | 100 percent of prior maintenance base, capped at the net payable for new S/4HANA licenses | Use rights continue during the transition |
| Contract conversion | Replaces the whole contract in one transaction, with the option to drop shelfware | The lesser of 100 percent of prior maintenance base or 90 percent of the new net payable; the full maintenance base carries forward | Use rights continue during the transition |
| Cloud extension | Replaces on premises licenses with cloud subscriptions | Not set out in the briefing; agreed in the deal | Terminated on signature; a 5 year cloud subscription is required |
What changes the credit you get
- A priced alternative. Put a funded hyperscaler or on premises plan on the table before the credit is discussed. Arguments about past investment move the number far less.
- A clean shelfware list. Contract conversion allows you to drop unused licenses, so know which ones you would drop before SAP proposes the scope.
- Carry forward at renewal. Ask how the credit is treated when the first term ends. A credit that disappears at renewal raises your run rate in year six.
Our RISE with SAP guide covers the full subscription mechanics, including ramps and uplifts.
How should you size FUE and settle indirect access before you sign?
Size FUE from measured authorization usage, and resolve indirect access exposure as a separate item before it enters a RISE quote. Both are far easier to do before SAP sizes its proposal than after.
Rebuild the FUE count from usage
The contracted named user count describes what was bought, and it often includes departed staff and users classified at the most expensive type. Start from who holds which authorizations and who actually runs which transactions. Our guide to calculating FUE counts covers the classification rules.
- USMM and SLAW. The system measurement and License Administration Workbench show user types as SAP counts them today.
- ST03N workload statistics. These show which users ran which transactions, and how often, over the retained period.
- SUIM. The user information system shows which authorizations each user holds, which drives how RISE classifies them.
- SAP Readiness Check. It gives the scope and custom code picture SAP will use when it sizes the project.
Resolve indirect access separately
Once indirect access sits inside the RISE bundle, it is valued at SAP's number and cannot be argued on its merits. Run SAP's Digital Access Evaluation Service or your own document count first, then settle the exposure as a separate line. Our indirect access guide explains how documents are counted.
Keep the infrastructure contract yours where the model allows
Under hyperscaler hosted perpetual, the infrastructure deal is yours to negotiate with AWS, Microsoft or Google. Under RISE, the infrastructure is bundled and billed at SAP's rates, even when it runs on a hyperscaler. Ask SAP to show the infrastructure share of the fee so you can compare it with a direct quote.
What will the SAP account team say, and how should you answer?
Expect the conversation to start with RISE and with urgency. These are the lines we hear most, with replies that keep the alternatives open.
- "ECC support ends in 2027, so you need to sign this quarter." Mainstream maintenance for Business Suite 7 ends at the end of 2027, and extended maintenance runs from 2028 to the end of 2030 at a premium of two percentage points. You have time to price the options; see our 2027 deadline guide.
- "On premises S/4HANA is a dead end." SAP states that until 2040 at least one S/4HANA release will be in maintenance. Ask which innovations you would lose, and put a value on them.
- "SAP's AI only comes with the cloud." At Sapphire in May 2026, SAP said on premises S/4HANA and ECC customers that commit to moving most of their systems to SAP Cloud ERP gain access to select AI scenarios. Ask for the scenarios, the terms and the price in writing.
- "The conversion credit is fixed by policy." The policy gives a formula and the deal sets the number. Ask for the credit calculation line by line.
- "Exit terms are standard." Standard terms end usage rights on the last day of the term. Ask what transition period and data export support SAP will write into the order form.
Which contract terms should you ask for in each model?
On a subscription, the terms that matter most govern renewal and exit. On perpetual, they govern support and flexibility. Ask for these before signature, while SAP still wants the deal.
- Renewal price cap. A fixed ceiling on the uplift at the first renewal removes the exit cost as SAP's pricing basis.
- Transition period at term end. A right to extend for a defined period at the same price gives you time to migrate without a cliff.
- Data export and transition assistance. Name the format, the scope and the fees, so leaving becomes a planned project.
- FUE reduction right at renewal. SAP's standard cloud terms do not let you reduce subscribed quantities during the term, so write in the right to reduce at renewal if headcount falls.
- Conversion credit carried into renewal. Write down how the credit affects the renewal base, or it may vanish in year six.
- Support flexibility on perpetual. For perpetual licenses, ask for the right to reduce support on unused products without repricing the rest.
Our SAP advisory team prices the four models side by side and reviews the order form before you sign. The wider library of SAP licensing guides sits in the SAP knowledge hub.
What to do next
- 18 months before your target signature. Price all four models on the same baseline before the first SAP meeting, so the opening proposal arrives with alternatives already beside it.
- 12 months out. Model exit economics at term end for each option, including a time pressured ERP migration, and put that number in the first business case.
- 10 months out. Rebuild the FUE count from measured authorization usage and transaction data, then set it against the contracted named user count.
- 9 months out. Measure indirect access and settle the exposure separately, before it is priced into a bundled quote at SAP's valuation.
- 6 months out. Get a direct infrastructure quote and a partner managed service quote, so the RISE bundle has a comparison point.
- Until signature. Keep the second model funded and credible, and negotiate the renewal cap, transition period and credit treatment before price.
Frequently asked questions
What are the four S/4HANA commercial models?
On premises perpetual, RISE with SAP private cloud, GROW with SAP public cloud, and perpetual licenses hosted on AWS, Azure or Google Cloud. The first and last give you owned licenses. RISE and GROW are subscriptions, so the software rights last only as long as the term you pay for.
Why does the model choice matter more than the negotiation?
Because every later negotiating point, such as FUE sizing, escalation caps or bundle scope, works within limits the model has already set. A good discount on the wrong model still leaves you with the wrong rights at term end.
Is RISE always the right answer?
No. It is always the first answer SAP gives, because RISE is its strategic offer. It fits companies leaving their data centers with thin operations teams. Companies with strong hyperscaler agreements or an in house Basis team often do better hosting perpetual licenses themselves.
What is the perpetual versus subscription asymmetry?
Perpetual rights continue after support ends, so a dispute with SAP puts updates and support at risk but never your running system. Subscription rights stop on the last day of the term, so a dispute at renewal puts continuity itself at stake. That difference decides who holds the stronger hand in year four.
How negotiable is the conversion credit?
Very. SAP's policy gives a formula based on your prior maintenance base, but the figure in the order form varied by double digit percentages between comparable deals we saw. Because it is usually the largest single number in a conversion, ask for the calculation line by line and negotiate it before price.
How often is the exit actually modeled?
In fewer than half of the first proposals we reviewed. To build it yourself, add the cost of new licenses, a migration project and a bridging period, then compare that total with the renewal uplift SAP could ask for over the next term.
How should FUE be sized?
From what users actually do. Pull authorization data from SUIM and transaction usage from ST03N, classify each user as advanced, core or self service, then convert with SAP's ratios. The result is often well below a count copied from the named user contract.
When should indirect access be resolved?
Before SAP prices the RISE quote. Measure document volumes created by third party systems, decide how you will license them, and agree that as a separate line. Inside the bundle, the exposure is folded into a single fee and can no longer be contested on its own.
Does keeping an alternative alive actually help?
Yes, and it has to be real to work. A funded hosting quote, a project plan and a decision date show SAP the alternative can be executed. In the deals we advised, the size of the conversion credit followed how credible that alternative looked at signature.
Can the infrastructure contract be kept separate?
Yes, if you keep perpetual licenses and host them on a hyperscaler, because the hosting agreement is yours. Under RISE, SAP contracts the infrastructure and bills it inside the subscription, even when it runs on AWS, Azure or Google Cloud, so you lose direct control of that price.