Migrating from ECC to SAP ERP Private Cloud: Licensing and Cost Implications

Executive Summary:

Migrating from SAP ECC (ERP Central Component) to SAP ERP Private Cloud is more than a technical upgrade – it’s a shift in how you pay for and license your enterprise software.

This advisory highlights how your existing ECC licenses and maintenance fees can translate into cloud subscription credits, how migration timing affects costs, and what to negotiate in your new contract.

IT executives must carefully navigate these licensing and cost implications to avoid double-paying for software and to secure a favorable long-term deal in the cloud.

ECC to Private Cloud – A Paradigm Shift in Licensing

Moving from ECC to SAP ERP Private Cloud (for most enterprises, this means adopting S/4HANA in a private cloud edition) represents a fundamental change in the licensing model:

• From Owning to Renting: Under ECC, you owned perpetual licenses and paid annual maintenance (~20–22% of license value) for support and updates. In a private cloud, you transition to a subscription-based model (operational expense), where you pay annually (or monthly) for access, and support is included. If you stop subscribing, you lose the right to use the software – unlike ECC, which you could technically run indefinitely (albeit unsupported after 2027).
• Bundled Services: The subscription fee in SAP’s private cloud (often via RISE with SAP) includes the software license, underlying HANA database, infrastructure (cloud hosting), and standard support. It consolidates what used to be separate costs (hardware, database, support) into a single price. This can simplify budgeting, but it can also make it harder to see individual cost components and may inflate the apparent cost.
• CapEx vs OpEx: CFOs will notice the shift from a large upfront capital expenditure (purchasing licenses and hardware) to a steady operating expense. This can aid in cash flow management and align costs with usage, but over the years, the total outlay may be higher. For example, an ECC Professional user license might cost approximately $4,000 one-time (plus approximately $880/year in maintenance). In contrast, a similar user in the private cloud could incur approximately $200–$250 per month in subscription fees. Over five years, the subscription outlay per user can far exceed the old model, so understanding long-term TCO is critical.

Takeaway: Migrating to SAP ERP Private Cloud offers a more comprehensive and flexible model; however, it requires a careful cost analysis.

What looks straightforward – “one subscription for everything” – masks a complex trade-off between short-term convenience and long-term cost accumulation.

Always evaluate the 5- to 10-year total cost of ownership before committing, just as you would in a Gartner-style IT strategy plan.

Converting ECC Licenses to Cloud Subscriptions (and Getting Credit)

Your existing ECC licenses do not automatically carry over to the SAP private cloud. Instead, SAP typically requires a contract conversion:

• Contract Conversion: This means you retire (terminate) your old ECC license agreements and sign a brand-new contract for S/4HANA (cloud subscription or new licenses). In this negotiation, SAP may offer credits for the value of the licenses you give up. Essentially, they acknowledge your past investment to offset the cost of the new subscription. However, these credits are negotiated, not guaranteed. Early on, SAP allowed up to 90% credit of your current maintenance base toward the new subscription; however, in recent years, this cap has been reduced (e.g., 80% as of 2023, with hints that it may drop further). The longer you wait to convert, the smaller the credit percentage could be.
• Value Assessment: SAP will evaluate which of your ECC licenses map to the S/4HANA scope you’ll be using. Shelfware (unused licenses) won’t carry much credit. For instance, if you purchased modules or user licenses that your organization never fully deployed, SAP is unlikely to provide a full credit for those. It’s in your interest to “clean house” before conversion – identify and terminate any truly unused licenses (so you’re not paying maintenance on them now, and they won’t count against you in the conversion deal).
• Double-Pay Pitfall: Without sufficient credit, moving to a subscription can feel like paying twice for the same software. Imagine you spent $5 million on ECC licenses years ago; switching to a new subscription without credit essentially means those $5 million in assets are written off. Avoid this by explicitly negotiating license value credits. Some enterprises have achieved anywhere from 40% to 80% of their original license value as credit in the new deal – but only by pressing SAP hard and backing it up with data (usage metrics, business importance of moving now, etc.).
• Product Conversion (Legacy): In the past, SAP offered “product conversion” swaps – exchanging specific ECC licenses for equivalent S/4HANA product licenses. That program was limited and largely retired; today, the go-to approach is the full contract conversion described above.

Actionable Insight: Approach SAP early to discuss conversion terms. Request a detailed proposal outlining how your ECC investments will be recognized.

If the initial credit offer is insufficient, prepare a counter-document that outlines how S/4HANA components replace your current software and the license value you’ve invested. Highlight any recent purchases to support a higher credit limit.

Remember, SAP’s goal is to move you to the cloud – use that as leverage to get a better deal (such as additional discounts or extended rights) in exchange for your commitment.

Leveraging Maintenance Dollars and SAP Incentives

Many enterprises have paid SAP maintenance for years – and those payments can become a bargaining chip in your migration:

• Maintenance as Currency: When you convert to subscription, your annual maintenance fees (which you’ll stop paying on ECC once you terminate it) can effectively be redirected into the subscription budget. SAP is aware of this and often attempts to price the cloud subscription at a level comparable to your existing maintenance costs, plus a markup for the additional infrastructure/services. As a negotiating tactic, calculate the total maintenance cost you would incur from now until 2027 (end of ECC mainstream support) or 2030 (end of extended support), and use that as a baseline for what you can afford in subscription fees. SAP might offer to “net out” a portion of the remaining maintenance in a deal – especially if you’re an early adopter.
• Maintenance Holiday or Ramp-Down: If you plan a phased migration, inquire about SAP’s Cloud Extension Policy. This program enables customers to maintain a hybrid environment without incurring duplicate costs. For example, as you move a chunk of users or processes to the cloud, you can terminate the equivalent on-prem licenses and stop paying maintenance on them, reallocating that budget to the cloud subscription. This ensures you’re not paying two full bills at once. However, note that SAP typically requires an expanded overall investment for this flexibility (you must be buying new cloud solutions, not just dropping costs). Still, it’s a useful tool for gradually shifting spend from maintenance to subscription, in sync with your project timeline.
• Extended Support vs. Subscription: Standard ECC support ends in 2027. SAP offers extended maintenance to 2030 for an additional 2% fee (roughly 24% of the license value per year instead of 22%). If your migration will slip past 2027, you have a choice: pay SAP’s rising support costs or seek alternatives like third-party support. Some companies opt for third-party support (from firms like Rimini Street, etc.) at approximately 50% of SAP’s maintenance cost, allowing them to save money while completing their migration. Beware: SAP may penalize those who leave its maintenance – for example, you might not qualify for conversion credits or you’d face reinstatement fees to return later. Recently, SAP has introduced a “bridging” subscription for laggards: an offering to run ECC in a private cloud from 2031 to 2033 for an inflated fee. It’s essentially a costly safety net if you can’t complete the S/4HANA transition by 2030. The takeaway is that delaying gets expensive one way or another.
• Incentives for Early Movers: Conversely, SAP dangles carrots for early migrations. These can include better conversion credits, discount packages, or even free extended support. For instance, in some negotiated RISE deals, SAP has agreed to keep supporting a customer’s ECC until 2031-2033 at no extra charge – giving them breathing room – provided the customer signs the cloud contract now. Such perks are not standard; they are special incentives that are more readily available today than they will be closer to the deadline. As 2027 approaches, expect SAP to become less generous, as pressure on customers increases.

Actionable Insight: Use your maintenance budget to your advantage.

Run the numbers on all scenarios: continuing maintenance, moving to a subscription, and third-party support. This will clarify which path is financially viable.

When negotiating, explicitly ask, “How will our existing maintenance payments be credited or offset in this deal?”

Also, ensure that any incentives (such as extended support or cloud credits) are documented in the contract. Verbal promises can evaporate once you sign on the dotted line.

Timing is Everything: Migration Timelines and Cost Overlap

The schedule of your migration project has a direct impact on costs and contract structure:

• Avoiding Parallel Costs: Ideally, you want a short (or zero) period where you’re paying for both ECC and the new cloud concurrently. In reality, some overlap is unavoidable (e.g., testing, phased go-lives, etc.). Plan for how long you might need dual landscapes and try to minimize this window. For example, if you negotiate your new subscription to start when you go live on the cloud, you could continue on ECC maintenance up until that switch. Some enterprises negotiate a transition period in the contract (like the first 6 months of the subscription at a reduced rate or free) to account for the overlap during implementation. This kind of provision can save significantly if you have a drawn-out migration.
• Phased Migrations: If you’re migrating module by module or region by region, you may be running ECC and S/4HANA Private Cloud side by side for a year or more. In such cases, review SAP’s policies for partial migrations (such as the Cloud Extension Policy discussed) to enable a staged ramp-down of ECC maintenance. Coordinate your contract terms with your timeline – for instance, ensure the ECC contract can be terminated in pieces or that your new contract allows a staggered activation of licenses. This might involve a bit more contractual complexity (multiple start dates or a flexible quantity schedule), but it can prevent paying 100% for both environments.
• Deadlines and Rush: Keep the big dates in mind: 2027 (support ends) and 2030 (final extension). If you plan to cut it close to 2027, you’ll be negotiating in a seller’s market – lots of other customers will also be rushing, and SAP knows time is nearly up. This could mean fewer discounts and a stricter approach to terms. Starting your migration earlier (2025–2026) potentially gives you better leverage and access to skilled migration partners (who will be overbooked later on). If you foresee missing 2027, decide if you’ll pay SAP’s extended maintenance or use third-party support for a couple of years; bake that cost into your roadmap.
• Bridge Option for Last Resort: As mentioned, SAP’s new “SAP ERP, private edition, transition option” for 2031-33 is essentially a premium-priced bridge for those truly unable to complete the transition by 2030. It’s a subscription service that keeps your ECC running in SAP’s cloud, including security patches, at a higher fee than a standard S/4HANA subscription. It requires moving your ECC onto HANA and into SAP’s private cloud by 2030. While this offers an emergency fallback, it’s significantly more expensive (and functionally limited to core ECC). Consider it the option of last resort – better to migrate to S/4HANA properly than pay extra to keep legacy ECC on life support.

Takeaway: Develop a realistic timeline for your S/4HANA migration and align your contracts to that timeline. Build financial buffers to cover any overlap period. An optimized sequence (e.g., cutting over to the right when your new subscription starts) can save millions of dollars.

Don’t hesitate to discuss timing considerations with SAP – for example, asking for a contract that only charges full subscription fees once you’ve decommissioned ECC.

And if you know you’ll need more time, communicate early; you might secure a more favorable interim arrangement now than if you wait until the last minute.

Subscription Pricing and the New User Licensing Model

One of the biggest changes in moving to SAP ERP Private Cloud is how you quantify usage and pay for it:

• Full User Equivalents (FUEs): In ECC, you had hundreds or thousands of named users, each with a license type (Professional, Limited, Employee Self-Service, etc.) that you bought outright. In the cloud, SAP often uses a consolidated metric called FUE for subscriptions. Each user role is assigned a weight (for example, an advanced user might be assigned a weight of 1.0 FUE, while a casual user is assigned a weight of 0.1 FUE). Instead of buying 1000 separate user licenses, you might subscribe to, say, 300 FUEs, which cover those 1000 users in aggregate. This simplifies licensing on paper, but getting the sizing right is tricky. If you over-estimate and lock in more FUEs than you need, you’re stuck paying for them during the contract term. Under-estimate, and you may have to true-up (often at a higher marginal cost or with penalties).
• All-Inclusive Subscription: The subscription price might seem high at first glance, but remember it includes a lot. Here’s a quick comparison of cost elements between on-prem ECC and a Private Cloud subscription:

• Reading the Price Tag: Since the subscription is all-inclusive, it may be quoted as a single figure, such as “$X million per year for 5 years.” It’s important to break this down. Ask SAP for the assumptions behind that number (e.g., the number of users or FUEs, their types, and the required infrastructure size). Only by understanding the components can you compare it to your current costs. For instance, if SAP’s quote is $2M/year, and you know you currently spend $1M on maintenance + $500k on infrastructure + $200k on hardware depreciation, etc., you can see whether there’s a “cloud premium” being added. Often, there is – SAP’s convenience bundle may come at a higher price than doing it yourself. That’s why savvy CIOs price out a DIY scenario (S/4HANA on-prem or hosted on your cloud account) versus the SAP subscription. This doesn’t mean you’ll choose DIY, but it gives you negotiating power to say, “It would cost me $X to run this myself, why is your price $X+Y? Can we remove certain components or adjust the user count to bring it in line?”
• Growth and Flexibility: Consider your growth plans. In a subscription, if your user count or transactions grow, you’ll need to increase your subscription (and costs) accordingly – which is fine if growth is planned. But if you foresee potential downsizing or divestitures, note that cloud contracts typically don’t let you shrink commitments mid-term. Try to negotiate some flexibility (for example, the right to reduce users by, say, 10% at renewal without penalty, or a clause to recalibrate if a business unit is sold). While SAP may not readily agree, raising the point opens the door to at least acknowledging this issue. The worst case is being stuck overpaying for unused capacity for years because business circumstances have changed.

Actionable Insight: Right-size your subscription.

Before signing, do a thorough license audit of ECC usage to estimate how many FUEs or cloud users you truly need.

Many companies find that not all named users are active or require full licenses – cleaning this up can drastically reduce your cloud subscription size (and cost).

Also, clarify what happens if you exceed the contracted metric – is there an automatic charge, or do you negotiate at that time? Clarity on these terms will prevent nasty surprises later.

Negotiating the Contract – Structure and Pitfalls

Adopting SAP ERP Private Cloud means entering into a new type of contract with SAP (or its cloud entity).

Key areas to focus on:

• Contract Structure: Unlike a simple license purchase plus annual support, the cloud contract is a comprehensive service agreement. Expect provisions regarding service availability (SLA), data protection, and responsibilities that were not included in your previous license agreement. It’s a bundle of software and services, so involve both IT and procurement/legal in the review. Multi-year lock-in is standard, typically with an initial term of 3 or 5 years, often accompanied by auto-renewal for 1- or 2-year periods. Know the notice period required if you don’t want to renew (commonly, 6-12 months before the renewal date, you must notify, or it auto-extends).
• Price Escalation: Verify if the subscription fee is fixed for the term or if SAP has built-in annual increases. It’s common to see 3-5% per year escalation clauses. You may negotiate this down or cap it, but you need to ask for it. If your contract is longer than three years, locking in a stable price can result in significant savings. Conversely, if you expect cloud costs might drop (due to infrastructure becoming cheaper), consider shorter terms to renegotiate if needed.
• Termination and Exit: Ensure you understand what happens if you wish to terminate your agreement. There’s usually no early termination right without paying the full term, so you’re essentially committed financially even if you stop using the service. Also, plan the exit strategy at contract end – SAP should commit to providing your data back in a usable format and support migration out (even if just at a technical level). If you think you might ever revert to on-prem or switch to a different solution, negotiate for a conversion option or assistance. Some customers attempt to include a clause stating, “If we leave RISE, we can convert to S/4HANA on-prem licenses at a predefined cost.” Although SAP may resist, it’s worth exploring.
• Indirect Access & Add-Ons: Moving to the cloud does not automatically eliminate concerns related to indirect usage licensing. If you have third-party systems accessing SAP data, make sure your new contract addresses Digital Access (SAP’s model for documents created indirectly) or any API call charges. Ideally, negotiate for some included digital access documents or an approach that won’t significantly increase your costs if your e-commerce site or middleware integrates with SAP. Also, list out any other SAP software you use (SolMan, third-party apps on SAP DB, etc.) – you might need new arrangements for those in the cloud contract or confirm they’re included.
• Hidden Fees and Services: Specify which services are included and which are extra. For example, basic hosting is included, but what about disaster recovery setup, additional non-production systems, or extra storage beyond a certain limit? These can sometimes incur extra fees. Request a detailed breakdown of what your subscription includes. If you encounter vague terms like “standard services” or “base storage”, request specifics (e.g., the number of GB, the number of environments, the level of support response times, etc.). Anything not spelled out may be an upsell later.
• Governance and Changes: Understand how you’ll request changes or additional capacity during the term. The contract may stipulate how you can add users or extra modules and how pricing will be calculated for those (e.g., pro-rated at the same discount level or at the list price?). Also, confirm if you have any renewal protection – will the renewal be at the same discount percentage as the initial purchase, or could SAP increase the price? Try to lock in renewal price protections or, at the very least, a cap on increases at renewal time.

Common Pitfalls to Avoid:

• Assuming “we already paid so that S/4HANA will be free”: Many organizations initially think migrating to S/4HANA is like an upgrade covered by maintenance. It’s not – without a contract conversion, you have to buy S/4HANA licenses afresh. This has caused sticker shock for those unprepared. Set expectations early with leadership about the significant licensing costs associated with the new system (even if you negotiate them down).
• Not Securing Credits/Incentives Upfront: If SAP sales promises “We’ll give you 50% credit for your ECC licenses” or “Sign by Q4 and we’ll include extra cloud platform capacity,” get it in writing in the contract or order form. After signing, your leverage is gone. Every incentive should be reflected in a contract clause or an addendum.
• Overlooking Support Cost Changes: When you swap licenses, your maintenance base resets to zero. For example, if you move to S/4HANA on-prem (not cloud) via conversion, the annual support may increase because it’s now 22% of a new (possibly higher) license value. Budget for this. In the cloud, support is included; however, if you keep some systems on-premises, note that as you drop certain licenses, the remaining ones may still carry full maintenance – there’s rarely an automatic reduction unless negotiated.
• Locking into the Wrong Metrics: Ensure the subscription metrics align with your business objectives. If you choose a user-based metric (FUEs), but your user count is expected to decrease with automation, a different metric may be considered. SAP sometimes offers alternative metrics (like revenue or orders) for certain cloud deals. Choose one that fits your usage pattern to avoid overpaying.
• Ignoring Auto-Renewal and Renewal Terms: A common pitfall is forgetting that after the initial term, the contract auto-renews, and prices can increase. Mark your calendar far in advance to renegotiate or give notice. If you miss the window, you might be locked for another year or more at less favorable terms.
• Insufficient Testing of Assumptions: Did you assume your current named user count directly translates to FUEs? Test those assumptions with a small sandbox or trial if possible. Or engage SAP’s sizing teams to simulate the usage. Surprises after signing (like discovering you need 20% more FUEs for the same workload) can blow your budget. Validate, validate, validate.

Actionable Insight:

Treat the contract like a long-term partnership document, not just a purchase. Involve your legal and sourcing experts to comb through it. Create a checklist of the above points (user counts, credit amounts, flexible terms, support for legacy systems, and exit clauses) and ensure each is addressed to your satisfaction.

Pushing back on terms is expected – even large global enterprises negotiate hard with SAP, and so should you. The goal is a balanced contract that supports your business through this transformation, rather than a one-sided agreement you’ll regret in a year.

Recommendations (Expert Tips)

• Start Early & Educate Stakeholders: Begin internal planning for the ECC to cloud move well before looming deadlines. Educate executives that this isn’t a simple upgrade – it requires budget for new licenses or subscriptions. Early preparation gives you time to secure approvals and align expectations.
• Audit and Optimize Current Usage: Conduct a thorough license audit of your ECC environment before entering into negotiations to ensure optimal usage. Identify inactive users, duplicate accounts, or unused modules. Clean up or reclassify licenses (e.g., shift occasional users to lower-tier licenses now). This ensures you don’t convert unnecessary licenses into the new model, which would inflate costs.
• Build a 5-10 Year TCO Comparison: Create a detailed total-cost-of-ownership model comparing staying on ECC (with extended maintenance or third-party support), migrating to S/4HANA on-premises, and migrating to SAP ERP Private Cloud. Include hardware, staffing, downtime, and likely SAP incentives. Use this analysis to drive negotiations – if SAP’s cloud quote doesn’t beat your on-prem scenario over, say, 5-7 years, push for better pricing or terms.
• Leverage Maintenance Credits: If you’ve paid SAP maintenance for decades, don’t walk away from that value. Negotiate conversion credits aggressively. Aim high in initial asks (e.g., request 100% credit knowing you’ll land lower) and use examples of other customers (if known) to justify your case. Every dollar of credit is a dollar saved on the new contract.
• Consider Phased (Hybrid) Approach: You don’t have to move everything at once. Many enterprises phase their migration over 12 to 24 months. If implemented correctly, a phased approach can reduce risk and facilitate cost smoothing. Use SAP’s Cloud Extension Policy to adjust maintenance as you go. For example, migrate one division to S/4HANA Private Cloud and cut the ECC licenses (and maintenance) for that division. This prevents paying double and allows you to learn on a smaller scale before the full rollout.
• Negotiate Safeguards in the Contract: Don’t accept the boilerplate terms if they don’t fit your needs. Key safeguards to fight for: the right to reduce user counts at renewal, caps on annual price increases, protections against indirect usage fees, and clarity on how/when you can terminate or exit. If you’re a big SAP customer, you have more power than you might think to amend terms – use it.
• Explore Third-Party Support (Cautiously): If your S/4HANA migration is far in the future, consider evaluating third-party support after 2027 to save costs. Be aware of the trade-offs: you’ll save money, but SAP will likely cut off your upgrade path and incentives during that time. It can, however, be a bridge strategy to reduce cash burn while you prepare for the cloud. If you choose this route, plan how to return to SAP’s fold (including budgeting for any penalties) when you’re ready to convert.
• Involve Independent Expertise: Consider engaging an independent SAP licensing advisor or consulting firm to help navigate the negotiation. They can provide benchmarks (e.g., what discount % others got, how much credit is typical, any “gotcha” clauses to watch for). Their fee may pay for itself if they help you avoid a single costly mistake or win a slightly better deal.
• Pilot the Cloud in a Sandbox: If possible, conduct a pilot in the S/4HANA Private Cloud (perhaps under a temporary license or trial) to gauge performance, verify the compatibility of customizations, and validate user counts. This real-world insight will strengthen your position in determining subscription sizing and identifying any additional services you may need (or can do without).
• Keep Leadership Engaged: Finally, treat this licensing migration as a strategic initiative. Regularly update your CIO, CFO, and sourcing VPs on progress, sticking points, and budget implications. Their support (or intervention) may be needed if negotiations reach an impasse. Having executive buy-in on your negotiation stance (“we will walk away if terms aren’t right”) can pressure SAP to be more flexible.

Checklist: 5 Actions to Take

1. Inventory & Baseline: Gather all SAP contracts, license counts, and current maintenance costs. Document what you own and how it’s being used. This is your baseline for any conversion discussion.
2. Engage with SAP (or a Trusted Partner) for Mapping: Initiate discussions with SAP or a trusted advisor to map your ECC products/users to their S/4HANA equivalents. Ask SAP for an initial conversion proposal (including credits and subscription estimate) – this gives you a starting point to evaluate.
3. Run Cost Scenarios: Develop a multi-year cost scenario analysis. Include: sticking on ECC with extended support, moving to S/4 on-prem (if that’s an option for you), and moving to SAP ERP Private Cloud. Factor in one-time migration costs as well. Use this to identify the most cost-effective path and as evidence in negotiations (“our analysis shows your current offer would cost 30% more than staying on-prem – help us close that gap”).
4. Optimize and Right-Size: Before signing anything, review your license usage and determine the minimum required cloud subscription scope to ensure optimal efficiency. Right-size user types, eliminate unused licenses, and consider future needs. Share this sizing with SAP to ensure the quote reflects these optimizations. Don’t let them simply convert your old entitlements number-for-number if your actual usage is leaner.
5. Negotiate Contract Terms: When you have a draft offer on the table, scrutinize the contract. Assemble a cross-functional team (IT, procurement, legal) to review. Negotiate improvements: e.g., “We need a 12-month notification window for non-renewal instead of 3 months,” or “Include two extra sandbox environments at no charge,” or “Cap price increase at 2%/year.” Use your leverage – if SAP knows you have alternatives (such as delaying third-party support or considering a competitor), you can extract better terms. Don’t rush; ensure that all agreed-upon points are included in writing before final signature.

FAQs

Q1: What happens to our existing ECC licenses when we migrate to SAP ERP Private Cloud?
A: In most cases, your ECC perpetual licenses will be terminated once you fully move to the cloud subscription. You won’t be using those licenses anymore, and SAP doesn’t “carry them over” one-for-one. Instead, you start a fresh subscription agreement for the cloud. The good news is you can negotiate to get credit for those sunk costs – effectively a discount on the new subscription based on the value of the licenses you give up. Think of it as trading in your old software assets. But if you don’t negotiate it, those old licenses simply go unused (and you stop paying maintenance on them). Always clarify with SAP how your legacy investments are being acknowledged in the new deal.

Q2: Can we use our current maintenance payments to offset the cost of the new cloud subscription?
A: Indirectly, yes. While you won’t literally transfer a maintenance contract into a subscription, SAP often accounts for your maintenance stream in its pricing. There are also formal programs (like the Cloud Extension Policy) that let you reduce maintenance fees in proportion to new cloud spend. Practically, suppose you’ve been paying $1 million per year in maintenance. In that case, SAP might initially propose a cloud subscription that’s somewhat higher but “close” to that run-rate (since the subscription includes maintenance plus other services). The key is to negotiate so you’re not paying both at full rate simultaneously. For example, you could time the maintenance contract end with the subscription start, or ask for a transitional discount on the subscription while you still run ECC. Maintenance payments have also been used by customers as leverage: “I’ll commit that maintenance budget to your cloud, but I expect an equivalent value in return (in terms of capacity or discount).” Use every maintenance dollar as a bargaining chip – you’ve earned it over years of support fees.

Q3: Will we be paying for ECC and the new SAP Private Cloud simultaneously during the migration?
A: It can happen, but you should strive to minimize it. During migration, there may be months when your ECC system remains live (and you continue to pay for maintenance or support), while your S/4HANA Private Cloud subscription has already commenced. This overlap means double spending on ERP. Strategies to reduce this include aligning contract start dates (e.g., not starting subscription billing until a key migration milestone is reached), utilizing SAP’s policy to drop maintenance on migrated modules, or negotiating a grace period. For instance, some companies negotiate that the first 3-6 months of the cloud subscription are at a reduced cost, specifically because they will still be winding down their ECC implementation during that period. Realistically, a brief overlap is common (for cutover, data migration, etc.), but with careful plannin,g you shouldn’t be paying in full for both environments for an extended time.

Q4: How is the subscription pricing structured in SAP ERP Private Cloud, and how does it compare to what we pay now?
A: SAP’s private cloud subscription pricing is typically custom-quoted based on your system size and users. It often uses the Full User Equivalent (FUE) model – essentially a weighted user count – or sometimes simpler metrics (number of users, volume of transactions, etc.). You will get a single annual price that includes everything (software, support, infrastructure). To compare with current costs, break down your current spend into its components: license amortization, annual maintenance, hardware costs, database licenses, IT personnel for upkeep, etc. Add those up over a multi-year period. Then compare to the multi-year subscription quote. Many enterprises find that the subscription is higher on an annual basis than just maintenance was, but remember it covers more. For example, if you pay $2 $2 $2M/year subscription and you used to pay $1M in maintenance, the extra $1M is ostensibly covering what you spent on servers, storage, and perhaps premium support services. The important part is ensuring the subscription is right-sized (you’re not paying for far more users or capacity than you need) and that it’s competitive. SAP doesn’t publish price lists, so you must rely on negotiation and possibly some industry benchmarks. Don’t be shy to ask SAP to explain the pricing model: “How many users is this based on? What type of users? What if we have more or fewer? Is the infrastructure sizing for production only, or does it include test systems?” This transparency will help you judge if it’s a good deal.

Q5: What contract terms should we be most careful about when moving to SAP’s private cloud?
A: Several terms deserve special attention:

• Term and Renewal: Ensure you understand the initial term length and the renewal process. Avoid auto-renewing for long periods without a chance to renegotiate. Try to include a clause that any renewal will be mutually agreed or at least limited to a one-year extension at a time, so you maintain flexibility.
• Price Increases: If the contract allows SAP to increase fees annually or at renewal, try to cap those (e.g., “max 3% per year” or tied to an inflation index). Otherwise, you could face budget surprises in year 4 or 5.
• Volume Flexibility: As mentioned, you generally can’t reduce the user count or usage metric mid-term. However, you may be able to negotiate the right to reduce at renewal or to carry over unused capacity (some contracts allow for a limited rollover of unused credits, etc.). Ensure you’re comfortable with the level of commitment.
• Exit and Downgrade: Clarify what happens if you decide to leave the cloud at the end of the term. Do you have any rights to transition back to on-premises (likely not without purchasing new licenses, but good to know)? And what about downgrading services – for instance, if you realize you don’t need a certain component in year 2, can you drop it next term? The contract should specify whether the scope is fixed or can be adjusted.
• Data Ownership and Access: Confirm that your data is your own and that SAP will provide a method to retrieve all your data upon termination in a readable format. Also, understand the assistance SAP provides for transitions (they might keep systems running read-only for a few weeks after term for data extraction, etc. – if so, get that in writing).
• Service Levels and Penalties: Review the SLA (service level agreement) for uptime, support response, etc. Ensure it meets your business requirements (e.g., if you operate 24/7 globally, does SAP’s support cover that?). The contract should include service credits or penalties if they fail to meet these SLAs – not that credits compensate for downtime, but it keeps them accountable.
• Indirect Usage Clause: Very important – ensure the contract includes the resolution of any indirect access licensing. SAP introduced a model for indirect/digital access, and many RISE contracts include a certain allowance of “documents” created indirectly. Ensure it’s sufficient for your needs or negotiate additional capacity so you’re not surprised later with extra fees for, say, your e-commerce orders exceeding SAP’s capacity.

In summary, read the fine print and negotiate the contract as thoroughly as you would a major outsourcing agreement. Once you move to the private cloud, SAP becomes not just your software provider but also your service provider, so you want those terms to be crystal clear and fair.

Read about our SAP Advisory services for Rise.

Do you want to know more about our SAP Advisory Services?

Please enable JavaScript in your browser to complete this form.

Name *

First

Last

Email *

Company

Message *

Submit