S/4HANA Licensing Migration Paths – ECC Conversion, RISE Adoption, and Hybrid Models
Mapping S/4HANA Licensing Migration Paths
Migrating from SAP ECC to S/4HANA is not just a technical upgrade – it’s a strategic business decision with significant licensing implications.
Organizations typically consider three core migration paths, each with distinct cost models and benefits:
- Perpetual On-Premise Conversion: Convert existing ECC licenses to S/4HANA on-premise licenses. This path preserves your current entitlements and contract terms, essentially swapping ECC licenses for their S/4HANA equivalents. It lets you leverage prior investments and maintain a CapEx model with ongoing maintenance, ensuring continuity and control.
- Subscription via RISE with SAP: Move to a subscription-based model where S/4HANA is delivered as a cloud service. In this “subscription-first” approach, software, infrastructure, and basic managed services are bundled into a single contract. It shifts ERP spend to OpEx and often accelerates innovation cycles while reducing in-house IT overhead.
- Hybrid Licensing: Utilize a combination of on-premises licenses and cloud subscriptions. For example, core systems might stay on-premise while new capabilities or regions are deployed via RISE. This provides flexibility to meet phased rollout plans or regulatory requirements, but adds complexity that must be carefully managed.
Each model affects IT budgets, risk, and agility differently. A thorough upfront assessment of these options ensures your S/4HANA migration path aligns with both your financial strategy and transformation roadmap.
ECC to S/4HANA: License Conversion Options
When converting legacy ECC licenses to S/4HANA, SAP offers two approaches: product conversion and contract conversion, each with different impacts on cost and continuity:
Product Conversion: This incremental approach replaces your existing ECC licenses with equivalent S/4HANA licenses, maintaining your original contract terms intact. You retain your negotiated discounts and replace ECC products with S/4HANA versions.
A key benefit is dual-use rights: during migration, you can run ECC and S/4HANA in parallel without incurring duplicate costs, making product conversion ideal for phased rollouts. It preserves your entitlements without requiring a contract overhaul, but it won’t reduce your license footprint – shelfware remains, and you continue to pay maintenance on unused licenses.
Contract Conversion: This involves replacing the entire contract. You terminate your ECC agreement and sign a new S/4HANA contract. In return, SAP grants license conversion credits, valued at the equivalent of your existing licenses, to be applied toward the new licenses. This one-time reset lets you redesign your license portfolio – drop obsolete modules, right-size user counts, and adopt new S/4HANA metrics. The trade-off: you move to SAP’s latest licensing rules and lose any legacy perks from your old contract.
Timing is critical. SAP’s conversion credit incentives are gradually shrinking – early movers historically received the highest credits, while late movers will get less. Acting sooner ensures you maximize your credit value and avoid double payment for overlapping ECC and S/4HANA usage.
Understanding RISE with SAP Licensing Model
RISE with SAP is a subscription-based cloud offering designed to streamline the adoption of S/4HANA. Instead of buying software outright, you pay SAP a subscription fee that bundles the S/4HANA software, cloud infrastructure, and basic technical services (maintenance, updates, monitoring) under one contract.
A RISE subscription typically involves a multi-year commitment, shifting ERP spending from a capital expense to an operating expense. This OpEx model eliminates upfront license costs and can accelerate deployment since infrastructure and upgrades are handled by SAP. For many CIOs shaping their 2025 SAP licensing strategy, the simplicity and agility of this model are appealing – it offers quick access to the latest innovations without the internal infrastructure burden.
Successful RISE adoption still demands savvy negotiation. Key levers include committing to larger volumes or bundling additional SAP cloud services to win discounts. It’s also wise to include flexibility in the contract (e.g., rights to adjust user counts or swap services as needs change) and to seek migration assistance from SAP as part of the package. With careful negotiation, the subscription-first path can deliver strong value, but it’s crucial to weigh its cost against your long-term needs before fully embracing RISE.
The Hybrid Model – Strategic Middle Ground
A hybrid SAP licensing model blends on-premise and cloud deployment strategies, offering a middle ground for S/4HANA migration.
For example, a company might keep certain S/4HANA modules on-premises under perpetual licenses while moving other functions or regions onto RISE with SAP. This approach is particularly suitable for phased rollouts or when certain systems must remain on-premises due to regulatory requirements.
The main advantage of a hybrid is flexibility – you leverage cloud benefits where they make sense while keeping sensitive or critical workloads in-house. However, that flexibility introduces additional complexity. Managing dual license models requires vigilance to avoid inefficiencies.
A key risk is double licensing – inadvertently paying for the same users or processes twice. To mitigate this, negotiate dual-use rights or transition clauses with SAP so you can run both old and new systems in parallel without incurring duplicate charges.
When executed well, a hybrid model enables you to optimize each environment for its strengths, but it requires strong governance and clear contract terms to prevent overlap and surprises.
Decision Frameworks – Perpetual vs Subscription vs Hybrid
Deciding between a perpetual model, a subscription model, or a hybrid of both is a strategic exercise in balancing cost, control, and complexity.
Perpetual vs. Subscription: A perpetual license (on-premise) requires an upfront capital expenditure (CapEx) investment plus annual maintenance, but grants you full control over the system (infrastructure, customizations, and upgrade timing) and indefinite usage rights. In contrast, a subscription model like RISE shifts costs to OpEx with no upfront license fee – you pay an ongoing subscription. Subscription brings flexibility (easy to scale users or modules) and ensures you’re always on the latest software version, but it may lead to higher cumulative costs over a long period. It also shifts more responsibility to the vendor’s cloud. The decision often hinges on financial preferences (CapEx vs. OpEx) and the balance between control and convenience you need.
Hybrid vs. Single Model: A hybrid strategy offers flexibility and risk diversification, but at the expense of increased licensing complexity. Splitting workloads between on-premise and cloud lets you gain some cloud benefits while keeping critical systems in-house. This can smooth your transition, but it means managing two licensing regimes in parallel. A single-model strategy (either all on-premises or all-cloud) is simpler to administer and avoids overlap, yet it concentrates the downsides of that choice. For example, going “all cloud” maximizes agility but leaves you dependent on SAP’s platform and pricing, whereas going “all on-prem” maximizes control but could leave you lagging in innovation. Your choice should align with your risk appetite, IT capabilities, and long-term roadmap.
Ultimately, the best path is the one that aligns with your financial strategy and transformation goals – balancing cost optimization with the agility and control your business requires.
Optimization Playbook for License Migration
Executing a smooth and cost-effective S/4HANA license migration requires diligent planning and negotiation. Use the following best practices as a playbook to maximize value and minimize risk:
- Inventory current entitlements: Begin with a full inventory of your ECC licenses and users. Identify unused or underutilized licenses (“shelfware”) and note their maintenance costs. This baseline shows the true value of your entitlements and informs how much credit you can carry into S/4HANA.
- Model the TCO for each path: Compare the multi-year total cost of ownership for different paths – staying on-premise, moving to RISE, or a hybrid mix. Include all costs: license or subscription fees, annual maintenance, infrastructure (data center vs. cloud), and support. A 5- or 10-year projection for each scenario will highlight which option delivers better long-term value for your business.
- Leverage timing and incentives: Plan your migration to coincide with SAP’s incentive programs and deadlines. SAP often provides better conversion discounts or credits at year-end or right before support milestones. By engaging with SAP when incentives are at their peak, you can lock in higher credit values and potentially secure extras, such as funding for migration services.
- Negotiate flexible terms: Build flexibility into your new S/4HANA agreements. Ensure you have dual-use rights so that legacy ECC and new S/4HANA systems can run in parallel during the transition without incurring additional costs. If you opt for RISE, negotiate provisions to scale usage and clarify pricing for future growth. Also, aim for safeguards against unexpected price hikes to keep your costs predictable.
By following this playbook, you can ensure a controlled and cost-optimized S/4HANA licensing migration. The key is to act deliberately and early. With SAP’s ECC support ending in 2027 and conversion incentives declining each year, now is the time to solidify your migration path. A proactive licensing strategy ensures that when your organization goes live on S/4HANA, it has the right entitlements at the right cost – fully aligned to your business objectives.
Read about our SAP License Optimization Service.
