SAP Cloud & Hybrid Licensing Strategies: Navigating On-Prem and Cloud in One Environment
Hybrid SAP landscapes have become the new norm in 2025.
Companies now juggle traditional on-premise systems (like ECC or SAP S/4HANA) alongside cloud solutions (such as SuccessFactors, Ariba, and SAP’s Business Technology Platform). This mix introduces significant licensing complexity.
Crafting a proactive SAP hybrid licensing strategy is critical to avoid cost traps and compliance risks.
In this guide, we explore how to navigate SAP’s on-prem and cloud licensing in one environment with an eye on flexibility, cost efficiency, and staying in SAP’s good graces.
The Hybrid Licensing Reality — On-Prem, Cloud, and Everything in Between
Most large enterprises today run a blend of on-premise and cloud SAP software.
This hybrid SAP licensing reality means you might have overlapping user entitlements and different contract models working in parallel.
For example, you could be running legacy SAP ERP on-premise while also rolling out new cloud-based SAP applications. Without a unified strategy, it’s easy to overpay or get tangled in compliance issues.
Key challenges in a hybrid environment include coordinating user licenses across systems and managing multiple agreements.
A user might be covered under a perpetual on-prem license and also need access to a cloud module double licensing can occur if you’re not careful.
Mismatched contract terms and metrics (users vs. documents vs. cloud credits) add another layer of complexity. All this calls for a robust hybrid licensing approach to ensure you only pay for what you need and use.
On the upside, a well-negotiated hybrid model can offer flexibility. You can leverage cloud subscriptions for agility and innovation, while keeping cost-efficient on-prem licenses for stable core systems.
The goal is to balance both worlds: get the scalability of cloud services without discarding the value of your existing investments.
BTP Licensing Models: CPEA, BTPEA, and Consumption-Based Flexibility
SAP Business Technology Platform (BTP) is often the linchpin connecting on-prem and cloud systems.
SAP offers multiple BTP licensing models, and choosing the right one can greatly impact your costs and flexibility:
- CPEA (Cloud Platform Enterprise Agreement): A consumption-based model where you purchase a pool of SAP cloud credits (also called Cloud Consumption Units) upfront. These credits form a flexible currency that you can spend on any eligible SAP BTP services as needed. Instead of signing separate subscriptions for databases, integration, analytics, etc., CPEA gives one bucket of credits to allocate across all those services. This offers tremendous flexibility – you can experiment and scale services on demand – but it requires good planning to avoid running out or leaving unused credits on the table.
- BTPEA (Business Technology Platform Enterprise Agreement): Essentially the next evolution of CPEA, tailored specifically to SAP BTP. Functionally, it’s very similar: you commit to an upfront credit pool and consume services flexibly. The difference is scope – BTPEA is laser-focused on BTP services. For organizations heavily invested in building extensions and integrations on BTP, a BTPEA can provide volume discounts and more targeted incentives for that platform. In short, CPEA covers a wide range of SAP cloud offerings (potentially beyond BTP), while BTPEA is meant for BTP-centric usage under similar consumption terms.
- Pay-As-You-Go (PAYG): SAP BTP also offers a true pay-as-you-go option with zero upfront commitment. You simply activate services and pay monthly for what you use, at standard rates. This model maximizes flexibility and is great for initial experiments, prototypes, or unpredictable workloads. The trade-off is that cost–per–unit prices are higher than under an enterprise agreement, since you get no committed volume discounts.
- Subscription Model: In some cases, you can license BTP services via a fixed subscription (e.g., a set capacity of an SAP cloud database or a specific SaaS service on BTP). Subscriptions provide predictable costs and sometimes deeper discounts for steady-state usage, but lack the fluid flexibility of credits or PAYG. You’re paying for a certain level of capacity, whether you use it fully or not.
Choosing between these models hinges on your plans and budget posture. If you foresee consistent or heavy use of BTP services, a consumption-based enterprise agreement (CPEA/BTPEA) can be cost-efficient but only if you right-size the commitment.
On the other hand, if your BTP needs are small or sporadic, pay-as-you-go might save money and risk.
Many companies actually combine models: for example, use an enterprise agreement for core planned projects and keep a PAYG account for ad-hoc innovation so it doesn’t eat into your credits.
The key is to align the model with your project scope and to revisit it as your cloud footprint grows.
Further insights, SAP BTP Licensing & Cost Optimization: Getting the Most from Your Cloud Credits.
Cloud Credits Strategy: Avoid the “Use-It-or-Lose-It” Trap
SAP’s cloud credit system can be a double-edged sword. Cloud credits (the currency in CPEA/BTPEA agreements) typically come with an expiration date – often tied to your contract year or term.
If you don’t use them within that period, they expire. In other words, it’s “use it or lose it.” This trap has caught many companies that over-committed credits and ended up letting unused value go to waste.
To avoid wasting budget, plan your cloud credit consumption realistically.
When negotiating a credit pool, be conservative and base it on concrete project roadmaps. It’s safer to slightly under-commit and then top up later than to over-commit and scramble to use credits at year-end.
Also, monitor your consumption closely via the SAP BTP cockpit or monitoring tools.
Set up alerts or dashboards to track credit usage in real time. This will allow you to react if usage is lower than expected, perhaps by quickly onboarding a new workload to utilize excess credits.
Savvy SAP customers also negotiate for flexibility around credits.
While SAP’s standard policy is strict on expiration, you may have leverage to discuss options like rollover of unused credits to the next period, or a “true-down” adjustment.
For instance, some enterprises negotiate the ability to carry over a percentage of unused credits into the next year, or to reduce their committed spend in a following term if adoption lags.
These concessions aren’t guaranteed, but it doesn’t hurt to ask during negotiations, especially if SAP is eager to win or renew your business.
The bottom line: treat cloud credits as a valuable asset manage them actively so every dollar delivers innovation, and push for terms that reduce the risk of unused credits.
Hybrid Licensing Scenarios — Practical Alignments & Avoiding Double Billing
A one-size licensing approach doesn’t fit all. Different hybrid scenarios require different tactics to stay cost-efficient and compliant.
Here are three common scenarios and how to handle them:
- On-Prem + BTP Integration: Many companies connect on-premises SAP applications with new cloud-based services on BTP (for example, building a custom extension app on BTP that pulls data from your on-prem ECC system). This is powerful, but be cautious of overlapping licensing. If on-prem users or processes call BTP services, you might end up “double paying” – once for the on-prem license and again for the BTP resource usage. To avoid surprises, design your architecture carefully. Offload only those workloads to BTP that truly need the cloud scale or innovation, and check if any existing on-prem license entitlements cover similar functionality. Sometimes, an on-prem SAP engine (already licensed) could handle a task that you’re about to pay for again in BTP. The lesson: align your on-prem and cloud usage to complement each other, not duplicate. Ensure integration scenarios are reviewed from a licensing perspective so you’re not inadvertently paying twice for the same business process.
- Dual-Use Rights During Migrations: When migrating from on-prem SAP to cloud (say ECC to S/4HANA Cloud), you’ll likely run both environments in parallel for some time. Without precautions, this can mean double licenses, which is both costly and against SAP rules. The good news: SAP often allows temporary dual-use licensing during migrations, but you must explicitly negotiate and document it. For example, you might secure a 12-month period where you can operate your old ECC system read-only while the new S/4HANA is live, without paying for two full licenses. Always include transition provisions in your contract. Define the allowed overlap duration and any limits (e.g., the legacy system must be used for non-production activities or read-only after cutover). This way, you won’t be penalized in an audit for keeping the old system running alongside the new. Dual-use rights give you breathing room to transition users and data gradually, but they are not automatic – make sure they’re in writing as part of your deal.
- Indirect Access & Hyperscaler Integrations: In a hybrid world, your SAP systems are often connected to third-party platforms, data lakes, or analytics on hyperscalers like AWS and Azure. This raises the tricky issue of indirect access licensing. Indirect access means non-SAP systems or users interacting with SAP data – for example, a cloud data warehouse reading SAP tables, or an IoT sensor updating an SAP record. Under SAP’s newer Digital Access model, you license this by the documents created in SAP (e.g., number of sales orders, invoices, etc., generated via external systems) instead of by user. It’s crucial to plan for these scenarios. If you’re integrating SAP with external apps, ensure you have the proper licensing for that indirect usage. That could mean purchasing a block of Digital Access documents or an add-on that covers those interfaces. Don’t assume your base license covers unlimited third-party use; it likely doesn’t. Also, be mindful of data flowing through platforms like Azure: even if it’s just analytics, if those analytics platforms trigger any transactions back in SAP, that counts as usage. The key is to clarify indirect access terms in your contracts. Many companies proactively adopt the digital document licensing to avoid surprise fines (it provides clearer rules than the old named-user approach for externals). In short, when connecting SAP to anything outside of SAP, put on your compliance hat – identify what interactions occur and license them appropriately to stay safe.
Leveraging Enterprise Cloud Agreements for Hybrid Efficiency
SAP offers enterprise-level agreements and programs that can simplify hybrid licensing and potentially save money – but only if aligned with your actual usage. One example is SAP’s Cloud Extension Policy and related transformation programs.
These allow you to convert or credit your existing on-prem investments into cloud subscriptions. For instance, maintenance fees from unused on-prem licenses can be applied toward new cloud services, reducing duplicate costs.
If you’re planning a big cloud move, ask SAP about converting your sunk maintenance into cloud credits or subscriptions so you’re not paying both at once.
Another approach is to sign enterprise cloud agreements that bundle multiple SAP cloud services under a single contract.
SAP’s RISE with SAP offering is a well-known bundle: it packages S/4HANA Cloud with infrastructure, support services, and sometimes throws in extras like SAP BTP credits or SAP Business Network access.
Similarly, a CPEA can be seen as a bundle of various BTP services. The advantage of bundling is the opportunity for a volume discount and a single negotiation for all items. However, beware of the shelfware problem.
Vendors often entice you to sign up for more cloud products or credits than you immediately need by dangling discounts. Ensure any bundled services align with your adoption schedule.
If you get a chunk of SuccessFactors or Ariba licenses as part of a transformation deal, have a clear timeline for rolling those out. Unused services in a bundle are just wasted spend, even if they were “discounted.”
To leverage these agreements effectively, tie them tightly to your roadmap.
If years 1 and 2 will focus on core ERP in the cloud, but procurement (Ariba) won’t come until year 3, try not to start paying for Ariba in year 1 of a bundle. Negotiate flexibility to add services when ready, or at least structure ramp-up clauses.
Also, keep an eye on cloud credits included in enterprise deals like RISE – if you get BTP credits as part of it, manage them as discussed earlier so they deliver value.
In summary, enterprise agreements can yield hybrid efficiency by consolidating spend and unlocking cross-product deals, but they only save money if you use what you buy. Be a tough customer: only agree to terms and products that match your actual cloud migration and usage plan.
Negotiation Tactics for Hybrid SAP Licensing
When dealing with SAP, you have more leverage than you might think especially in a hybrid context where SAP wants to keep your on-prem business while selling you cloud offerings.
Here are some strategic negotiation tactics to consider:
- Convert Maintenance into Subscription Credit: If you’re paying hefty annual maintenance on on-prem licenses but moving to the cloud, push SAP to apply those payments toward your new subscriptions. This is often possible under SAP’s conversion programs. It essentially lets you trade in the old maintenance fees as a discount on cloud services, so you’re not paying double during the switch. Make it a condition that any overlapping period is financially neutral.
- Align Contract End Dates (Co-Term Agreements): Try to synchronize the end dates of your major SAP contracts – both on-prem and cloud. When all your agreements come up for renewal together, you gain significant leverage. You can negotiate the entire relationship at once, and even play off options (like considering a competitor or a different SAP package) with greater credibility. Co-terming also prevents being locked into one side (e.g., stuck with on-prem maintenance until 2027 while your cloud contract expires in 2025). Synchronized renewals put you in control of deciding the mix of on-prem vs. cloud at that juncture with maximum flexibility.
- Protect Legacy Discounts: Over the years of using SAP on-prem, you might have negotiated substantial discounts on license list prices. When shifting to cloud contracts, don’t lose that hard-won pricing. Ensure that SAP takes into account your legacy investments. This could mean getting credit for the original license value in conversion calculations, or simply negotiating the cloud subscription at an aggressive discount level because of your long-term status as a customer. The goal is not to start from scratch at the list price for cloud. Remind SAP of the deal history and insist on comparable percentage discounts or better in the new hybrid arrangement.
- Negotiate Flex and Exit Clauses: Cloud subscriptions often have less flexibility than on-prem (where you at least owned the software perpetually). Insist on clauses that allow adjustments. For example, the ability to reduce users or services at renewal if your needs drop. Try to cap annual price increases or secure renewal price protections upfront. And if you’re unsure about a multi-year commitment, seek shorter terms or exit options without punitive penalties. Having an “out” or the ability to downsize keeps SAP motivated to earn your business continuously.
- Include Indirect Use in Agreements: To avoid future surprises, explicitly address indirect access and Digital Access in your contracts. If possible, negotiate an enterprise-wide indirect usage clause or a fixed fee that covers certain third-party integrations, rather than leaving it open-ended. Getting these terms in writing during the deal (when you have leverage) is far better than facing an audit later and paying list price for unlicensed use.
Every negotiation point boils down to maintaining flexibility and control. SAP’s default contracts often favor lock-in – your job is to introduce ways to stay agile.
Use the hybrid nature (SAP wants cloud adoption, but you still have viable on-prem options or competitors) to your advantage.
In the end, a well-negotiated hybrid license deal will let you pivot as needed without punitive costs.
Hybrid Compliance — Audit Readiness Across Platforms
Running a hybrid SAP estate means you have to stay compliant under both traditional and cloud rules.
SAP’s auditors can scrutinize your on-prem license use (user counts, package usage, etc.) and separately review your cloud subscription usage.
Non-compliance in either area could lead to hefty penalties or forced purchases, so it’s essential to be audit-ready on both fronts.
Start by implementing regular internal audits and license tracking. For on-prem systems, use SAP’s tools like the License Administration Workbench (LAW) or System Measurement programs to track named users and engine metrics.
If you have many SAP systems, aggregate the data to a central license dashboard (Solution Manager can help with this) to see your total license consumption versus entitlements. Identify any license gaps or excesses proactively.
It’s much better to clean up dormant accounts or adjust license types internally than to have SAP find the issue.
On the cloud side, take advantage of usage reports in the SAP BTP cockpit or cloud admin portals. Monitor how your consumption compares to your subscription limits or credit allocations.
Ensure you’re not unknowingly exceeding contract allowances (like extra storage, API calls, or user counts beyond your subscription).
If something is trending over your entitlement, you can address it (by either optimizing usage or arranging to purchase more before it becomes an audit finding).
Consider investing in SAP license compliance tools for a more automated overview. There are third-party solutions that consolidate on-prem and cloud license data to give a unified compliance view.
Whether through third-party software or your own diligence, maintain an up-to-date license position for both on-prem and cloud.
Document any special licensing terms you have (such as dual-use rights or approved indirect access) so that if an audit happens, you can show the auditors the exact clauses that cover your scenario.
In a hybrid scenario, it’s also wise to run simulated audits periodically. For example, have your team simulate an SAP audit by using SAP’s measurement tools and checking results against contracts.
This exercise can catch misunderstandings – such as a metric that you thought was licensed one way, but SAP measures differently.
By being continuously audit-ready, you not only avoid compliance nightmares but also gain insights to optimize usage (like spotting under-utilized licenses that you can reallocate or retire).
In short, treat compliance as an ongoing process. You want a no-surprises environment. This will give you confidence to expand your hybrid landscape without fear that some licensing boogeyman is lurking.
Plus, if you ever decide to renegotiate or expand licenses, having clean compliance records puts you in a position of strength with SAP.
Case Example — Credit Flexibility Unlocks Hybrid Savings
Consider a company that needed to support spiky development and testing workloads on SAP. Traditionally, they might size their on-prem environment for peak usage or buy fixed cloud subscriptions, paying for a lot of idle capacity.
Instead, this company adopted a flexible credit-based approach on SAP BTP for its development and test systems.
During daytime working hours, they spun up smaller instances and during nightly test runs, they scaled up larger services – all funded from their cloud credit pool.
By aligning resource usage with actual need (and turning things off during down times), they made their credits stretch further.
At the end of the year, they had utilized nearly all their allocated credits to support the project, avoiding roughly 20% of the cost compared to a fixed subscription model that would have been sized for peak usage all the time.
This example illustrates the effectiveness of consumption-based licensing when utilized strategically. Because the credits provided agility, the company only “paid” (in credits) for computing power when it was required. They avoided the common scenario of over-provisioning and double-paying for both on-prem dev systems and cloud services concurrently.
The key takeaway: in a hybrid model, rightsizing and timing your usage can unlock significant savings. Cloud credits and hybrid architecture enable you to optimize across environments – but they require active management.
Those who treat SAP licenses and cloud resources dynamically, converting them into variable costs rather than fixed costs, often experience substantial efficiency gains.
FAQ — SAP Hybrid Licensing Clarified
Q: How does CPEA differ from BTPEA?
A: CPEA (Cloud Platform Enterprise Agreement) is a broad consumption contract where you buy credits to spend on various SAP cloud services (especially SAP BTP). BTPEA (BTP Enterprise Agreement) is very similar but focused exclusively on SAP BTP services.
In practice, both work as credit pools; BTPEA is just a BTP-specific flavor of the consumption model for organizations deeply invested in SAP’s platform services.
Q: Can unused BTP credits roll over to the next period?
A: Not by default. Typically, any unused SAP BTP cloud credits expire at the end of the defined period (year or contract term).
However, you might negotiate special terms to roll over a portion of unused credits or adjust future commitments if you under-utilize. It’s wise to assume “no rollover” unless explicitly stated in your contract, and plan usage accordingly.
Q: How can we avoid indirect access fines with SAP?
A: The best approach is to be proactive: understand all the third-party systems and apps interfacing with SAP. Then ensure you’re licensed appropriately under SAP’s indirect access rules. Most companies opt into SAP’s Digital Access licensing, which charges by document creation. By counting and licensing those documents (or negotiating an adequate volume or an unlimited indirect use clause), you sidestep the old named-user trap. Regularly review interfaces – if, say, a new e-commerce platform is connected, validate that its activity in SAP is covered. In negotiations, try to include indirect usage in the deal to avoid any gray areas. Ultimately, transparency and good faith with SAP (by disclosing your integration use cases) can transform indirect access from a potential audit bombshell into a manageable, fixed cost.
Q: What dual-use rights should I secure during an SAP migration?
A: Always secure a dual-use period where you can run both the old and new SAP systems without extra charge. For example, if migrating ECC to S/4HANA, negotiate a clause allowing you to keep ECC operational (in read-only or limited mode) for 6–12 months while S/4HANA goes live. Make sure it covers production if needed, because you may have a transition phase. Also, clarify if new transactions are allowed in the old system or not. The main point is to avoid a scenario where SAP expects you to license all your users twice during the migration. With an agreed-upon dual-use window, you can transition gradually and decommission the old system on a reasonable timeline, without incurring compliance risks.
Q: Why co-term on-prem and cloud contracts?
A: Co-terming means lining up the renewal dates of your various SAP agreements. This is hugely beneficial for a hybrid licensing strategy. When everything expires together, you have a holistic view of your SAP investment. You can make strategic decisions (move more to cloud, move some back on-prem, switch providers, etc.) without being locked in by one unaligned contract. It also gives you negotiating clout – SAP knows you could potentially walk away from a large chunk of business at once, which pressures them to offer better terms. Conversely, if your on-prem deal ends years after your cloud subscription, SAP can play hardball on the cloud renewal (since they know you’re stuck on-prem anyway, or vice versa). Synchronized renewals put you in control and ensure your hybrid strategy stays coordinated across all parts of your SAP landscape.
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