SAP Negotiations

SAP License Negotiation Guide (S/4HANA)

SAP License Negotiation Guide (S4HANA)

SAP License Negotiation Guide (S/4HANA)

Negotiating SAP S/4HANA licenses is a high-stakes endeavor for global enterprises.

It demands a clear strategy to manage complex licensing models and significant costs.

This guide provides CIOs, CFOs, and procurement leaders with a concise SAP license negotiation guide (S/4HANA) that covers key license options, cost drivers, negotiation tactics, and common pitfalls to avoid, helping you secure the best terms for your organization.

S/4HANA Licensing Models and Options

SAP S/4HANA can be licensed in several different ways, and understanding these options is the foundation of any effective negotiation.

  • Perpetual On-Premise License (CapEx): A one-time purchase to run S/4HANA in your data center. You pay a large upfront fee for the software, and then an annual maintenance fee (~20% of the license cost) for support and updates. This model gives full control and indefinite usage rights. For example, an enterprise might pay $1 million upfront for S/4HANA on-premises and approximately $ 200,000 per year in support. Benefit: You own the asset and can use it as long as needed. Drawback: higher initial cost plus responsibility for infrastructure and upgrades.
  • Subscription (Cloud SaaS or Private Cloud): A recurring subscription (OpEx) to use S/4HANA hosted by SAP or a cloud provider. The subscription fee typically bundles software, infrastructure, and standard support into one annual or monthly cost. Upfront costs are minimal, and SAP handles updates. Benefit: faster deployment and scalable costs. Drawback: if you stop subscribing, you lose access. Over several years, subscription fees can equal or exceed on-premises costs, so evaluate the Total Cost of Ownership (TCO) over 5 years or more.
  • RISE with SAP (Bundle): An all-in-one offering that packages S/4HANA Cloud (plus hosting and SAP services) under one contract. RISE simplifies procurement (one contract, one bill) and often includes migration tools or credits for retiring old licenses. Benefit: convenience and accelerated transformation. Drawback: less flexibility โ€“ youโ€™re locked into SAPโ€™s ecosystem and must trade in existing licenses. (This guide focuses on core S/4HANA licensing; RISE is mentioned for context but is a broader subscription bundle.)

Each model has trade-offs. On-prem vs. cloud affects whether you treat S/4HANA as a capital investment or an ongoing service.

CIOs and CFOs should jointly decide which model aligns with the companyโ€™s financial strategy and risk tolerance.

Itโ€™s common to perform a multi-year TCO analysis: for instance, SAP might claim a cloud subscription is cheaper in the short term, but after 4-5 years, an owned license could cost less if you efficiently manage infrastructure.

Always model out the costs over the long term before choosing your path.

Key Cost Drivers in S/4HANA Licensing

The price tag of an S/4HANA deal depends on several core factors. Understanding these cost drivers will help you identify where to focus your negotiations:

  • Number of Users (and Types of Users): Users are the primary unit of licensing. SAP uses a named user model with different user categories. Professional Users (full access) incur the highest cost per user. At the same time, Limited/Functional Users (for specific roles or modules) are more cost-effective, and Self-Service/Employee Users (with very limited use) are the least expensive. Example: A Professional user license might cost a few thousand dollars, versus a few hundred for a Limited user. The mix and count of user types can make or break your budget. Negotiation Tip: Clean up and right-size your user counts. Ensure each user has the appropriate license type โ€“ not everyone needs an expensive Professional license. Eliminating or downgrading unused user licenses before the purchase can save millions and strengthen your position.
  • Software Modules and Add-Ons: In addition to users, S/4HANA includes functional modules (such as Finance, HR, and Supply Chain) and optional add-ons or engines (including advanced analytics, industry solutions, or SAP add-ons priced by metrics like revenue, orders, or CPU cores). These can carry substantial extra fees. Negotiation Tip: Only license the modules you truly need. SAP often tries to bundle additional products; be cautious about โ€œshelfwareโ€ (licenses you pay for but donโ€™t end up using). Itโ€™s fine to start with core S/4HANA and add modules later as needed โ€“ or negotiate them in a bundle at a discount, but make sure they are items you plan to deploy.
  • Infrastructure & Hosting Costs: If you go on-premise, youโ€™ll incur hardware, storage, and data center costs (plus IT staff to manage the system). In a cloud subscription, those infrastructure costs are embedded in the subscription fee. Either way, itโ€™s part of the overall cost of S/4HANA. Negotiation Tip: Use SAPโ€™s cloud offering pricing as a benchmark, even if you plan to use on-premises solutions, and vice versa. This can reveal the true cost of convenience versus control. If on-prem, factor in your internal cost of infrastructure; if cloud, ensure the contract specifies what level of infrastructure and service (CPU, memory, uptime SLAs) you are getting.
  • Maintenance and Support Fees: For on-premise licenses, SAP charges annual support (typically 19โ€“22% of the net license price each year). This means a high upfront price also locks in a high yearly maintenance cost. In cloud and RISE deals, basic support is included in the subscription; however, be aware of escalators โ€“ SAP may impose price increases of 3-5% at renewal if not negotiated. Negotiation Tip: Negotiate the support terms. For on-premises, a lower maintenance base can sometimes be achieved by securing additional discounts on licenses (thus lowering the base on which maintenance is calculated) or by requesting a fixed maintenance percentage. Also, consider negotiating a cap on support fee increases over time, especially in cloud contracts.
  • Indirect Access (Digital Access): This is one of the most notorious SAP licensing โ€œgotchas.โ€ Indirect access means external systems or non-SAP applications accessing SAP data (for example, a web portal or third-party app creating sales orders in S/4HANA). Historically, SAP could charge for each indirect user. Now, with S/4HANA, SAP offers a Digital Access licensing model, which charges based on documents (such as orders and invoices) created by external systems. If you ignore this, an audit later could present a huge unexpected bill. Negotiation Tip: Address indirect usage up front in the contract. You can negotiate a fixed fee or a certain number of documents for digital access. For instance, some companies negotiate an enterprise โ€œall-you-can-eatโ€ digital access license (often priced at ~10% of your total license value per year) to cover unlimited documents. Others include a specific volume of documents or users for external access at a set price. The key is to get clarity and a cap in writing to avoid future penalties.

Below is a summary of major cost drivers and how to approach them in negotiations:

Cost DriverImpact on CostNegotiation Focus
Named Users & License TypesTypically the largest portion of S/4HANA cost. More users (especially Professional tier) = higher costs.Optimize user counts and types: Audit and remove inactive users; use lower-cost license types for users who donโ€™t need full access. Aim to purchase only what you need now, with flexibility to add users later.
Modules & Add-On ProductsExtra modules (e.g. advanced analytics, industry solutions) can carry high fees, sometimes based on usage metrics (sales, revenue, etc.).Bundle carefully: If additional modules are required, negotiate them as a bundle at a discount. If not needed immediately, keep them out of the deal or secure option pricing to add later. Avoid paying for โ€œnice-to-haveโ€ extras that arenโ€™t in your deployment plan.
Indirect Access (External Use)Unlicensed third-party or customer interactions with SAP can trigger substantial fees if not covered.Include it in the contract: Negotiate a digital access license or clause covering third-party systems. This could be a flat annual fee or a defined document volume to cover expected indirect usage. This prevents surprise audit bills down the road.
Deployment Model (Cloud vs On-Prem)Upfront CapEx (on-prem license + hardware) vs. recurring OpEx (cloud subscription). Cloud includes infrastructure in pricing. Costs converge over time if usage is steady.Align with strategy & get price protection: Choose the model best for your financial strategy. For cloud deals, negotiate price protections (cap on renewal increases, locked-in rates for additional users). For on-prem, consider future hardware and support costs in your comparison.
Support & Maintenance~20% of license cost per year for on-prem support; included in cloud but subject to price increases. Over a decade, support can exceed the initial license cost.Negotiate support terms: Try to cap maintenance increases or negotiate a lower support percentage if the deal is large. Ensure cloud contracts limit annual price hikes. Also, if youโ€™re not using certain licenses, consider terminating support on them (or converting them) to save cost.

Preparing for a Successful Negotiation

Up-front preparation is crucial before engaging SAPโ€™s sales team. Enterprises that do their homework can enter negotiations with facts and leverage on their side.

Key preparation steps include:

  • Audit Your Current Usage and Entitlements: If you are an existing SAP ECC customer, begin by analyzing your current setup. How many licenses (by type) do you own today, and how many are actually in use? Use SAPโ€™s License Administration Workbench (LAW) and other tools to identify inactive users or users assigned to higher license types than necessary. Many companies find that theyโ€™re only using ~70% of their existing licenses โ€“ a potential cost optimization opportunity. Clean up and re-harvest unused licenses internally before negotiating a new S/4HANA deal.
  • Determine Your Future Needs: Develop a clear picture of what your organization needs for S/4HANA. How many users will require access, and at what level (e.g., how many Professional vs Limited users)? Which modules are truly critical for your go-live, and which ones are nice-to-have or future phase? Having a detailed demand forecast prevents over-buying under SAPโ€™s pressure. It also lets you negotiate from a position of knowledge (โ€œWe know we only need 300 Finance users and 150 supply chain users, not the 600 SAP is suggestingโ€).
  • Identify Opportunities to Reduce or Eliminate: Review your existing contracts for any unused or redundant modules or features that can be removed. SAP sometimes offers conversion credits for unused licenses when migrating to S/4HANA, essentially providing trade-in value. Know what you might be willing to retire. For example, if you have old SAP ERP user licenses that wonโ€™t be needed after migration, those can be converted or credited against the S/4HANA purchase. Similarly, plan to retire outdated modules or custom solutions that S/4HANA may replace, and use that as a negotiation chip.
  • Assess Indirect Access Risk: Evaluate where non-SAP applications interface with your SAP system (customer portals, partner systems, IoT devices, etc.). Estimate how many documents or transactions these generate. This assessment equips you to negotiate an appropriate digital access agreement. You do not want to discover a major indirect usage exposure after youโ€™ve signed the contract โ€“ thatโ€™s when SAP has maximum leverage (usually via a compliance audit).
  • Gather Market Intelligence: Knowledge is power. Research typical discount levels and deals that similar companies have received. Engage with peers or independent advisors, if possible, to benchmark SAPโ€™s proposals. Understand SAPโ€™s fiscal calendar โ€“ SAPโ€™s year-end (typically December 31) or quarter-end push often means theyโ€™re more willing to discount deeply to hit sales targets. Knowing this, you can time your negotiations to align with when SAP is hungry to close the deal.
  • Set Your Line in the Sand (and Plan B): Decide in advance what a โ€œgood dealโ€ looks like for your company. Set target metrics like โ€œat least 50% off list priceโ€ or โ€œmust include X, Y, Z termsโ€. Also, consider your plan B โ€“ for example, are you prepared to delay the project or even consider a competitor (such as Oracle or Microsoft Dynamics) if SAPโ€™s offer isnโ€™t acceptable? Having an alternative or the willingness to walk away (if feasible) gives you negotiating power. Even if switching vendors is unlikely, a credible exploration of alternatives can pressure SAP to be more flexible.

By thoroughly preparing in these ways, you walk into negotiations with a clear understanding of your needs and a strong factual basis.

This reduces the chance of being oversold and increases your confidence to push back on unfavorable terms.

Negotiation Strategies and Tactics

When itโ€™s time to negotiate the S/4HANA contract, approach it as a strategic project.

SAP expects customers to negotiate, and they have seasoned sales teams โ€“ you need to come equally prepared.

Here are proven negotiation strategies to maximize value:

  • Leverage Timing to Your Advantage: The timing of your negotiation can significantly affect the discount. SAP sales representatives are subject to quarterly and annual quotas. If you can align your purchase decision with SAPโ€™s end-of-quarter or end-of-year, youโ€™ll often see much higher discounts. Itโ€™s not uncommon to achieve 50% or more off list price when SAP is trying to meet a big target. Be mindful of SAPโ€™s fiscal year (which is the calendar year) โ€“ the closer to December, the more pressure on SAP to close deals. However, balance this with your project timeline; donโ€™t let SAPโ€™s timeline force you into a rushed decision. If you have flexibility, use it to maximize discounts.
  • Create Competitive Tension: Even if you are committed to S/4HANA, it helps to shop around and let SAP know you have options. Engage with alternatives (Oracle ERP, Microsoft Dynamics 365, etc.) enough to obtain a comparative quote or at least demonstrate internal evaluation. Communicate to SAP that you are considering these options. The mere existence of a credible alternative quote can make SAP more inclined to improve pricing and terms. (Many enterprises use an RFP process for this reason โ€“ to have leverage in final negotiations with SAP.)
  • Aim for Bundled Savings (But Avoid Unneeded Bundles): Ask SAP about enterprise bundle deals or promotions. Often, SAP offers incentive packages โ€“ for example, bundling S/4HANA with certain SAP Cloud Platform services or analytics tools at a more favorable price. This can be a way to get more value for the same spend if those extra products are useful to you. However, be very cautious about bundle deals that include things outside your strategic roadmap. A common pitfall is agreeing to a larger bundle because โ€œthe discount is great,โ€ only to find a year later youโ€™re paying maintenance on software you havenโ€™t deployed. Bundle what adds value; exclude or remove anything youโ€™re unsure about.
  • Negotiate Contract Flexibility: Donโ€™t just focus on the dollar amount โ€“ the contract terms can save (or cost) you greatly over the long run. Key terms to negotiate:
    • Price Protections: For cloud subscriptions, negotiate a cap on renewal price increases (e.g., no more than 3% per year after the initial term) and lock in the discounted per-user or per-FUE rate for any additional users you add later. This prevents the scenario where SAP gives a big upfront discount but then doubles the price in year 4 when you renew.
    • Flexibility to Adjust: If you anticipate growth or changes, build in rights to adjust your license counts. For example, you might negotiate the right to reduce user count by a certain percentage if your business divests a division, or the right to swap one module for another of similar value if needs change. Phased roll-outs can be part of this: you might commit to 1,000 users on Day 1, but have the option to add another 500 users in Year 2 at the same price. This way you pay for capacity as you need it.
    • Termination and Refund Clauses: In large, multi-year agreements, see if you can include a termination for convenience (even with a penalty) or downgrade rights after a certain period. While SAP often resists this, even a softened clause could save money if your strategy shifts (for instance, if an acquisition changes your system landscape).
  • Use SAPโ€™s Migration Incentives Wisely: If you are moving from SAP ECC to S/4HANA, SAP likely will offer conversion credits or trade-in value for your existing licenses. Typically, the sooner you migrate, the better the incentive. For example, SAP might offer 100% credit of unused ECC licenses towards S/4HANA if you sign this year, but that offer might drop to 50% in a year or two. Leverage these programs to reduce cost, but do your math โ€” a โ€œcreditโ€ might still come with buying more licenses than you truly need. Ensure the credit applies to items you will use, and try to have SAP assign a clear monetary value to the credit in the proposal.
  • Address Indirect/Digital Access Upfront: As noted earlier, make sure your negotiation explicitly covers how indirect usage will be handled. Do not accept vague answers like โ€œweโ€™ll sort that out laterโ€ or an omission of the topic. Insist on a clause or specific licensing for digital access. For instance, negotiate a package (e.g. $X per year for up to Y,000 documents created by external systems, or a one-time conversion to the document-based licensing model). Reaching an agreement in the contract phase is far easier than fighting an audit claim two years later. SAP has offered programs (such as a Digital Access Adoption Program) in the past โ€“ inquire if any such incentives are currently available to help mitigate the cost.
  • Maintain Control of the Negotiation Narrative: SAP sales representatives are trained to manage the deal process, often creating a sense of urgency (โ€œPrices will go up next quarterโ€ or โ€œThis discount is only valid if you sign by month-endโ€). While you should be aware of real deadlines (such as support end dates for ECC in 2027), donโ€™t let arbitrary sales deadlines dictate your actions. Stick to your requirements and timeline. If SAP presents a โ€œtake it or leave itโ€ ultimatum, be prepared to pause. Often, those ultimatums soften as the quarter-end draws nearer.
  • Document Everything: As you negotiate, keep clear documentation of every quote, promise, and term discussed. If the salesperson says, โ€œIโ€™ll throw in 100 free self-service usersโ€ or โ€œweโ€™ll include that at no cost,โ€ get it in writing (at a minimum, via email). When it’s time to draft the contract, ensure that all these points are included in the agreement. If itโ€™s not in the contract, it doesnโ€™t exist. Itโ€™s much easier to negotiate inclusions before signing than to fight for them after.

By using these strategies, companies have secured significantly better deals.

For example, combining a competitive bid approach with year-end timing and a thorough cleanup of user licenses can easily result in a 30-50% cost reduction compared to the initial SAP quote.

Remember that everything is negotiable: license price, discounts on add-ons, maintenance terms, payment schedule, even future roadmap commitments.

A well-negotiated S/4HANA contract sets the stage for a successful partnership with SAP, on your terms and budget.

Common Pitfalls to Avoid

Even savvy enterprises can stumble in SAP negotiations. Here are common pitfalls in S/4HANA licensing deals โ€“ and how to avoid them:

  • Overbuying โ€œJust in Caseโ€: SAP might encourage you to purchase extra users or modules up front for future growth or โ€œto get a better discount.โ€ This often leads to shelfware โ€“ licenses sitting unused while you continue to pay support for them. Avoidance: Buy in line with a realistic deployment plan. Negotiate the ability to true-up later at locked-in discounts instead of buying everything Day 1. Itโ€™s better to start a bit smaller and expand than overcommit and waste budget.
  • Ignoring Indirect Use Liability: As mentioned, failing to account for third-party or indirect access can be disastrous. Some companies have been hit with compliance audits, which claim millions in fees for unlicensed indirect use. Avoidance: Proactively include indirect access in the negotiation. If SAP isnโ€™t bringing it up, you bring it up and get an arrangement in writing. This turns a potential surprise into a planned cost (usually at a fraction of the audit penalty that would otherwise be incurred).
  • Accepting Standard Contract Terms: SAPโ€™s boilerplate contract tends to favor SAP. It may include clauses that restrict usage, prevent license transfers, or allow SAP to increase fees, among other provisions. If you simply sign the standard terms, you likely miss opportunities to improve them. Avoidance: Redline the contract heavily โ€“ negotiate terms such as liability caps, audit procedures (e.g., request longer notice and collaborative audits), and price increase limits. Also, ensure that any promises made by sales (such as special pricing, swap rights, etc.) are documented in the contract. Have your legal and procurement teams review everything.
  • Neglecting Renewal and Post-Deal Management: Many focus on the initial purchase and overlook what happens in the 3-5 years that follow. For cloud subscriptions, renewal time can bring steep price hikes if not capped. For on-prem, after a few years, you might be paying maintenance on things you donโ€™t use. Avoidance: Set calendar reminders well in advance of renewal dates. As part of the initial deal, negotiate renewal terms or, at the very least, the right to benchmark and renegotiate. Implement a governance process to continuously monitor SAP use, regularly identifying any unused licenses or modules and attempting to terminate or repurpose them. An SAP license management tool or team can pay for itself by preventing ongoing waste.
  • Last-Minute Rush (Losing Leverage): If you approach SAP at the 11th hour (e.g., your ECC support is expiring next month and you must sign S/4HANA), youโ€™ve lost leverage. SAP knows you have no time or alternatives and will stick to higher pricing. Avoidance: Initiate the engagement at least 6-12 months before a critical deadline. If you find yourself late, consider temporary measures (like extending ECC maintenance if possible) to buy time. Itโ€™s better to pay for a short extension than to sign a bad multi-year deal under duress.
  • Not Involving Stakeholders Early: Sometimes IT goes far down the negotiation path without enough input from finance, or vice versa. This can lead to internal disconnects (e.g., IT negotiates a technically great deal that finance later rejects due to cost structure). Avoidance: Involve all key stakeholders โ€“ including IT, procurement, finance, and business unit leaders โ€“ from the outset. A unified approach ensures the deal meets technical needs, budget constraints, and procurement best practices. It also presents a united front to SAP; for instance, procurement can push for cost savings while IT validates that youโ€™re not compromising something vital.

By being aware of these pitfalls, you can double-check that youโ€™re not overlooking something important in the heat of negotiations.

Every extra percentage point of discount or protective clause you secure will pay dividends over the life of the S/4HANA investment.

Recommendations

To wrap up, here are expert recommendations for CIOs, CFOs, and procurement leaders embarking on an S/4HANA negotiation.

These tips summarize the best practices covered above:

  • Do Your Homework First: Never approach SAP unprepared. Audit current licenses and usage, and know exactly what you need (and donโ€™t need) for S/4HANA. Preparation prevents over-buying.
  • Engage SAP at the Right Time: Plan negotiations around SAPโ€™s sales cycles. Aim for year-end or quarter-end when possible to maximize discount potential. Patience can pay off in pricing.
  • Leverage Alternatives: Even if you intend to choose SAP, solicit information and pricing from competitors to ensure you’re getting the best deal. Use those alternatives as a credible bargaining chip to get SAP to sharpen its pencil.
  • Negotiate More Than Price: Scrutinize contract terms, such as renewal rates, price increases, and usage rights. Push for flexibility (phased additions, the ability to swap or drop licenses) and protect your future interests with caps and clauses.
  • Address Indirect Usage & Compliance: Donโ€™t leave the table without a solution for indirect access. Proactively include digital access licensing or similar in your deal. Itโ€™s cheaper to negotiate upfront than to pay audit penalties later.
  • Avoid Shelfware: Resist the urge or pressure to โ€œbuy bigโ€ just for a discount. Unused licenses are a tax on your budget. Itโ€™s better to negotiate options to expand later at the same discount, rather than overspend now.
  • Involve Cross-Functional Stakeholders: Bring together IT, finance, and procurement in the negotiation process. A united team ensures that technical requirements, cost objectives, and contractual safeguards are all accounted for in the final deal.
  • Document and Confirm Everything: Get all promises in writing and ensure the final contract language reflects them. Donโ€™t rely on verbal assurances. If a term or concession isnโ€™t in the contract, assume it doesnโ€™t exist.
  • Consider Expert Help: If your deal is particularly large or complex, consider engaging an independent SAP licensing advisor or legal counsel with experience in software contracts. They can often identify hidden risks or savings that internal teams might miss.

By following these recommendations, enterprises will be well-positioned to negotiate an SAP S/4HANA agreement that delivers value and minimizes risk.

Checklist: 5 Actions to Take

1. Assess Current State: Gather your internal data now. Inventory all existing SAP licenses and usage. Identify inactive users, high-level license assignments, and any third-party interfaces. (Goal: establish a baseline and uncover optimization opportunities.)

2. Define Future Requirements: Map out what your S/4HANA usage will look like over the next 3-5 years. How many users (by type) and which modules are truly needed at go-live? Plan for phased growth. (Goal: know exactly what to ask for in the contract.)

3. Build Your Negotiation Team and Strategy: Assemble a cross-functional team (IT, procurement, finance, legal). Research SAPโ€™s sales timelines and benchmark pricing. Decide on target discounts and non-negotiable terms. Also, determine your walk-away alternatives or contingency (e.g., extending ECC, evaluating other ERP). (Goal: present a unified front with clear objectives.)

4. Engage SAP (and Maintain Leverage): When ready, start the discussion with SAP. Solicit a proposal, but donโ€™t reveal your full hand. Inquire about any incentive programs (such as migration credits, etc.). Concurrently, if feasible, continue dialogues with alternate vendors. Time your serious negotiations to align with SAPโ€™s quarter-end or year-end. Push back on initial offers, and use data to counter (e.g., โ€œWe only need X users; our analysis shows Yโ€). (Goal: drive the conversation toward your desired outcome, not just react to SAPโ€™s pitch.)

5. Finalize Contract with Eyes Open: Before signing, review the contract in detail against your checklist. Verify it includes all negotiated discounts, protections (caps on increases, indirect access terms, delivery timelines, support levels). Have your legal team review the document for any unfavorable clauses that may be hidden in the fine print. Only sign when youโ€™re confident the deal matches your understanding. (Goal: ensure no surprises later โ€“ what you sign is what you expect.)

Following this step-by-step plan will help ensure nothing falls through the cracks in your S/4HANA negotiation journey.

Further Reading

FAQ

Q1: How much discount off the list price is realistic in an SAP S/4HANA negotiation?
A: It depends on your leverage, but large enterprises commonly negotiate anywhere from 30% to over 50% off SAPโ€™s list prices. Discounts can be higher (even 60-70% off) if you align with end-of-quarter sales pushes or have competitive bids. SAPโ€™s list prices are notoriously high, and the โ€œstreet priceโ€ paid after negotiation is usually much lower, especially for committed strategic customers.

Q2: What happens to our existing SAP ECC licenses when we move to S/4HANA?
A: Typically, SAP will offer a conversion program. Your ECC licenses can be converted or credited toward S/4HANA licenses under certain conditions. For example, you might get credit for the remaining value of your old licenses if you migrate by a certain date. However, the rules can be complex โ€“ you often must retire the old licenses. Itโ€™s crucial to negotiate how legacy investments are protected. Ensure SAP provides written detail on how your prior spend is being valued in the S/4HANA deal (e.g., a credit percentage or swap ratio).

Q3: Should we consider RISE with SAP, or stick to a traditional S/4HANA license?
A: RISE with SAP is essentially a bundle: S/4HANA Cloud + hosting + some extras in one subscription. It offers simplicity (one contract, rapid start) but at the cost of flexibility (youโ€™re locked into SAPโ€™s cloud and terms). A traditional S/4HANA license (on-prem or cloud subscription outside of RISE) might be preferable if you want more control over infrastructure, prefer a hybrid approach, or want to manage licenses yourself. If your company doesnโ€™t mind an all-in-one SaaS and values simplicity, RISE could be worth evaluating. In negotiations, the key is to compare the long-term costs and terms. RISE may have a higher initial cost, but it includes more services. ร  la carte licensing might be cheaper if you run your systems efficiently. Many enterprises conduct a side-by-side TCO comparison over 5-10 years before making a decision.

Q4: How can we manage indirect access and prevent unexpected fees?
A: The safest approach is to tackle it head-on in your S/4HANA license agreement. During negotiations, insist on a clause or license for indirect (digital) access. You can opt for SAPโ€™s Digital Access model (document-based licensing) or negotiate a custom rider that covers known interfaces (e.g., your e-commerce portal, supplier network, etc.). By agreeing on either a fixed annual fee or a specified allotment of documents/users for external access, you set a predictable cost. Additionally, maintain good monitoring โ€“ continue to run usage reports on interfaces. If your usage exceeds what was contracted for in the future, you can proactively discuss adjusting the license rather than waiting for an audit.

Q5: When is the best time to negotiate an SAP S/4HANA deal, and who should be involved?
A: Timing: The best time is when you have ample runway (no imminent deadline) and when SAP has incentive, often leading into SAPโ€™s fiscal year-end (Q4) is ideal. Engage early enough to compare options and let the negotiation play out over a few months; donโ€™t wait until your current system support is about to expire. Who to involve: Make it a team effort โ€“ include IT (to know technical needs and usage), finance (to assess budget impact and deal structure), procurement (to drive the commercial negotiation and contract details), and legal (to review terms). Executive sponsorship from a CIO or CFO is also beneficial. This cross-functional team ensures all angles are covered, from operational requirements to financial prudence. SAP is a strategic vendor, so treat the negotiation with corresponding senior attention.

Read about our SAP Contract Negotiation Service.

SAP Contract Negotiation Serivce - Win Your Next SAP Deal

Do you want to know more about our SAP Contract Negotiation Service?

Please enable JavaScript in your browser to complete this form.
Name
Author
  • Fredrik Filipsson

    Fredrik Filipsson is the co-founder of Redress Compliance, a leading independent advisory firm specializing in Oracle, Microsoft, SAP, IBM, and Salesforce licensing. With over 20 years of experience in software licensing and contract negotiations, Fredrik has helped hundreds of organizationsโ€”including numerous Fortune 500 companiesโ€”optimize costs, avoid compliance risks, and secure favorable terms with major software vendors. Fredrik built his expertise over two decades working directly for IBM, SAP, and Oracle, where he gained in-depth knowledge of their licensing programs and sales practices. For the past 11 years, he has worked as a consultant, advising global enterprises on complex licensing challenges and large-scale contract negotiations.

    View all posts

Redress Compliance