Not Sure If Your SAP Licences Are Right-Sized?
Our independent SAP licensing assessment identifies over-licensing, compliance gaps, and cost reduction opportunities — with no ties to SAP or any reseller.
Book a Free Consultation →1. SAP Solutions for Small Businesses: Business One vs. S/4HANA
SAP offers various ERP products tailored to a company's size and needs. For small and mid-sized businesses, SAP Business One is the flagship solution — a comprehensive ERP package designed for organisations with up to a few hundred employees. It provides core modules (finance, sales, inventory, etc.) with a simpler implementation and lower cost.
In contrast, SAP S/4HANA is SAP's enterprise-grade suite meant for large corporations. Still, it's also available in cloud editions that some growing small businesses adopt for advanced capabilities or global operations. For a deep dive into S/4HANA licensing mechanics, see our SAP S/4HANA Licensing: Complete Guide.
The key difference is scope and complexity: Business One covers essential functions with minimal IT overhead, while S/4HANA offers extensive features and industry-specific modules — more power but significantly higher complexity and cost.
| Criteria | SAP Business One | SAP S/4HANA |
|---|---|---|
| Target audience | Small businesses (10–250 employees) | Mid-to-large enterprises (250+ employees) |
| Core modules | Finance, Sales, Purchasing, Inventory, CRM, MRP | Full suite: FI/CO, SD, MM, PP, HR, plus industry solutions |
| Implementation time | 4–12 weeks typical | 6–18 months typical |
| Implementation cost | $30K–$200K | $500K–$5M+ |
| Sold through | SAP Channel Partners (VARs) | SAP direct or large SIs |
| Minimum users | 1 user (Starter Package: max 5) | ~35–40 FUE minimum in cloud |
| Database | SAP HANA or MS SQL Server | SAP HANA only |
Global context: Business One is used worldwide (with multi-language and localisation support), often implemented by local SAP partners. S/4HANA can also fit a smaller enterprise if there's a need for robust, scalable processes or if a small subsidiary must align with a larger parent company's S/4HANA system.
The decision comes down to scale and requirements — a 50-person firm will almost always favour Business One's affordability and simplicity. A fast-growing or globally distributed small enterprise might consider S/4HANA Cloud for its breadth, despite the higher cost. Don't let SAP's sales team push you into S/4HANA prematurely — it's designed for an entirely different scale of operation.
2. Licensing Models and Cost Structure (Perpetual vs. Cloud)
SAP licensing comes in two fundamental models: perpetual licences (up-front purchase + annual support fee) and subscription licences (cloud-based, pay-as-you-go). Small businesses must weigh CapEx vs. OpEx carefully.
A perpetual licence for SAP Business One means paying once for the software and yearly maintenance (~20% of licence cost) for support and updates. This grants indefinite use rights, but you'll also need infrastructure (servers, IT staff) if you choose to self-host.
A cloud subscription (for SAP Business One Cloud or SAP S/4HANA Cloud) is an all-in recurring fee — it typically includes the software, hosting, and standard support. The upfront cost is low (attractive to a small company's cash flow), but the long-term total might equal or exceed on-premises costs if you subscribe for many years.
For example, RISE with SAP is a bundle offering S/4HANA as a service — it simplifies contracting (one package including infrastructure) and is purely subscription (OpEx). This can benefit a small business by reducing IT complexity; however, it locks you into SAP's cloud ecosystem. For an independent assessment of RISE, see our RISE with SAP: Hidden Costs and How to Secure Flexibility.
Sometimes owning licences is cheaper by year 5, whereas subscription costs accumulate over time. Build a detailed TCO model before committing to either model — the initial "affordability" of subscriptions can be misleading.
User Licensing: The Real Cost Driver
User licensing is the primary cost layer. SAP uses named user licences — each user requires a specific licence type, and accounts cannot be shared casually. For small teams, this means carefully assigning the right licence type to each user. For a comprehensive breakdown of all SAP user licence categories, see our SAP Licensing Guide for ITAM Practitioners.
| User Licence Type | SAP Business One (approx. cost) | SAP S/4HANA (approx. cost) |
|---|---|---|
| Professional (Full) | ~$3,000 per user (perpetual) or ~$100/user/month (cloud) | ~$4,000–$6,000 per user (perpetual) + 20%/yr support, or ~$200+ per user/month (cloud) |
| Limited / Casual | ~$1,500 per user (perpetual) or ~$50/user/month (cloud) | ~$1,000+ per user (perpetual) + support, or ~$50–$100 per user/month (cloud) |
| Self-Service (ESS) | N/A (minimum licence is Limited user) | Minimal cost (often included in bundles; e.g. 30 self-serve users count as 1 full user in cloud) |
Costs are illustrative list prices; actual negotiated prices can be significantly lower. Small businesses should note that Business One also offers a Starter Package licence (capped at 5 users) at a significantly lower price point — a budget-friendly entry route. For detailed guidance on individual licence types, see our guides on SAP Professional User Licences, SAP Limited Professional Licences, and SAP Employee Self-Service Licences.
💰 Example: 40-User Business One Cloud Deployment
3. Key Cost Drivers and Hidden Expenses
For CIOs and CFOs at small enterprises, it's critical to understand what drives SAP costs beyond the licence fee. The number of users is the most obvious factor, but there are several other cost drivers that can surprise you. For a comprehensive breakdown, see our guide on SAP Licensing Cost Drivers and Optimisation.
Implementation and Training
The services to implement SAP often exceed the software cost. For a small business, a partner-led Business One implementation can cost anywhere from $30,000 to $200,000+, depending on the complexity. S/4HANA projects can be even larger. Don't underestimate consulting, data migration, and employee training expenses — they are part of the true cost of SAP.
Maintenance and Support
If you purchase licences on-premise, annual support fees (~20% of licence price) will recur. Over the course of 5 years, maintenance can equal the initial licence cost. SAP occasionally raises maintenance rates, so negotiate caps if possible. For strategies on managing this cost, see our SAP Licence Renewal: How to Save Costs guide.
Infrastructure
Running SAP on-premise means servers, storage, backups, and IT personnel. A cloud subscription shifts these costs to SAP (the fee covers hosting), which is helpful for a business with limited IT staff. For guidance on navigating hybrid environments, see our SAP Cloud and Hybrid Licensing Strategies guide.
Add-Ons and Extra Modules
The base licence covers core modules, but both Business One and S/4HANA offer add-ons (e.g., advanced warehousing, CRM integrations, industry-specific functions). Some are included, while others incur additional costs with varying licensing metrics. For an overview of SAP's package licences, see our guide on SAP Package (Engine) Licences.
Indirect Usage (Digital Access)
Indirect usage means any scenario where non-SAP systems or external users interact with data in SAP. If your e-commerce website or a third-party CRM connects to SAP to create an order, SAP could require licences for those activities. Neglecting indirect use licensing can lead to an audit and surprise fees worth multiples of your original licence investment.
SAP has a concept of Digital Access licensing (charging by documents like sales orders generated via external systems) for S/4HANA. The cost can be managed through a document-based licence pack or a fixed-fee add-on. For a complete explanation, see our SAP Digital Access Licensing: Complete Guide and our comparison of Indirect vs Digital Access models.
Global Deployment Considerations
If your small business operates in multiple countries, consider how that affects licensing. SAP licences are typically enterprise-wide, but you need enough licences for all users globally. Check localisation needs — additional languages or country-specific versions of Business One might be required. Companies expanding internationally should ensure their SAP contract covers new entities or geographies without requiring an entirely new licence purchase for each region.
A 40-user wholesale distributor budgeted beyond just the $2,750/month subscription to include $100,000 in one-time implementation services, ongoing training costs, and $10,000/year for a specialised warehouse add-on. By mapping out all cost elements upfront, they avoided budget surprises and negotiated a 15% implementation discount from their partner.
Result: True TCO predicted within 5% of actuals after Year 14. Common Licensing Pitfalls and How to Avoid Them
SAP contracts are infamous for their complexity, which can trip up small businesses unfamiliar with enterprise software deals. Here are the most dangerous pitfalls we see in our advisory practice.
Over-Licensing (Shelfware)
It's easy to buy more licences than you use, especially under pressure from sales or "bulk discount" logic. For a small firm, tying up capital in unused SAP licences is wasteful. Start with what you truly need now. You can usually buy more licences later. Consider phasing your user count — e.g., start with 20 users and add more as your team expands, rather than committing to 50 from the outset.
A 150-employee company initially considered 100 SAP user licences (assuming future growth). After an internal audit of roles, they realised only ~60 users needed access at launch. Rightsizing the purchase saved them thousands in annual maintenance fees on 40 would-be shelfware licences.
Result: 40% reduction in initial licence spendIgnoring Indirect Access
Failing to account for third-party system access is a major risk. Small businesses might assume "we only have 30 employees on SAP, so we're compliant." Still, if an external ecommerce site or a vendor portal connects to SAP data without proper licensing, you're technically out of compliance. Be upfront with SAP about your integration plans and negotiate a digital access licence or appropriate terms for indirect use in the contract. For strategies, see our guide on SAP Digital Access Adoption Program (DAAP).
Uncapped Support Escalators
Many SAP cloud contracts include clauses that allow for annual price increases (e.g., 5–7% per year after the initial term). If unchecked, these escalators can quickly inflate your costs beyond budget for a small business. In negotiation, insist on a cap — for example, "renewal increases not to exceed 3% per year" or tied to an inflation index.
Lack of Term Flexibility
Committing to a long-term, inflexible contract can be a significant risk. If you sign a 5-year cloud subscription for 100 users but then downsize or need to switch solutions, you may be stuck paying the full amount. Try to negotiate flexibility — such as the ability to reduce users at renewal, or a shorter term with options to extend. For detailed negotiation strategies, see our SAP Contract Negotiation Playbook.
Not Involving Stakeholders
If the licensing deal is struck by IT alone or just procurement, without input from business units, you might select the wrong mix of modules or user types. Ensure all stakeholders (IT, finance, department heads) review licence allocations and needed functionality.
Diligence at the contracting stage saves a lot of pain later. Small companies should approach SAP contracts with the same rigour a large enterprise would: inventory your needs, read the fine print, and don't be afraid to ask for changes. SAP is open to negotiation — it's expected, even for smaller deals.
Need Help Navigating Your SAP Contract?
Redress Compliance provides independent SAP licensing advisory — no ties to SAP, no reseller conflicts. We help small and midsize enterprises avoid overspending, defend against audits, and negotiate better terms.
5. Negotiation Tips for Cost Optimisation
Even global enterprises negotiate hard with SAP — a small business should do the same. Here are practical tips to get a better deal on SAP licensing.
Leverage Timing
SAP sales reps have quarterly and yearly targets. Plan your purchase around SAP's end-of-quarter or fiscal year if possible. You're more likely to secure a substantial discount (even 30–50% off the list price) when the vendor is eager to close deals.
Get Multiple Quotes
Even if you are set on SAP, consider soliciting quotes or demos from alternatives (Oracle, NetSuite, Microsoft Dynamics, etc.). Having options strengthens your bargaining position with SAP. Internally, it also validates that SAP is the right choice for your needs.
Mix Licence Types Wisely
Don't buy all Professional-user licences if many of your users only need limited functionality. Determine how many "power users" (accountants, managers) truly need full access and licence the rest as Limited or self-service users. This tailored mix can dramatically cut costs.
A small retailer kept costs down by licensing only 15 of its 50 SAP users on a full Professional licence, with the rest on Limited licences for basic tasks — aligning cost to actual usage and saving over 30% compared to an all-Professional approach.
Result: 30%+ reduction in licensing spendNegotiate Maintenance Terms
If you're buying perpetual licences, negotiate the maintenance rate or at least a freeze on increases for a few years. Sometimes SAP (or partners in the case of Business One) can agree to, for example, 18% annual support (versus the standard ~20%) or hold off on an increase for the first two years.
Consider a Phased Rollout
Only pay for what you need in the first phase. Negotiate a ramp-up: e.g., "We will start with 30 users and have the option to add 20 more next year at the same discount rate." This way, you aren't paying for unused licences in year 1, but you have pre-negotiated pricing for growth.
Seek Bundled Offers (Carefully)
SAP and its resellers sometimes offer bundle discounts — e.g., including a Business Intelligence module or SAP SuccessFactors (HR) at a favourable rate if purchased with the ERP. This can be attractive if you truly plan to use those extras. However, avoid the temptation to accept bundles of "extra" products you don't need — that just creates shelfware.
Document Everything
Ensure the final contract paperwork accurately reflects all promises — whether it's a specific discount, extra training days included, or a clause regarding indirect usage. It's worth having a legal or contract expert review the terms. Pay attention to clauses on audit rights, licence metrics, and any future conversion rights (e.g., the ability to convert on-prem licences to cloud credits later).
6. Recommendations (Practical Tips)
- Audit Your Needs First: Before consulting with SAP or partners, assess your business's actual needs internally. Map out users by department and which modules/features they'll use. This prevents over-buying unnecessary licences or modules.
- Choose the Right Product: Align the solution with your size and strategy — start with SAP Business One if you're a small business with standard needs. Consider S/4HANA only if you truly need its advanced capabilities or plan to scale significantly. For migration planning, see our S/4HANA Migration Licensing Guide.
- Optimise Licence Mix: Use licence types to your advantage. Licence high-level users (CFO, planners) on Professional licences, and casual or task-based users (sales reps, warehouse staff) on Limited licences. This tiered approach can cut software costs by 30% or more.
- Negotiate Everything: Treat SAP licensing like buying a car — almost every line item is negotiable. Push for discounts on licence fees, seek concessions like free starter training or extended payment terms, and cap those maintenance or renewal increases.
- Plan for Indirect Access: From day one, account for any external systems or users that connect to SAP. If you have an e-commerce site, supplier portal, or even Office 365 macros accessing SAP data, discuss a fair licence solution upfront. See our SAP Digital Access guide for details.
- Monitor and Manage Usage: Post-implementation, regularly review your SAP user list and licence assignments. Remove inactive users and adjust licence types if someone's role changes. For audit preparation guidance, see our SAP Licence Audit Tools guide.
- Engage Experienced Partners: Work with an SAP-certified partner or a licensing consultant who knows the SMB context. Expert guidance can pay for itself by helping you avoid pitfalls.
- Think Long Term: Anticipate your growth. If you plan to expand operations or add users in the next 3–5 years, discuss these plans with SAP during negotiations. You might secure locked-in pricing for additional licences or flexible terms that accommodate expansion.
- Utilise SAP User Groups: Join SAP user groups or forums (like ASUG or regional SME forums). Fellow small businesses might share how they handled an SAP audit or achieved a better discount — invaluable insights for your strategy.
- Stay Educated on Licensing Changes: SAP occasionally changes licensing policies or introduces new bundles. Keep an eye on SAP's updates and review your licence position annually. For ongoing education, explore our SAP Licence Renewal Timeline and Checklist.
7. Checklist: 5 Actions to Take
Frequently Asked Questions
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Fredrik Filipsson
Fredrik brings 20+ years of enterprise software licensing expertise, including experience working directly for SAP, Oracle, and IBM. He has advised hundreds of organisations — including numerous Fortune 500 companies — on SAP licence optimisation, audit defence, and contract negotiations, specialising in helping enterprises avoid compliance risks and secure favourable terms.