SAP S/4HANA Migration Licensing Guide for CIOs and CTOs
SAP S/4HANA migration isn’t just a technical upgrade – it’s a licensing transformation that can significantly impact cost.
CIOs and CTOs must navigate new license models (perpetual vs. subscription), plan for HANA database requirements, and manage contract conversions to avoid unexpected costs and issues.
This guide explains how transitioning from ECC to S/4HANA impacts your license landscape and provides strategies to optimize costs and negotiate effectively.
The License Shift from ECC to S/4HANA
Migrating from SAP ECC (ERP Central Component) to S/4HANA means embracing a new licensing paradigm.
SAP S/4HANA is sold as a new product; you don’t automatically carry over your old ECC licenses. In practical terms, this requires re-evaluating what you own and what you’ll need under S/4HANA.
For example, S/4HANA runs exclusively on SAP’s HANA database. Therefore, ECC customers using third-party databases (such as Oracle or SQL Server) must either license HANA or utilize SAP’s cloud offering, where HANA is bundled.
Additionally, some functionality included in ECC may require separate licenses in S/4HANA (e.g., advanced cash management, extended warehouse management).
SAP’s support timeline adds pressure: standard ECC support ends in 2027, after which costly extended maintenance kicks in.
In short, the move to S/4HANA compels organizations to rethink their licensing model, assess costs early, and plan for contract changes as part of the migration project.
S/4HANA Deployment and Licensing Options (On-Premises vs Cloud)
SAP S/4HANA can be deployed on-premises with traditional perpetual licensing or in the cloud with subscription licensing.
The flagship cloud offering is RISE with SAP, which bundles S/4HANA software, infrastructure (hosting), and support into a single subscription.
By contrast, the on-premises model involves purchasing perpetual licenses (a one-time fee per user or package), running S/4HANA in your own (or a chosen provider’s) data center, and paying annual support (typically ~22% of the license value).
With RISE (Cloud), costs are OPEX: for example, you might pay a fixed annual fee based on usage metrics (often measured in “Full User Equivalents” or FUEs).
This subscription covers the software licenses, HANA database, and standard support. It offers convenience – one contract and rapid provisioning – but also entails lock-in. If you stop subscribing, you lose rights to use S/4HANA (much like any SaaS product), and switching away can be complex.
SAP often incentivizes RISE deals with credits or discounts to encourage ECC customers to migrate to the cloud. However, subscription pricing over a 5-10 year period can end up higher in net present cost than owning licenses, so it requires careful financial analysis.
With Traditional On-Premises licensing, you pay upfront to own the S/4HANA software. For instance, a Professional User license typically has a list price of around $4,000 (one-time), and a Limited User license has a list price of around $1,000. However, you can typically negotiate discounts for a migration.
You continue to pay yearly maintenance (support) on these licenses (~20-22% of the net price), which provides upgrades and fixes. You also need to account for infrastructure (such as servers or cloud hosting) and a HANA database license.
The benefit is flexibility: you retain control over where to run S/4HANA (on AWS/Azure, on-premises data center, etc.), and you keep your software rights indefinitely.
If costs become an issue, you could even drop SAP maintenance (losing support but saving fees) – an option not available in a pure subscription model.
Read Contractual Differences Between RISE with SAP and BYOL Models.
Key takeaway:
Cloud subscription (RISE) shifts SAP ERP to a rental model with bundled services, whereas on-premises keeps an ownership model.
CIOs should weigh the convenience of an all-in-one subscription against potential long-term cost and vendor lock-in.
In many cases, large enterprises negotiate private cloud or hybrid arrangements to balance these factors (e.g., moving some systems to RISE while keeping others on traditional licenses).
The choice will directly influence your cost structure and flexibility in the S/4HANA era.
License Conversion Strategies and Costs
When preparing for S/4HANA, one of the most critical steps is deciding how to transition your existing SAP licenses.
SAP has provided conversion programs to ensure customers don’t lose the investment made in ECC licenses, but the rules have recently evolved.
Until 2023, there were two main approaches: product conversion and contract conversion.
- Product Conversion (now retired): This feature enabled a gradual, line-by-line mapping of your ECC licenses to their S/4HANA equivalents. You can keep your existing contract and simply add S/4HANA Enterprise Management components, effectively carrying over most of your existing entitlements. This phased approach enables companies to migrate in steps without requiring the entire environment to be relicensed at once. However, SAP discontinued this option in mid-2023. The special S/4HANA add-on license for ECC customers was removed from SAP’s price list, meaning new S/4 licenses can no longer be obtained via partial product conversion. If you haven’t already purchased the legacy S/4HANA Enterprise Management for ERP Customers license, this path is closed.
- Contract Conversion: Now the primary route for on-premise S/4HANA, contract conversion means ripping off the band-aid in one go. You negotiate a brand new S/4HANA contract (with whatever user types and packages you need) and terminate your old ECC contract. The good news: SAP offers a credit for your existing licenses to offset the cost of new licenses. Initially, SAP allowed up to 90% of the new S/4 license fees to be offset by the book value of your old licenses. Over time, this offset has been reduced – currently around 70% – and it’s expected to decrease as 2027 nears. In practice, this means if you act early, you might only pay 30 cents on the dollar for S/4 licenses (the rest covered by your ECC investments). If you wait, SAP will give less credit, requiring more net-new spend. Contract conversion also offers a chance to clean up shelfware – you can choose not to carry over unused licenses, thereby not paying maintenance on them in the future. The trade-off: it’s a one-time, full migration of your licensing metrics (often a complex negotiation to ensure you get sufficient S/4 entitlements for your business).
- RISE with SAP (Subscription Conversion): If you opt for RISE (or S/4HANA Cloud), you aren’t buying new perpetual licenses, so there is no like-for-like license transfer. Instead, SAP typically offers incentive discounts or service credits to customers who move to RISE from ECC. You will likely “trade in” your existing licenses; in fact, many RISE contracts require you to retire your old licenses or put them in abeyance. While you may get a special deal (for example, a discounted first-year subscription or credits acknowledging your past investment), essentially, you are moving to a pay-as-you-go model. Be aware: once you’re in a subscription, you cannot revert to your old perpetual licenses if things don’t work out. Any return to on-prem would require re-licensing S/4HANA from scratch (or reinstating your old ECC contract with back maintenance fees, which is costly and impractical).
Timing is crucial.
Every year closer to 2027, the value SAP assigns to your ECC licenses for conversion diminishes. Additionally, after 2027, if you haven’t migrated, you’ll be paying an extra premium for extended maintenance (an additional 2% on top of regular maintenance fees, for years 2028-2030).
That higher support cost could have been money invested in a new S/4 system instead. Therefore, organizations planning a move should engage with SAP early to secure the best conversion terms.
Even if you don’t intend to fully cut over to S/4HANA immediately, you might negotiate a contract conversion now with S/4HANA license entitlements secured for future use, maximizing credits and avoiding the late-mover tax.
In any conversion scenario, negotiate dual usage rights during the transition. You will likely run ECC and S/4HANA side by side for some months or years as you implement and roll out the new system.
Ensure your agreement explicitly permits use of both the old ECC environment and the new S/4HANA environment concurrently during a defined migration period without additional license charges.
SAP’s policies allow this in principle, but it’s safest to have it in writing to avoid compliance issues mid-migration.
Read Mapping Legacy SAP ERP Licenses to S/4HANA User Roles.
Key Cost Factors in S/4HANA Licensing
Planning for S/4HANA means understanding all the components that will drive cost. Licensing costs can be a substantial portion of the project budget, so break down each element:
- Named Users: Both ECC and S/4HANA primarily license by named users (for on-premises). In S/4HANA, user categories (e.g., Professional, Functional, Employee, Developer) may have different rights but are conceptually similar to ECC’s user types. Each user license has a price – for example, professional users list in the thousands of dollars each, while limited users are a fraction of that. If you opt for a cloud subscription, users may be grouped into FUEs or user bundles, with charges applied every month. In any case, the number of users and their license type are core cost drivers. This is where careful analysis can save money: do all 1,000 of your users need full Professional access, or can 300 be categorized as lighter users? Rightsizing user types to actual roles can dramatically reduce cost.
- S/4HANA Modules & Engines: Beyond users, SAP often charges for packages or engines – additional functionality or industry solutions. In ECC, you may have licensed engines such as SAP Payroll and Warehouse Management. In S/4HANA, some modules are now integrated (e.g., basic warehouse management is included in S/4’s core), but others might be separate or newly available. Advanced capabilities, such as Extended Warehouse Management (EWM), Advanced Planning (PP/DS), Transportation Management, or Cash Management, may require separate license purchases if you need them. Each comes with its metric (which could be per user, per throughput, or a flat fee). Evaluate which add-ons are truly necessary in the S/4HANA environment and allocate the budget accordingly. This is an opportunity to remove unused modules or explore third-party alternatives if the SAP package is too expensive.
- SAP HANA Database: S/4HANA only runs on the HANA database. For on-premises customers, this means you need a HANA license. SAP offers a runtime HANA license (cheaper, restricted to S/4 usage only) or a full HANA license (more expensive, allowing custom use beyond S/4). This cost can be significant, often calculated by memory size. Ensure that you size your HANA needs (in terms of terabytes of memory, etc.) and include this in your cost estimates. In RISE or S/4 Cloud, the HANA database is included in the subscription fee (you don’t license it separately, but you indirectly pay for it as part of the subscription).
- Maintenance & Support: For perpetual licenses, annual maintenance is a mandatory cost to receive updates and support. SAP Enterprise Support accounts for ~22% of your license fees annually. Over a typical 5-year period, maintenance fees cumulatively roughly equal the original license cost. Keep that in mind: a $1M license deal translates to approximately $1M in support payments over 4-5 years. Support costs are expected to grow ~3-4% per year (or more, if you transition to the new, higher-tier support models SAP is introducing). In the cloud/subscription model, support is bundled – you don’t see a separate maintenance bill, but the subscription price includes support service. Always confirm what level of support is included in a subscription and whether any premium support options incur additional costs.
- Indirect Access (Digital Access): One of the thornier licensing areas is indirect use – when non-SAP systems or external users access data in SAP. Under ECC, SAP sometimes required a named user license for any individual or system that triggered SAP transactions (even if through a third-party app). This led to some famous audit disputes. In S/4HANA, SAP introduced Digital Access licenses, which measure indirect usage by documents (e.g., the number of sales orders and invoices created by external systems). This can be more cost-effective and transparent. However, it’s not automatic – you must opt into a document-based licensing model or negotiate it into your contract. For budgeting, you can estimate digital access needs by analyzing the number of business documents your interfaces generate. SAP often proposes a flat add-on (e.g., ~10% of your S/4 license value for unlimited indirect use) or selling document packs (for example, 1,000 documents for a specified amount). Failing to address indirect access is dangerous – if an audit reveals heavy external use without proper licenses, the back charges or compliance penalties can be substantial. Make digital access a line item in your migration planning to avoid surprises.
- Infrastructure and Hosting: While not part of SAP’s license per se, don’t overlook the cost of running S/4HANA. If you are on-premises, you may need new hardware sized for HANA’s in-memory requirements, or a robust cloud infrastructure if you host it in AWS or Azure. These costs (servers, storage, cloud VM costs, etc.) can be significant and should be included in the total cost of ownership. In RISE, this is included in your subscription – SAP provides the infrastructure in their cloud or via a hyperscaler partner. Just remember, “included” doesn’t mean “free” – it means you’re paying for it as part of that subscription fee. If you already have a cost-efficient internal IT or cloud contract, compare it with what SAP charges for hosting within RISE.
- Implementation and Transition Costs: Although not licensing, the costs of implementation services, data migration, and process changes are often larger than the software cost. Why mention it in a licensing guide? Because SAP sometimes uses software discounts to drive services, e.g., offering a break on licenses if you sign up by a certain date or utilize their consulting services. Keep the overall project budget in mind – a cheaper license is not a win if the implementation timeline doubles. Conversely, a well-negotiated license deal (with phased payments, etc.) can free up budget for a smoother implementation.
Pricing example: For an illustrative mid-size scenario, consider 500 users migrating to S/4HANA on-premise. At list prices, 100 Professional users at approximately $4,000 each and 400 Limited users at approximately $1,000 each would total around $1 million in license fees. Annual maintenance would be approximately $ 200,000.
If the company chose a cloud subscription instead, those 500 users might translate to, say, 300 FUEs (depending on the usage mix). At an approximate $1,500 per FUE per year (example figure), the subscription might be approximately $ 450,000 per year, all-inclusive.
Over five years, the cloud cost would be approximately $2.25 million, versus approximately $2 million for on-premises solutions (including license, maintenance, and some infrastructure costs) – highlighting that the cloud’s lower upfront spend can equal a higher cumulative cost.
These numbers vary widely, but the point is to model out multi-year costs for both options. Also, remember that with an on-premises deal, you could negotiate a 50%+ discount off the $1M list price and apply ECC credits, potentially reducing it to $500k + maintenance, which dramatically undercuts the cloud TCO.
Each case is unique, so run the numbers for your specific situation and don’t hesitate to ask SAP and implementation partners for detailed quotes.
Read Budgeting for SAP S/4HANA License Transition Without Surprises.
Common Licensing Pitfalls and Hidden Challenges
Even seasoned IT executives can get tripped up by SAP’s licensing nuances during an S/4HANA migration.
Here are some common pitfalls to watch for:
- Indirect Use Assumptions: As mentioned, don’t assume S/4HANA magically fixes indirect access costs. Some believe “moving to S/4 means indirect usage is free now” – this is false. You must opt in and likely pay for digital access licenses or ensure that you have sufficient named users for external systems. Address this upfront in your contract to avoid compliance issues later.
- Misclassification of Users: When migrating to S/4, you may be tempted to classify users in less expensive categories to save costs (e.g., labeling many users as “Employee” users when they perform tasks that require a “Professional” license). Be very careful – SAP provides definitions of each user type or FUE category. During an audit or true-up, SAP will re-evaluate roles, and if it finds under-licensing, the penalties or back-charges could wipe out any savings. Conversely, some companies overprovision everyone as full users out of fear, resulting in significant overspending. The solution is to conduct a detailed role mapping and usage analysis, gathering data on the actual transactions each user executes and aligning it with the correct license type. This diligence before purchasing will ensure you buy neither too much nor too little.
- Forgetting New License Requirements for New Functionality: S/4HANA comes with a host of new features (analytics, Fiori apps, etc.). Some are included in the base license, others are add-ons. For example, if you plan to use S/4’s embedded Transportation Management or advanced forecasting, make sure you have licenses for those. It’s easy to assume something is included and later get a bill. Use SAP’s pricelist and ask explicitly which S/4 modules are included in the “Enterprise Management” license and which are separate. Also, check if any functionality you used in ECC has been deprecated or transformed in S/4 – you might be entitled to it differently or need a replacement product.
- Losing Negotiation Leverage in a RISE Deal: Moving to RISE (full cloud) can simplify things, but one downside is that you lose some leverage. In a traditional model, you could decide to postpone upgrades or utilize third-party support to negotiate cost reductions with SAP. In RISE, if SAP raises prices at renewal or if the service is subpar, your options are limited because all pieces (software, support, hosting) are tied together. Some customers assume cloud is “simpler and automatically cheaper” – in reality, it simplifies internal IT tasks but not necessarily the licensing complexity or cost. Go in with open eyes: treat RISE as a long-term marriage. Negotiate protective clauses (e.g., limits on renewal price increases, exit options for poor performance, transparency in usage metrics). And if you have significant sunk costs in existing licenses, weigh that against essentially starting over in subscription.
- Not Utilizing the Migration as a Clean-up Opportunity: An often-overlooked aspect is the chance to eliminate shelfware. Over the years, with ECC, companies accumulate unused licenses or pay maintenance on modules they no longer use. A migration is the perfect time to trim that fat. When performing contract conversion, you can exclude those extra users or products and avoid purchasing their S/4 equivalents. If moving to the cloud, you can start fresh with only what you need. Failing to do this means you carry forward unnecessary costs. Don’t blindly “convert everything one-to-one” – analyze actual usage and only bring what delivers value into S/4HANA.
- Incomplete Budgeting (Total Cost of Ownership): A final pitfall is focusing solely on SAP’s license line item and overlooking the rest. Ensure your migration business case accounts for all costs throughout the lifecycle, including license or subscription fees, support and maintenance, hardware or cloud infrastructure, implementation and training, potential parallel run costs, and data volume growth (which can impact HANA size and cost). Many projects get approval for the implementation but then face internal pushback later when additional licensing needs emerge (“We didn’t budget $200k for digital access licenses!”). Avoid that unpleasant surprise by budget-padding for contingencies or known unknowns in SAP licensing.
Read S/4HANA Digital Access Considerations for Indirect Use Compliance.
Recommendations
To prepare for an S/4HANA migration from ECC while controlling license impact and cost, CIOs and CTOs should:
- Inventory and Optimize Licenses First: Conduct a thorough audit of current SAP usage. Identify active users, their roles, and any unused licenses. Clean up or retire what you don’t need before translating it to S/4HANA. Optimization can easily cut 20-30% of users or cost that you’d otherwise overbuy.
- Leverage SAP’s Conversion Incentives Early: Take advantage of SAP’s license conversion programs sooner rather than later. The credit for your existing ECC licenses will never be higher than it is today. Early movers get better financial terms (and avoid extended support fees after 2027). Delay only if it provides a strategic advantage that outweighs the additional cost you’ll incur.
- Compare RISE vs. On-Prem TCO: Conduct a comprehensive, multi-year cost comparison of staying on-premises (including perpetual licenses, maintenance, and infrastructure) versus the RISE subscription. Include best-case and worst-case assumptions (e.g., consider SAP raising cloud fees, or the cost of hardware refresh on-prem). Use these numbers to guide your decision and negotiation – don’t just follow SAP’s preferred path blindly.
- Negotiate Everything with SAP: Treat the S/4HANA licensing deal as a full negotiation, not a formality. Push for discounts on licenses (50% or more off list is common in competitive situations). Insist on price protections (cap on maintenance increases or subscription renewal uplift). If going RISE, negotiate SLA penalties, flexibility to adjust user counts, and clarity on included components (e.g., is SAP Analytics Cloud included or extra?). SAP has quarter-end and year-end targets – timing your negotiations can yield better discounts.
- Address Indirect Use in the Contract: Don’t Leave Digital Access to Chance. If you have non-SAP systems or customer/supplier portals that interface with SAP, establish a plan to manage these interfaces. You may negotiate a flat fee for unlimited indirect usage or purchase document licenses in bulk at a discounted rate. The key is to get this in writing as part of your S/4HANA agreement. This proactive step can save you from a multimillion-dollar compliance surprise down the road.
- Secure Transitional Rights: Ensure your contract or agreement with SAP provides for the parallel use of ECC and S/4HANA during the migration process. This often comes as a temporary license key or a time-bound clause. It prevents any licensing conflicts, for example, when production is on ECC and testing/training is happening on S/4HANA.
- Plan for Future Growth: As you negotiate S/4 licenses, consider your organization’s growth over the next 5-10 years. It might be wise to lock in pricing tiers now (e.g., pre-agree on the price per user for additional users in the future). SAP’s pricing is volume-based – reaching a higher tier can lower unit costs. If you expect to expand, negotiate expansion options now rather than at a costly later date.
- Evaluate Third-Party Support vs SAP’s Offers: If you are not ready for S/4HANA by 2027, weigh the cost of SAP’s extended maintenance vs. third-party support providers for ECC. Some enterprises save money by using third-party support (dropping SAP maintenance) to buy time for migration, but be aware that this has implications (you lose upgrade rights). This can be a tactical move to control costs in the short term.
- Engage Experienced Licensing Experts: SAP licensing and contracts are complex. In a migration of this magnitude, consider consulting with SAP licensing experts or firms that specialize in contract negotiation. They can provide benchmarks (what have other companies paid?), identify gotchas in contract terms, and help structure a deal that protects your interests. The cost of expert advice can be minor compared to the millions in license fees and potential audit exposure at stake.
Read Retiring Old SAP Components During S/4HANA Migration.
FAQ
Q: How does SAP S/4HANA’s licensing differ from SAP ECC’s licensing?
A: ECC used perpetual licenses (you bought user and module licenses outright) with annual maintenance. S/4HANA still offers perpetual licenses for on-premises, but also introduces subscription licensing for cloud deployments (e.g., RISE with SAP). Additionally, S/4HANA changed some licensing metrics (for example, offering document-based licensing for indirect access instead of requiring named users for every scenario). In short, S/4HANA introduces new license models and options that were not available in ECC.
Q: Can we convert our existing ECC licenses to S/4HANA, or do we have to buy everything new?
A: You can convert your ECC licenses, but the process is not automatic. SAP offers a contract conversion program that provides credit for the licenses you already own, which can be applied toward the cost of new S/4HANA licenses. In the past, a gradual product conversion was possible; however, that path has now been removed. Now, it’s typically a full contract conversion or a move to a RISE subscription. The key is to negotiate the value of your existing investment – SAP will offset a percentage of the new license cost (currently up to ~70%). That means you don’t necessarily pay full price again, but you will pay something for the new S/4 licenses or subscription. Planning this conversion carefully can preserve a lot of value from your ECC assets.
Q: What is RISE with SAP, and should we consider it for our S/4HANA migration?
A: RISE with SAP is essentially SAP’s bundled cloud offering for S/4HANA. Instead of just buying software, you purchase a subscription service where SAP provides the S/4HANA system, the HANA infrastructure (in SAP’s cloud or hyperscaler of choice), and manages the technical operations. You pay a regular subscription fee based on usage (often measured in FUEs or users). You should consider RISE if you want an OpEx model and less in-house technical management. It can simplify the move to S/4HANA because SAP handles a lot behind the scenes. However, you should also consider the drawbacks: you relinquish ownership of licenses, may incur a premium for SAP’s hosting services, and are locked into SAP’s cloud ecosystem. Some organizations negotiate RISE for certain systems or subsidiaries while keeping core systems on-prem. Evaluate the total cost and flexibility of RISE versus doing a traditional migration – it’s not one-size-fits-all.
Q: What are the major cost components we should budget for in an S/4HANA migration?
A: Key cost components include: Software licenses or subscriptions (this is the upfront license purchase or ongoing cloud fees for S/4HANA users and modules), HANA database costs (license or appliance costs if on-prem), Annual support/maintenance (if you own licenses, ~22% per year), Implementation and consulting (system integrator fees, data migration, testing, etc.), Infrastructure (hardware servers or cloud hosting costs if not going with RISE), and Training/change management for your team. In addition, budget for Indirect access licensing (either document licenses or additional user licenses) if you have other systems interfacing with SAP. Also consider a contingency for unplanned needs (for example, if you discover you need an additional module, such as Treasury or an analytics add-on). A thorough budget will encompass both the one-time migration costs and the recurring costs associated with running S/4HANA over the next several years.
Q: How can we minimize and optimize licensing costs during the S/4HANA migration?
A: Start with a deep usage analysis of current licenses to eliminate waste. If you find 15% of your named users haven’t logged in for a year, plan to drop them from your S/4HANA license count. Similarly, identify modules or engines you’re paying for but not leveraging – don’t bring those to S/4. Next, engage with SAP early and obtain quotes for different scenarios (on-premises vs. RISE, varying user counts) – use these to inform your negotiations. Always ask for SAP’s tiered pricing details; sometimes buying a slightly higher quantity can result in a significantly reduced per-unit price. Consider timing your purchase to coincide with quarter-end or year-end, when SAP is more likely to offer generous discounts. If you’re a significant customer, leverage that – maybe get commitments for free training, or extra test system licenses at no charge. Finally, ensure your implementation timeline is efficient; prolonging the project can lead to paying maintenance on both old and new systems in parallel, which is a form of double spending. A well-planned, rightsized approach is the best way to keep licensing costs under control.
Q: What is SAP’s Digital Access (indirect use) license, and how does it affect us?
A: Digital Access is SAP’s model for licensing indirect usage of S/4HANA. Instead of requiring a named user license for every external user or system, SAP allows you to license the outcomes (documents) of those interactions. For example, if an e-commerce site creates sales orders in S/4HANA, you can license that by the number of sales order documents, rather than buying an SAP user for every web customer. This often comes as packages of documents (e.g., 1,000 sales documents = 1 block license) or an “all-you-can-eat” add-on fee. For you, this means estimating the amount of document traffic generated by your external systems and determining whether the digital access model is cost-effective. SAP previously offered a promotional adoption program to help customers transition to this model. Importantly, you must update your contract to include digital access if you want to use it; otherwise, by default, the old named-user rules might still apply (leading to compliance risk). Therefore, digital access can potentially save money and simplify indirect licensing; however, you need to proactively opt in and budget for it during the migration.
Q: How will staying on ECC past 2027 impact our costs and licenses?
A: SAP has made it clear that mainstream maintenance for ECC ends in 2027. From 2028 through 2030, you can opt for extended maintenance, which incurs a surcharge (an additional 2% on top of your regular maintenance fees, resulting in approximately 24% per year). That means you’ll be paying more just to stay where you are, with no new enhancements. Additionally, SAP is unlikely to invest in innovation for ECC, so you’re paying more for an aging product. License-wise, nothing new happens – you keep using your ECC licenses – but you might find that any later conversion to S/4HANA yields less credit value, because SAP will say you’ve gotten value out of them for longer. There’s also a soft impact: as the ecosystem evolves, finding skilled resources for ECC may become more challenging or expensive. Essentially, delaying migration can incur both direct costs (higher support fees, possibly needing to self-fund integration of new tech that SAP is delivering only on S/4) and opportunity costs (falling behind in capabilities). It’s a valid strategy if you truly aren’t ready or the business case doesn’t justify S/4 yet, but ensure you’re aware of these cost implications and have a plan to eventually transition.
Q: What should we look out for in S/4HANA contracts and negotiations with SAP?
A: Several things: First, clarity on metrics – make sure it’s crystal clear how your usage will be measured (users, FUEs, transactions, etc.) and that it aligns with how you operate. Second, price protections – negotiate caps on maintenance increases, and if subscription, caps on annual price uplift at renewal. Third, include components – list out everything you expect to be included (test systems, backup systems, support tools, etc.) so you don’t incur surprise charges. Fourth, termination and fallback terms – if you’re trading in licenses for RISE, can you get them back if you exit RISE in the future (perhaps with a penalty)? Often, you cannot, but it’s worth asking for contingencies. Also, be aware of bundled cloud services you may not need – SAP might bundle BTP (Business Technology Platform) credits or other services; ensure you want them. If not, try to remove them for cost or ensure they’re free so you’re not paying for unused extras. Lastly, audit clause and compliance – ensure the contract language around audits is reasonable (e.g., you want a standard 30-day notice, and audit procedures that won’t disrupt your business unduly). A fair contract will set you up for a partnership with SAP; an imbalanced one could cost you down the line. Don’t be afraid to involve legal and licensing experts to review any S/4HANA agreement before signing.
Q: Is S/4HANA Cloud (RISE) cheaper than on-prem in the long run?
A: It depends on your scenario. RISE shifts costs to a subscription model, which can appear cheaper in the first year (since you avoid a large capital license purchase). It also includes hardware/hosting and some services, which on-prem you’d pay for separately. However, over a longer period (say 5-7 years), the subscription fees can add up to equal or exceed what you might have spent owning licenses and running them yourself. For example, if you have stable user counts and a capable IT infrastructure, buying licenses and using a low-cost cloud provider or existing data center might yield lower TCO than paying SAP annually for RISE. On the other hand, if you value SAP handling updates, having a scalable subscription that you can increase or decrease, and not worrying about infrastructure, the extra cost might be justified as a business decision. Many organizations find that pure costs are similar within a certain range, and the decision ultimately comes down to strategy: do you want to outsource your ERP technology backbone (go RISE) or maintain more control (go traditional)? Therefore, run a detailed cost model for 5 and 10 years. Include intangibles (personnel costs to manage systems, cost of potential downtime if self-managing vs SLA with SAP, etc.). The answer will vary – there is no universal cheaper option, but there is a best option for your company’s needs and strategy.
Q: What are the risks of not addressing licensing properly during the migration?
A: The risks include unbudgeted cost blowouts (finding out mid-project you need an extra $500k in licenses for something you overlooked), compliance issues (realizing after go-live that you’re out of compliance in some area, triggering an audit or true-up that could be very expensive), and operational delays (licenses not being in place could delay testing or cutover if, say, you forgot to license a key engine for S/4HANA). There’s also the risk of over-committing – locking into a pricey contract for far more capacity than you need, wasting budget for years. Another risk is relationship strain with SAP if negotiations are done last-minute or in bad faith – you want SAP as an ally during migration (for support, expertise), not as an adversary. By thoroughly addressing licensing – doing the homework upfront, involving procurement, using benchmarks, and negotiating transparently – you mitigate these risks. Essentially, the better you manage the licensing aspect, the smoother (and cheaper) your S/4HANA journey will be.
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