SAP S/4HANA Pricing and Cost Optimization

SAP S/4HANA Pricing and Costs: Understanding and Optimizing Your Investment

Executive Summary:

SAP S/4HANA is a powerful but costly enterprise ERP solution. Its pricing model is complex, with different licensing options (on-premises vs. cloud) and a variety of user types that affect cost.

This article breaks down S/4HANA pricing models, typical list prices, and key cost drivers. It also provides benchmarking insights and expert strategies to optimize costs.

The goal is to help IT and finance leaders at global enterprises manage S/4HANA’s expenses through informed planning, negotiation, and ongoing license management.

Understanding S/4HANA Licensing Models

SAP S/4HANA offers multiple licensing models that significantly impact cost structure and financial flexibility.

The two primary approaches are:

• Perpetual On-Premise Licensing (CapEx): You purchase a one-time, perpetual license to run S/4HANA on your infrastructure. Upfront costs are high (often millions for large deployments), and you pay annual support of ~20–22% of the license value for maintenance and updates. You own the software indefinitely, but the total cost includes hardware, database (SAP HANA) licenses, data center operations, and IT staff to manage the system. This model offers maximum control and can be economical over a long horizon, but it requires significant capital outlay and in-house capability.
• Subscription Cloud Licensing (OpEx): You pay an annual or monthly subscription fee to use S/4HANA in the cloud (for example, S/4HANA Cloud public or private edition). The subscription typically bundles the software license, infrastructure hosting, and standard support. Upfront costs are minimal, and SAP handles updates. However, if you stop subscribing, you lose access to the software. This model reallocates ERP spending to an operating expense, making it more flexible in the short term. Over several years, subscription costs can accumulate to rival or exceed on-prem costs if not managed, so evaluating multi-year total cost of ownership (TCO) is critical.

(SAP also offers “RISE with SAP,” an all-in-one S/4HANA Cloud bundle with infrastructure and services under one contract. While RISE is a notable option, this article focuses on the standard on-premises and S/4HANA Cloud licensing outside of RISE.)

Key Point:

Align the licensing model with your company’s financial strategy. On-premises (CapEx) may be a suitable option if you have a capital budget and require control, whereas cloud (OpEx) might be more suitable for organizations that prioritize agility and lower upfront costs.

Always project a 5-10 year TCO under each model, including infrastructure and support, to inform your decision.

S/4HANA User Types and List Pricing

Licensing costs for S/4HANA are primarily driven by the number of users and the type of access each user requires.

SAP employs a tiered named-user model on-premises, and a similar concept in the cloud, often measured in Full User Equivalents (FUEs).

There are three main S/4HANA user license categories:

• Professional User (Full): A “power user” license that allows full access to all or most S/4HANA modules and functionality. These are required for users in roles like administrators, power finance or supply chain users – generally anyone who needs broad capabilities. Professional licenses carry the highest cost per user.
• Limited / Functional User: A license for users with restricted scope – for example, someone who only uses the ERP for a specific function or a single module (finance clerks, HR staff, etc.). These users have narrower access and are priced significantly lower than Professional users.
• Self-Service / Employee User: An ultra-light license for casual or occasional use, such as employees who just enter time sheets, travel expenses, or simple self-service tasks. Often, these are very low-cost or even bundled (e.g., multiple self-service users may be counted as a fraction of one full user for licensing purposes).

Indicative List Prices: SAP does not publicly publish official price lists, but historically, the ballpark list price ranges for S/4HANA have been:

Table: Approximate SAP S/4HANA list prices for different user types (Note: Actual negotiated prices are usually lower.)

These ranges are list prices – in practice, most enterprises negotiate substantial discounts off these rates.

For on-premise licenses, discounts of 50% or more off the list price are common for large deals.

In the cloud subscription model, SAP often provides tiered volume discounts (for instance, the per-user monthly rate may decrease significantly as you add more users or commit to a larger contract).

Always engage SAP with the expectation that the sticker price is negotiable.

On-Premise vs. Cloud: Key Cost Components

Beyond the basic license fees, the cost structure of S/4HANA differs between on-prem and cloud deployments.

Understanding these components will help in budgeting and comparing options:

• License vs. Subscription: In an on-premise scenario, you pay upfront to own licenses, then yearly maintenance. For example, a 500-user on-premises deployment might involve a $1 million initial license purchase, plus approximately $200,000 per year in support fees. In a cloud scenario, the same 500-user deployment might be offered as a subscription of approximately $300,000–$500,000 per year. Over five years, the cumulative spend could be similar; however, on-premises solutions have higher initial costs, while cloud solutions spread the cost out over the annual period. The accounting treatment also differs (CapEx amortization vs. OpEx expense).
• Infrastructure and Hosting: On-premise customers must budget for hardware, servers, storage, networking, backups, and disaster recovery for the S/4HANA system. This could result in significant yearly costs (hundreds of thousands of dollars for a large enterprise environment) and necessitate the allocation of IT resources for management. In the cloud model, infrastructure is included – SAP (or the hyperscaler hosting S/4HANA Cloud) provides the data center, hardware, and technical management as part of the subscription. This shifts costs to the vendor, but you pay for that convenience within the subscription fee. If your organization has a very cost-efficient internal IT operation, running on-premise might be cheaper; if not, the included cloud infrastructure can provide value.
• Maintenance and Support: For on-premise installations, annual maintenance (support) is an additional cost (~20% of the original license fee each year) and is mandatory for continued support and software updates. This means an upfront license of $1M will cost ~$200k each year in support, and note that SAP often raises support fees periodically (for instance, an inflationary increase of 3-5% in a given year). In cloud subscriptions, standard support is typically bundled in the price. However, check the contract for any escalation clauses – cloud contracts may have built-in price increases (e.g., 3% per year) after an initial term. Additionally, premium support services (such as SAP MaxAttention) would incur an extra charge on both models.
• Upgrades and Innovation: With on-premise, you control the upgrade schedule but also bear the effort and cost of technical upgrades or migrations (often engaging consultants). In SAP S/4HANA Cloud (public edition), upgrades are pushed automatically every quarter by SAP at no extra cost, meaning you’re always on the latest version (but you have less control over timing). In a private cloud or on-prem model, you schedule upgrades, which can be costly projects. Consider these factors in your cost planning: the cloud may reduce upgrade costs and effort, whereas on-prem may allow you to defer upgrades to align with your budget cycles or custom needs (at the risk of running outdated versions).

Takeaway: On-premise vs. cloud is not just a technical decision – it’s a financial one.

The cost profiles differ in timing and composition, but either can potentially yield similar long-term costs depending on scale and efficiency.

Be sure to factor in all components (license/subscription, hardware, support, services) when comparing options.

Additional Cost Factors and Hidden Pitfalls

Implementing S/4HANA involves more than just user licenses or subscriptions.

Enterprises should be aware of several additional cost drivers and potential “gotchas” that can significantly impact the total cost:

• Indirect/Digital Access: This is one of SAP’s notorious hidden cost areas. Indirect access refers to the use of the SAP system by non-SAP applications or external users. For example, if a third-party e-commerce system creates sales orders in S/4HANA, SAP may require a license for that indirect use. To address this, SAP introduced a Digital Access model for S/4HANA that charges based on the number of documents (e.g., orders, invoices) created via indirect access. You can purchase document packs or opt for an annual flat fee for digital access. Pitfall: If you ignore indirect usage, an SAP license audit could hit you with a hefty bill for unlicensed use. Ensure your contract explicitly covers digital access (either by including a specific number of documents or a fixed fee for external interfaces) to avoid future surprises.
• Engines and Add-Ons: S/4HANA’s core modules (Finance, HR, Procurement, etc.) are generally covered by user licenses; however, some specialized functions or industry solutions require separate licenses, which are based on different metrics. These are sometimes referred to as “engines” or add-ons. For example, SAP Extended Warehouse Management may be licensed based on warehouse transactions, while SAP Treasury is licensed by the number of accounts or financial instruments, or industry packages are licensed by metrics such as revenue or the number of customers. These costs can be significant if needed. Additionally, remember that S/4HANA runs on the SAP HANA database; for on-premises deployments, a HANA database license is required. SAP offers a cheaper HANA Runtime license (about 15% of the value of the SAP application license), which restricts usage to SAP applications only, and a more expensive Full Use HANA license (often based on memory size) if you plan to use the database for non-SAP data or additional custom apps. Pitfall: Mis-licensing your HANA database or forgetting about an engine license can lead to compliance issues. Clarify which modules and components (analytics, industry add-ons, etc.) are included in your S/4HANA license and which cost extra.
• Implementation and Consulting Costs: The software license/subscription is just one part of the total cost. Implementing S/4HANA typically incurs large expenses for systems integrators, consultants, data migration, testing, and training. These services can easily equal or exceed the cost of the software itself. While not part of SAP’s licensing fees, they have a significant impact on the overall budget. Some SAP deals may bundle a limited amount of consulting or migration support as an incentive – evaluate these offers holistically. Don’t be swayed by a discount on licenses if the project services will cost several times the license fee; plan for both adequately.
• Contract Terms and Audits: The fine print of your SAP contract can have cost implications down the road. Pay attention to audit clauses – SAP reserves the right to audit your usage. Any shortfall (users or documents not properly licensed) could result in charges at the full list price as a penalty. Negotiate for protections if possible (for instance, the right to true-up at your discounted rate instead of list price, or a grace period to purchase additional licenses if an audit finds overuse). For cloud contracts, understand renewal terms: after the initial subscription period, prices could rise. Try to cap renewal price increases (e.g., no more than CPI or a fixed %).
  Additionally, consider shelfware (unused licenses) – if you have old SAP licenses that’re not in use, inquire with SAP about conversion credits when transitioning to S/4HANA. SAP often runs programs that let you credit the value of existing licenses toward new purchases (especially for transitioning to the cloud), but these offers diminish over time. Document any such agreements to ensure you realize those savings.

In summary, go into an S/4HANA purchase with eyes open to these extras.

A well-negotiated contract will address indirect usage, include or acknowledge any add-on needs, cap support increases, and clarify audit processes. Diligent planning here can save your company from unplanned costs later.

Benchmarking S/4HANA Costs in the Real World

What do enterprises spend on S/4HANA? The answer varies widely based on company size, user count, and scope, but some benchmarks can be gleaned from industry examples:

• Mid-Sized Enterprises: Many mid-market companies report S/4HANA Cloud subscription costs of a few hundred thousand dollars per year. For example, a company with ~100 S/4HANA Cloud users might spend around $100,000 to $200,000 annually on their subscription. In euros, one medium-sized European firm reported spending approximately €100,000 per year on S/4HANA Cloud licensing, which was a significant budget item but manageable for a mid-sized business. These firms value the cloud’s lower infrastructure burden, but the recurring cost needs to be justified by the business value.
• Large Enterprises: Global companies with thousands of users often end up with multi-million dollar S/4HANA agreements. An on-premises S/4HANA license deal for a large enterprise (with 500–1,000 users and a broad module footprint) could easily exceed $5 million in license fees (before discounts), plus $ 1 million or more per year in support, and substantial hardware and implementation costs. Under a subscription model, a large enterprise might be looking at $1 million or more per year, depending on user count and modules. It’s not unusual for a Fortune 500 company to budget tens of millions over several years for an S/4HANA transformation, including software, infrastructure, and services.
• Comparative TCO: SAP often claims that a cloud subscription can have lower total cost over a 3-5 year period compared to on-prem, thanks to eliminating hardware and IT overhead. However, customers have observed that after 4-5 years, the cumulative subscription fees may overtake on-premise costs if the on-prem system is run efficiently. For example, an organization that paid $1M upfront for licenses and $200k/year in support (on-prem) versus another paying ~$300k/year for a cloud subscription might both spend roughly $2M+ over five years. The difference lies in cash flow and flexibility – the cloud customer spreads the cost but continues to pay annually. In contrast, the on-premises customer makes a large upfront investment but may see lower incremental costs in years 6, 7, and beyond.

Benchmark wisely:

Each organization’s situation will differ, but using industry data as a sanity check is advisable.

If SAP quotes you a number, it’s valid to ask: “How does this compare to what similar companies are paying?” Enterprises often engage benchmarking services or informal peer networks (user groups) to gauge if a proposed S/4HANA deal is in line with market norms.

Don’t accept a quote in isolation – always compare and ask for a better one if it seems too high. Procurement teams should leverage these benchmarks to negotiate, ensuring your company isn’t overpaying relative to the market.

Strategies to Optimize and Reduce S/4HANA Costs

Controlling SAP S/4HANA costs requires proactive planning and savvy negotiation.

Here are key strategies and actionable tactics to optimize your spend:

• Rightsize Your Licenses: Before finalizing any purchase, thoroughly audit your user counts and requirements to ensure a precise fit. If you’re migrating from an older SAP system (ECC), analyze current usage to avoid over-buying licenses that won’t be used. Often, companies discover many inactive users or users who can be assigned a lower-tier license. Clean up your user list and match each role to the appropriate license type (e.g., only grant “Professional” licenses to those who truly require full access). By eliminating or reassigning excess licenses, one can significantly reduce costs – it’s not uncommon to decrease initial license counts by 20-30% through this exercise.
• Time Your Negotiation: Leverage SAP’s sales cycles to get better discounts. SAP account executives have quarterly and year-end targets. Plan your S/4HANA purchase or renewal discussions to coincide with these crunch times. For instance, initiating a deal late in Q4 or just before SAP’s fiscal year-end can improve your bargaining position – discounts of 50% or more off the list price are often achievable when SAP needs to meet a target. Additionally, create competitive tension: even if you are likely to choose SAP, having proposals or pricing from competitors (such as Oracle, Microsoft Dynamics, etc.) gives you leverage. Let SAP know you have options; it encourages them to sharpen their pencil on pricing and terms.
• Negotiate Beyond Price – Terms Matter: Optimize the contract clauses, not just the upfront cost. For a cloud subscription, negotiate caps on year-over-year price increases (for example, no more than 3% annual increase on subscription fees). If you anticipate growth, consider locking in today’s rates for additional users you may add later (e.g., ensure that if you purchase 100 more users next year, they receive the same discount rate). For on-prem, negotiate maintenance fee protection – while SAP standard support is ~22%, you might negotiate that it stays at that percentage without unexpected hikes. Also, consider securing contract flexibility, such as a phased rollout. If you only need 300 users on Day 1 but might need 500 by Year 2, negotiate a commitment for the 500 at a discounted rate, but only pay for the first 300 until you deploy the rest.
• Use Trade-In Credits and Bundles Wisely: If you already own SAP licenses or products, ask about conversion credits towards S/4HANA. SAP often provides credit for the value of unused licenses when moving to S/4 (especially for cloud deals). For example, you might get credit equal to your original license cost applied to the new purchase – but these deals often have time windows (the sooner you move, the better the credit). Similarly, be open to bundle deals but cautious: SAP might bundle in additional software (analytics, integrations, etc.) or cloud platform services at a discount. This can be cost-effective if you truly need those extras. Avoid the trap of “shelfware” – only accept bundled products that align with your roadmap; otherwise, you’re paying for unused functionality.
• Address Indirect Usage Upfront: As noted earlier, ensure that indirect access is discussed during negotiations. Don’t wait for SAP to mention it – proactively seek a solution. You could negotiate a fixed annual fee for all your third-party interfaces to SAP, or secure a certain number of free document transactions to cover expected volume. Getting clarity here can prevent a multi-million-dollar surprise later. It’s much easier to get favorable terms for digital access as part of an initial deal than after an audit has found an issue.
• Continuous License Management: After signing the deal, cost optimization doesn’t stop. Treat SAP license management as an ongoing discipline. Regularly (e.g., quarterly or semi-annually) review your license assignments and usage. Are there licenses for employees who left the company or changed roles? Re-harvest those and reassign instead of buying new ones. Monitor usage of engines or document counts if applicable. Being proactive helps you stay in compliance and avoid panic buys. It also positions you well for renewal negotiations, since you’ll know exactly what you use and need. Many enterprises implement internal governance or use tools (like SAP’s License Administration Workbench) to track usage continuously.
• Bring in Expert Help if Needed: If your team lacks deep experience in SAP negotiations, consider using third-party licensing advisors or consultants. Firms that specialize in SAP license optimization can provide benchmark data, negotiation strategies, and identify contract pitfalls (they have seen where others have overpaid or gotten caught out). While there’s an added cost to engaging experts, the ROI can be high – a reduction of even 5% in a large SAP deal can mean hundreds of thousands saved. Experts can also help interpret SAP’s proposals (which can be complex) and ensure you’re not agreeing to unfavorable terms hidden in the legalese.

By combining these approaches, enterprises have successfully reduced millions from their initial SAP quotes and kept ongoing costs in check.

Remember that SAP expects savvy customers to negotiate; those who do their homework and push back strategically are often rewarded with significantly better pricing and terms.

Recommendations (Expert Tips)

1. Conduct a License Audit Before You Buy: Inventory all users and current licenses (if migrating from an older SAP system). Clean up any inactive users and right-size each user to the correct license type. This homework prevents over-purchasing and provides a factual basis for negotiating with SAP.

2. Align Licensing with Business Strategy: Decide early whether on-premise or cloud (SaaS) licensing fits your organization’s needs and financial strategy. If you have the IT resources and plan to use the system for a decade, on-premise ownership might yield lower long-term costs. If you need faster time-to-value and prefer an operating expense model, the cloud could be a better option – but always model out the 5-10 year costs for each scenario to compare.

3. Never Pay Sticker Price – Negotiate Aggressively: Treat SAP’s quote as a starting point. Aim for substantial discounts (50% or more) off the list prices for large deals. Leverage quarter-end or year-end timing to get the best offers. Negotiate not just the price, but also contract terms such as caps on maintenance or renewal increases, and the inclusion of extras (e.g., sandbox systems, extra modules) at little to no additional cost. Every aspect of the deal is negotiable.

4. Cover Indirect Usage in the Contract: Make sure your agreement with SAP explicitly addresses indirect or third-party system access. Whether through SAP’s Digital Access document approach or named user licenses for external parties, get a defined model in writing. This will save you from compliance disputes and unexpected bills down the road.

5. Plan Phased Rollouts to Delay Costs: If you won’t use all the S/4HANA functionality or users on day one, don’t buy everything upfront. Structure the contract to add users or modules later at locked-in discount rates. This aligns the cost with actual project phases and staggers spending. SAP will often agree to this if you commit to a roadmap – just be mindful of any deadlines on using credits or promotions.

6. Monitor Usage and Reclaim Shelfware: Post-implementation, establish a routine to review license usage. Remove or reassign licenses that aren’t being used (for example, if an employee leaves, free up their license). This ensures you maximize the value of what you’ve purchased and can potentially avoid buying more if you can reallocate existing licenses. It also puts you in a strong position during audits since you’re already managing compliance proactively.

7. Budget for the Full Lifecycle: When planning S/4HANA costs, include everything – initial licenses/subscriptions, annual support, hardware or cloud infrastructure, implementation services, data migration, training, ongoing support, etc. Having a comprehensive budget (with a contingency for unexpected needs) will prevent nasty surprises. For instance, factor in a possible 3-5% annual increase in support or subscription fees so the CFO is prepared.

8. Keep Leverage for the Future: Once the ink is dry on your contract, continue to watch the market and SAP’s offerings. SAP may introduce new programs (for example, incentives like “GROW with SAP” for mid-sized companies, or future cloud promotions). If a better deal or program becomes available, be prepared to approach SAP to revise your agreement at renewal. Also, maintain relationships with alternative vendors and be aware of third-party support options – even if you stick with SAP, knowing you have alternatives gives you negotiating power in the long run.

Checklist: 5 Actions to Take

1. Assess Current Needs and Usage: Gather a cross-functional team (IT, procurement, finance) to review your current ERP usage. Inventory how many users you have, what roles they play, and which SAP modules or processes they will use. This assessment will clarify the type and number of S/4HANA licenses needed and prevent overestimation.

2. Evaluate Licensing Options (On-Prem vs. Cloud): Conduct a financial analysis comparing on-premise vs. cloud S/4HANA models for your situation. Include all relevant costs (licenses/subscription, infrastructure, support, implementation). Decide which model aligns with your company’s strategy and budget preferences. For example, if capital expenditure is feasible and long-term cost minimization is a priority, on-prem might win; if flexibility and quick startup are key, lean towards cloud. Present this analysis to executives to inform their decision-making process.

3. Prepare for Negotiation: Before engaging SAP sales, do your homework. Research typical S/4HANA pricing for organizations of your size (benchmark data). Set a target discount or budget internally. Identify any existing SAP investments you can leverage (legacy licenses that could be credited, etc.). Also, plan the timing of negotiations (whenever possible, aim for SAP’s quarter-end). Assemble your negotiation team and ensure all stakeholders (IT, procurement, legal, finance) are aligned on must-haves (price point, contract terms, indirect access resolution, etc.).

4. Negotiate and Secure a Favorable Contract: Enter discussions with SAP armed with data and a clear ask. Push for the maximum discount and remind SAP of competitive alternatives. Carefully review the contract terms – include provisions for future growth (additional users at locked rates), cap any annual price increases, and explicitly document anything SAP promised (like special discounts, credits for old licenses, or extra systems/environments). Involve legal counsel to review audit clauses and any onerous terms. Don’t rush – ensure the final contract protects your interests and budget over the long run.

5. Implement and Monitor: After signing, execute the project prudently. During implementation, only deploy/purchase licenses as needed per phase. Set up a license management process: designate an owner to track SAP usage vs. entitlements, perform periodic internal audits, and educate internal teams about license compliance (for example, avoid connecting unlicensed third-party systems without approval). As you go live and use S/4HANA, keep an eye on utilization. This operational vigilance will help you avoid compliance issues and inform your strategy when it’s time to renew or expand your SAP agreement.

By following these steps, your enterprise will be well-positioned to maximize the value of SAP S/4HANA while keeping costs under tight control.

FAQs

Q1: What are the main licensing options for SAP S/4HANA, and how do they impact cost?
A: The two main licensing models are on-premises perpetual licensing and cloud subscription licensing. With on-premises, you pay a large one-time fee to purchase the software and then ~20% per year of that cost for support—this is a CapEx-heavy approach, but you own the software indefinitely. With cloud (Software-as-a-Service), you pay an annual or monthly subscription that includes the software, hosting, and basic support—this is OpEx and has a lower upfront cost, but it’s a rental model (if you stop paying, you lose access). In the long run, on-premises solutions can be cheaper if you utilize the system for many years and control infrastructure costs, whereas cloud solutions offer more agility and predictable yearly costs but might end up costing more over, say, a decade. (SAP also offers RISE with SAP, a bundled subscription with cloud infrastructure and services included, but its cost profile is similar to the general cloud model, just packaged as one contract.) Companies should compare the multi-year total cost of ownership for each option to decide which is more cost-effective for them.

Q2: How are S/4HANA user licenses categorized, and what do they roughly cost?
A: S/4HANA user licenses come in tiers: Professional users (full access) are the most expensive; Limited/Functional users (access to specific modules or tasks) are cheaper; and Employee Self-Service users (very limited usage, like time entry or approvals) are the least expensive. In terms of list price, a Professional user license on-premise might be in the ~$3,000–$6,000 range (one-time, plus annual support fees), whereas in the cloud it could be around $200–$250 per user per month. Limited users might be only $500–$1,500 each on-prem (one-time), or roughly $50–$100 per month in the cloud. Self-service users often cost a fraction of a full user license (sometimes dozens of employee self-service users equate to one full user license). In cloud subscriptions, they might even be included at no extra charge up to a certain ratio. These figures are highly negotiable – large enterprises often secure deep discounts. The key is to match each employee with the right license type, ensuring you’re not overpaying (for example, avoid giving a Professional license to someone who only needs limited functionality).

Q3: What hidden costs should we watch out for beyond the basic S/4HANA license?
A: There are several potential additional costs to consider. Annual maintenance/support on on-premises licenses (approximately 22% of the license cost each year) can add up and may increase over time, so budget for these increases or negotiate caps. Indirect access fees (if third-party systems or external users interact with SAP) can be a big hidden cost – SAP’s Digital Access model might require you to pay by document counts for those indirect usages, so make sure to address that in your planning and contract. Add-on modules or engines may also incur additional fees – not every piece of functionality is included in the base license. If you need a special module (e.g., advanced planning, treasury), determine if it utilizes a separate metric (such as the number of orders or revenue) and incurs additional costs. Additionally, for on-premise deployments, don’t forget the cost of the HANA database license if it’s not included. SAP offers a cheaper, restricted-use DB license or a full-use license, depending on your needs. Finally, consider implementation and training costs, which, although external to SAP’s licensing, will significantly impact the total project cost. All these factors mean that the true cost of S/4HANA is often higher than just the sticker price of licenses – careful planning is needed to avoid unexpected expenses.

Q4: How can we negotiate better terms and reduce our S/4HANA costs during procurement?
A: Preparation and timing are key. First, conduct an internal assessment to determine exactly what you need – this prevents SAP from upselling unnecessary users or extras. When engaging with SAP, don’t accept the first quote; it’s expected that enterprises negotiate. Try to time your negotiations around SAP’s end-of-quarter or fiscal year – sales teams are more likely to offer significant discounts (50%+ off list) when they need to meet targets. Use any leverage you have: for example, consider soliciting a bid from a competitor (even if you intend to go with SAP) to use as a bargaining chip. Ask for the contract terms you want: limit maintenance or subscription price increases, get protections against indirect usage fees, and include a clause for adding more users later at the same discount. It’s also effective to involve experienced negotiators or third-party advisors who are familiar with SAP’s tactics and understand the achievable discounts in the market. Essentially, treat this like any major vendor negotiation – come with data, push for concessions, and don’t be afraid to walk away or delay if the terms aren’t right. SAP will often come back with a better offer rather than losing the deal.

Q5: What should our CIO, CFO, and procurement team each focus on to control S/4HANA costs?
A: Each stakeholder has a unique perspective:

• The CIO/IT team should ensure the licensing model aligns with the IT strategy and technical requirements. For example, if you have a cloud-first strategy, the CIO might lean towards S/4HANA Cloud; if you have specific compliance or customization needs, on-premises might be necessary. The CIO must also plan for compliance management (governance to track license usage and avoid over-deployment) and make sure the contract covers technical needs (like adequate environments for development/test, integration allowances, performance capacity for peak loads, etc., so that there aren’t surprise costs for extra hardware or capacity.
• Procurement should focus on getting the best commercial deal. That means aggressively benchmarking prices, negotiating discounts and favorable terms, and ensuring the contract has no hidden traps. Procurement will coordinate the negotiation strategy, focusing on both price and other key aspects, such as termination clauses, audit rights, and liability. They should aim to structure a deal that is both competitive and flexible, avoiding any one-sided terms that favor only the vendor.
• The CFO/Finance team’s focus is on affordability and value. They will evaluate the payment structure (CapEx vs. OpEx) and its impact on financial statements and budgets. For instance, the CFO will consider if spreading costs annually (subscription) is preferable for cash flow, or if a one-time capital hit makes sense and yields savings. Finance will also look at ROI – ensuring that if the company is investing millions in S/4HANA, there are clear business benefits or efficiencies expected. Additionally, the finance team will want predictability, so they will be keen to lock in known costs (avoiding scenarios where fees can spike unpredictably in a few years). They may also set aside contingency funds for any change orders or additional licenses that may be needed later, to avoid scrambling for budget.

In practice, these stakeholders must work together. The best outcome is achieved when IT defines what’s needed, procurement secures a great deal for it, and finance confirms it’s viable and sustainable. Collaboration ensures that S/4HANA delivers value without budget overruns.

Further Reading

• SAP S/4HANA Licensing Types Explained: Professional, Limited, and Self-Service Users
• On-Premise vs. Cloud for SAP S/4HANA: Total Cost of Ownership Compared
• SAP S/4HANA Cloud Pricing Benchmarks for U.S. Enterprises
• How to Use Legacy SAP License Credits When Migrating to S/4HANA
• S/4HANA Add-Ons and HANA Database Licensing Costs : The Hidden Costs You Must Budget For
• SAP Runtime vs SAP Full Use: What Enterprise IT Needs to Know

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