SAP SuccessFactors Licensing & Optimization
SuccessFactors is at the heart of SAP’s HR cloud strategy. As companies migrate from legacy SAP HCM on-premise systems to the cloud, understanding the SuccessFactors licensing model becomes crucial.
Why? Because how you license and negotiate SuccessFactors can make or break your HR transformation budget. Being informed about modules, pricing models, and contract tactics is essential for a cost-efficient HR transformation.
SuccessFactors Suite Overview – Modules and Capabilities
SAP SuccessFactors is a comprehensive cloud-based HR suite composed of multiple modules. Each module addresses specific HR processes, and together they cover the entire employee lifecycle, from hire to retirement.
All modules are delivered as SaaS (Software-as-a-Service) subscriptions, meaning your organization pays to use them via the cloud rather than installing software on-premise.
Core HR:
The foundation is Employee Central, the central HR system of record for all core employee data. Alongside it is Employee Central Payroll, a cloud payroll engine that processes employee pay.
Talent Management:
SuccessFactors offers a range of talent-focused modules that you can mix and match based on your needs:
- Recruiting: Manages the recruiting process from job postings to hiring decisions.
- Onboarding: Automates and simplifies new-hire onboarding (and offboarding) with streamlined workflows.
- Performance & Goals: Facilitates performance appraisals, goal setting, and continuous feedback.
- Compensation: Supports merit increases, bonus allocations, and compensation planning.
- Learning: A learning management system for employee training and development.
- Succession & Development: Helps identify high-potential talent, plan succession for key roles, and guide employee career development.
SuccessFactors Licensing Model Explained
SuccessFactors uses a subscription licensing model based largely on the number of employees or users in the system.
Unlike traditional SAP on-premise licenses (which were purchased upfront with annual maintenance), SuccessFactors is sold as a cloud service – you pay per user (employee) per year for access.
However, user licensing differs by module. Some modules require enterprise-wide coverage, while others can be licensed for specific groups.
- Core HR modules (e.g., Employee Central): These are typically priced per employee record. If you have 3,000 employees, you generally need 3,000 Employee Central licenses because every employee’s data is stored in the core HR system.
- Role-based modules: Many talent modules can be licensed for a subset of users instead of the whole workforce.
Subscription fees scale with your workforce size and usage. As your employee count grows, total costs increase (though the cost per user may drop with volume discounts).
If your workforce shrinks, you typically cannot reduce the subscription count until the next renewal, so avoid over-licensing upfront.
Bundled vs. À la Carte SuccessFactors Modules
SuccessFactors modules can be bought as bundles or individually. Here’s how each approach works:
- Talent Suite Bundles: SAP offers bundles that group popular talent modules (e.g. Recruiting + Performance + Compensation) under one price. Bundles can simplify purchasing and often cost less than licensing each module separately.
- Full HCM Suite: You can opt for the entire SuccessFactors suite (all core and talent modules together). This is useful if you need an end-to-end HR solution and plan to use most of the functionality. Vendors typically provide a bulk discount for committing to the full suite.
- Selective Licensing: You have the flexibility to subscribe only to the modules you truly need. For instance, you might start with Employee Central and Learning only, and add others later. This avoids paying for features your organization isn’t ready to use.
Trade-off: Bundles can lower your per-module costs, but they might include components you won’t use right away. It can be smarter to start with a few key modules and expand later, rather than overbuying upfront just to get a “package” deal.
SAP will gladly sell you additional modules when you’re ready, so don’t let sales pressure push you into a larger bundle than you need.
Key Cost Drivers in SuccessFactors Licensing
Several factors determine the cost of a SuccessFactors subscription. Understanding these will help you manage your HR cloud budget:
- Workforce Size: This is the primary pricing metric. More employees means a higher total cost, though large headcounts qualify for volume discounts. SAP’s pricing is tiered – the cost per user drops as you hit higher user count brackets.
- Number of Modules: Each module added has its own fee. A company using only Core HR will pay far less than one using Core + multiple talent modules. Prioritize the modules that deliver the most value, and consider phasing others in over time to spread costs.
- Global Deployment: If you operate internationally, be mindful of any regional price variations or localization add-ons. You might negotiate a centralized global contract to leverage your full headcount for better rates.
- Add-Ons (Support, Storage): Optional services can add to the cost. For example, SAP’s premium support plans come at an extra charge. Likewise, exceeding standard data storage limits (e.g., for document uploads or extensive learning content) could incur additional fees. Include these in your planning if you anticipate needing them.
All these factors set your baseline cost, but remember that negotiation will ultimately decide the final price. Use these cost drivers as discussion points – for instance, higher user counts or multi-module deals should entitle you to better discounts.
Transition from SAP HCM On-Prem to SuccessFactors Cloud
Moving from SAP’s on-premise HR (SAP HCM) to the SuccessFactors cloud is a major project.
One big consideration is how to avoid double-paying during the transition period when you might have both systems running.
To make the most of your migration:
- Avoid Double-Paying: Plan your timeline to minimize any period where you pay for both old and new systems. Ideally, cut over to SuccessFactors as your on-prem maintenance comes up for renewal (so you can drop it). If some overlap is unavoidable, consider negotiating a short-term discount or credit to avoid paying full price for two systems simultaneously. In some cases, SAP may credit a portion of your remaining on-prem maintenance fees toward your SuccessFactors subscription if you time the cutover well.
- Employee Central Payroll: If you’re adopting EC Payroll (the cloud payroll engine) to replace SAP’s on-prem payroll, negotiate special terms. Seek credits for the legacy payroll licenses you’re retiring, and ensure you aren’t charged extra during parallel testing. The idea is to avoid penalties for moving payroll to the cloud.
- Use SAP Promotions: Ask about any current migration promotions. SAP sometimes offers discounted bundles or free trial periods for customers switching to the cloud by a certain date. Take advantage of these if they fit your plans – but make sure they truly align with your needs (don’t add a module you have no use for just because it’s temporarily free).
Treat the migration as a fresh negotiation. SAP knows you could consider alternatives (or stick with on-prem longer), so they have reason to make the cloud deal attractive. Push for every incentive and credit available to ensure a cost-effective transition.
Negotiation Strategies to Optimize SuccessFactors Pricing
Approach your SuccessFactors purchase or renewal with a clear negotiation strategy. Here are key tactics to help you secure the best pricing and terms:
- Benchmark Market Pricing: Know what others pay. Many enterprises end up paying around $15–$25 per employee per month for each module after discounts. If SAP’s quote is higher, cite those benchmarks or share a competitor’s quote to push for a better rate.
- Tiered Discounts for Volume: Larger user counts should mean cheaper per-user pricing. Ensure your quote reflects appropriate volume discounts. If you’re near a tier threshold (say 5,000 users), negotiate as if you’ve reached it. The more users (and modules) you commit to, the bigger the discount should be.
- Flexibility for Downsizing: You typically can’t scale licenses down until renewal. Try to negotiate some flexibility. At a minimum, ensure you can reduce the user count at renewal without penalty. If your workforce might shrink, avoid overcommitting to too many licenses up front.
- Freebies and Extras: Ask SAP to sweeten the deal with some no-cost extras. Request a free trial of a smaller module and a few free consulting or training hours. Perks like these reduce your overall project spend.
- Lock in Multi-Year Rates: Negotiate caps on price increases and lock in rates for multiple years. For instance, insist on at most a 5% annual increase and try to fix pricing for a 3-year term. Also, ensure any users you add later get the same discounted rate, so growth doesn’t become more expensive.
- Seek Service Credits: Beyond license fees, ask for some extras. You could request free consulting hours, admin training sessions, or even a test sandbox system to be included. Such perks can offset implementation costs and add value to your contract.
Be prepared to walk away or delay if needed – that stance often pushes SAP to improve the offer. In the end, a well-negotiated SuccessFactors contract gives you the flexibility and cost predictability you need, without breaking the bank.
Optimizing SuccessFactors Usage Post-Licensing
After securing a good contract, ensure you derive full value from your SuccessFactors investment by managing its use smartly:
- Audit and Reconcile Users: Regularly remove ex-employees and duplicate accounts so you’re not paying for “ghost” users.
- Maximize Module Adoption: Use every module you’re paying for. Train your people and promote the tools so they don’t sit unused.
- Use Config over Customization: Take advantage of SuccessFactors’ built-in configuration options instead of paying for expensive custom features or add-ons.
- Minimize Overlap: If you still use on-premise HR or payroll systems in parallel, retire them as soon as SuccessFactors is live to eliminate redundant licensing costs.
Related articles
- SuccessFactors Modules Breakdown: Which HR Modules Do You Need?
- SAP SuccessFactors Licensing Guide for CIOs and CTOs
- SAP SuccessFactors Licensing & Negotiation: A Guide for IT and Finance
- SuccessFactors vs On-Premise SAP HCM: Navigating the Licensing Transition
- SuccessFactors Pricing Negotiation
FAQ – SuccessFactors Licensing Questions
Q1: Is SuccessFactors sold as a full suite or by module?
A: You can buy SuccessFactors as standalone modules or as a bundled suite. SAP gives you the flexibility to start with just the modules you need and later expand to the full suite if it makes sense.
Q2: Can I license SuccessFactors for only part of my workforce?
A: Yes. While core HR modules like Employee Central are usually enterprise-wide, many other modules can be licensed for a subset of users. For example, you might deploy a performance module to just managers or a specific department at first.
Q3: How does SAP’s HR cloud pricing compare to on-prem HCM?
A: Cloud pricing is a per-user subscription (versus buying licenses + maintenance for on-prem). Over time, total costs can be similar, but cloud solutions include continuous updates and reduced IT overhead. SAP often provides credits to help with the switch from on-prem.
Q4: Can I negotiate SuccessFactors contract terms?
A: Absolutely. Everything from the per-user price to contract duration is negotiable. Customers often secure discounts off list prices, lock in multi-year rate caps, and include terms for flexibility. Don’t accept SAP’s first offer – push for a better deal.
Q5: What about payroll in SuccessFactors?
A: SuccessFactors offers Employee Central Payroll as an add-on for cloud payroll, licensed per employee. If you’re migrating from SAP’s on-prem payroll, negotiate to avoid dual costs during the transition. (You can also integrate SuccessFactors with a third-party payroll if needed.)
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