RISE with SAP to Cloud ERP Licensing
Introduction
SAP’s push toward cloud-based ERP has accelerated in recent years, evolving from the RISE with SAP offering toward a broader SAP ERP Cloud model.
This transition significantly changes how SAP software is licensed and contracted for CIOs and procurement leaders.
Traditional SAP licensing (perpetual licenses with annual maintenance) extends to subscription models that bundle software, infrastructure, and services under one agreement.
Below, we examine the changes in the licensing structure from RISE with SAP to SAP’s cloud ERP packages, including shifts in user metrics, incentive programs for existing customers, and key contract implications.
The goal is to provide a clear, advisory overview, enabling you to plan and negotiate effectively in this new landscape.
Learn more about the RISE vs. Cloud ERP overview.
Licensing Structure: RISE with SAP vs. SAP ERP Cloud
RISE with SAP was introduced in 2021 as an all-in-one subscription model designed to help customers migrate to SAP S/4HANA Cloud.
Under RISE, instead of purchasing software upfront and running it on your infrastructure, you pay SAP an annual subscription fee.
This fee includes:
- Software License: Rights to use S/4HANA Cloud (private or public editions).
- Infrastructure & Hosting: SAP provides the cloud infrastructure (via SAP’s data centers or hyperscalers like AWS/Azure/Google) and manages basic operations (system provisioning, updates, backups).
- Support & SLAs: Support and uptime guarantees are bundled (comparable to SAP Enterprise Support) (e.g., ~99.7% for production systems by default).
- Bundled Services: RISE contracts typically include extras, such as a starter pack of SAP Business Technology Platform (for integrations and extensions), select transformation tools (including process analysis via Signavio), and limited access to SAP Business Network (e.g., supplier network transactions or Ariba credits).
In essence, RISE with SAP = SAP’s ERP software + cloud infrastructure + services, all in one contract. You no longer own licenses; SAP manages a SaaS-like arrangement.
This simplified single contract model shifts SAP from a software vendor to a service provider role, accountable for running the system.
By contrast, SAP ERP Cloud (as an evolving concept in 2024–2025) refers more generally to SAP’s cloud ERP offerings outside the RISE bundle.
SAP has begun introducing new packaging (for example, the “SAP Cloud ERP Private” package in 2025), which continues the push to the cloud but potentially offers more flexibility in choosing components.
The key differences in licensing structure and approach include:
- Standalone Cloud Subscription: Enterprises can license SAP S/4HANA Cloud (public or private edition) as a standalone subscription, excluding the full RISE bundle of services. In such cases, you still pay a subscription for the software and support, but you might handle infrastructure contracts separately or through a partner. The term “SAP ERP Cloud” essentially refers to S/4HANA Cloud, delivered as a service, whether via RISE or another cloud subscription route. In practice, SAP’s private cloud edition is often sold via RISE, but SAP is rebranding and adjusting offerings to cater to different needs (e.g., the new Cloud ERP Private package).
- Bundle vs. Modular: RISE is a predefined bundle. SAP’s cloud ERP might be offered in more modular packages. For instance, you could choose a “Cloud ERP Private” package with additional transformation tools, or a learner subscription that includes only the core ERP and essential services. The licensing principle remains subscription-based, but SAP aims to streamline its offerings and clarify what is included (to address past confusion about the RISE scope).
- Contracting Parties: With RISE, SAP is your single vendor for everything (and SAP subcontracts the cloud infrastructure behind the scenes). In a non-RISE cloud scenario, an enterprise could, for example, sign a subscription for S/4HANA Cloud software from SAP but host it on their own through SAP’s “customer data center” option or by a cloud partner. In that case, licensing the software is still a subscription, but you might have more direct control over the infrastructure contract. Many large enterprises, however, find the fully bundled RISE model convenient and have adopted it; SAP’s new “Cloud ERP” packages continue to keep SAP as the primary cloud provider, just with updated naming and possibly refined terms.
Bottom Line:
RISE and the newer SAP ERP Cloud offerings represent a shift to subscription licensing. The core difference is that RISE was positioned as an all-encompassing transformation-as-a-service.
SAP’s cloud ERP licensing will remain subscription-based, but you’ll see updated packaging and naming.
Understanding exactly what a “Cloud ERP” package includes is crucial.
Does it mirror RISE’s all-in-one approach or allow separation of duties?
For CIOs, the licensing structure change means transitioning from CAPEX to OPEX budgeting and ensuring the contract encompasses all necessary elements (software, infrastructure, integrations) for a single predictable fee.
Learn about July 2025 RISE packaging changes.
Shifts in User Metrics and Licensing Units
One of the most notable changes in SAP’s licensing model with the move to the cloud is how user access is measured.
Historically, SAP on-premise licensing has revolved around Named Users, including Professional, Limited Professional, and Employee Self-Service users.
Each has different price points, plus licensing for modules based on various metrics (such as revenue, orders, and CPU cores for databases).
This model was complex and often led to shelfware or audits if users were misclassified.
RISE with SAP introduced a new unified user metric: the Full User Equivalent (FUE).
This metric aggregates all user types into a single consumable unit to simplify licensing.
Here’s how it works and what’s changed in user metrics:
- Full User Equivalents (FUEs): Under RISE (and continuing in SAP S/4HANA Cloud licensing generally), you contract for a certain number of FUEs instead of specific named-user counts. Different types of users consume different fractions of an FUE. For example, 1 FUE can correspond to 1 “Advanced” user, or 5 “Core” users, or 30 “Self-Service” users. In practical terms, an Advanced user is a heavy or power user (similar to the old Professional user), a Core user is a more limited operational user, and a Self-Service user is a lightweight user (e.g., an employee who just enters time or travel expenses). SAP also has a “Developer” user type in the cloud, which may be considered 0.5 FUE due to its lighter usage. This weighting system allows flexibility – you can mix and match user types as long as the total FUE consumption stays within your purchased amount.
What changed: You no longer need to purchase 100 Professional, 200 Limited, and 500 ESS user licenses separately. You might contract for, for example, 100 FUEs and allocate those across user roles as needed. This eliminates the need to predict exact user type counts upfront; you have a pool of capacity available. - No Named User Enforcement, but License by Usage: In S/4HANA Cloud, individual users aren’t “named licensed” as they were on-prem. Instead, the system measures your usage against the FUE quota. If you exceed your FUE allotment (e.g., your mix of users effectively totals 110 FUEs but you have only contracted for 100), you’ll need to true up by purchasing additional FUEs. Indirect/Digital access (where external systems create SAP transactions) is handled via a separate document-based metric in S/4HANA. Still, SAP often offers to include a certain volume of documents or a conversion to the digital access model as part of its cloud contracts. The key is that metrics shift from static, named users to consumption-based measures, providing some elasticity in how you use the system, but requiring vigilance to stay within contracted usage.
- Legacy Metrics Simplified: Engine metrics (such as the number of orders and revenue tiers) generally don’t apply in the RISE/S4 Cloud subscription world for core ERP. The subscription is primarily sized on users (FUEs) and system size (memory/throughput, which SAP translates into an infrastructure tier). For example, a large enterprise might choose a “XXL” system size for production and a certain number of users; the price is then quoted accordingly. You’re not separately licensing the HANA database or specific modules; they’re bundled in as per your chosen package. Some add-ons (like SAP SuccessFactors or Ariba) remain separate subscriptions, but the core ERP license is simplified to a few key metrics.
- Adjustment of User Definitions: Companies transitioning from ECC must map their old user licenses to the new FUE-based categories. SAP provides guidance for conversion (e.g., one ECC Professional User might translate to one Advanced user, also known as 1 FUE, whereas an Employee Self-Service user might map to a Self-Service user at 1/30th FUE). This change in metric is significant – it can alter the number of “users” you need to pay for. Enterprises should analyze usage patterns: many casual ECC users may count very minimally in FUE terms, potentially lowering cost. However, if not optimized, heavy users or high license counts could increase costs. The FUE model is intended to be flexible, but if not right-sized, you might over-commit to too many FUEs or the wrong mix of user types.
SAP’s cloud licensing moves towards outcome-based metrics and pooled capacity.
CIOs appreciate the flexibility; you can reassign FUEs from one department’s users to another if they need to change without buying new license types, but it requires careful monitoring.
Ensure you negotiate insight into how SAP will measure your FUE consumption and build in headroom for growth (ideally, pre-negotiate tiered pricing for additional FUEs).
At the same time, insist on clarity around indirect usage: confirm if your RISE or ERP Cloud subscription includes digital access documents or if that’s extra, so you won’t face surprise charges if, say, a CRM system or e-commerce platform connects to SAP and triggers documents.
Transitioning Existing Customers: Credits, Conversion Programs, and Deals
For enterprises already invested in SAP ECC or on-premise S/4HANA, moving to RISE or SAP ERP Cloud is not just a technical migration; it’s a strategic shift. It’s a financial and contractual migration.
SAP has rolled out incentive programs to ease the move, effectively crediting customers for their licenses and maintenance investments.
Understanding these programs is key to timing your move and negotiating the best deal:
- Maintenance Fee Credits: When RISE with SAP launched, SAP offered generous credits to customers who converted to an RISE subscription. Early adopters (circa 2021) could apply up to 90% of their annual maintenance fees toward the RISE subscription cost, meaning you wouldn’t be paying maintenance and subscription in parallel; most of your maintenance spend would be “converted” into the new subscription for a period. However, these credits diminish over time. For example, by 2024, the standard maintenance credit might be around 70% or less, and SAP indicated it would drop roughly 10% each year. Specifically, a customer paying $1 million in annual maintenance in 2021 might have initially received a $ 900,000 credit per year. However, by 2024, this credit could decrease to $700k, and by 2025–2026, it could be reduced to fifty or sixty percent. The incentive is clear: the sooner you transition, the more credit you receive, and the longer you wait, the more maintenance spend is left on the table when you move. This is a deliberate strategy by SAP to front-load rewards for early movers.
- Cloud Migration Credits (2024 program): As the 2027 end-of-support date for ECC looms, SAP, in late 2023 and 2024, doubled down on incentives through a “Rise with SAP Migration and Modernization Program.” Through the end of 2024, SAP offered special credits to encourage signing cloud deals. For instance, organizations moving an existing S/4HANA on-premises system to S/4 Cloud could receive credits worth roughly 60% of the annual subscription value, and those moving from ECC (a much older technology) could receive around 45% of the contract value credited. Sometimes, mid-sized customers were offered up to 100% credit for a limited time (effectively a free first year) to jump-start their move. These credits could offset both subscription fees and associated migration services. The takeaway: There is room to negotiate incentives, especially before published deadlines. If you’re evaluating a move now, ask SAP about the credits or migration funding available – these programs have specific end dates. Still, SAP often introduces new ones or can make exceptions for strategic customers.
- Conversion of Existing Licenses: What happens to the perpetual licenses you bought? In a RISE conversion, those on-premise licenses are typically terminated or put into “shelf” status when you sign the new subscription. You won’t pay maintenance anymore (saving that cost), but you also give up the rights to use them moving forward (after a migration period). SAP’s contracts sometimes allow a grace period of dual usage. For example, you might run ECC and S/4 in parallel during migration without extra license fees as long as you’ve contracted RISE and intend to retire the old system. Ensure your agreement covers dual-use to avoid compliance issues during the transition phase. Also, negotiate what happens if the cloud contract ends – do you have any right to re-activate your old licenses or convert the subscription to a perpetual license? (Usually not by default; once converted, you’d have to purchase licenses anew if you wanted to revert on-prem. This underscores the importance of commitment to the cloud decision.)
- Extended Maintenance and “Bridge” Options: Despite incentives, many large enterprises won’t complete their S/4HANA migrations by 2027. SAP’s official support for ECC ends then (with optional extended maintenance to 2030 at an extra 2% yearly maintenance fee). Recognizing this, SAP has unveiled a “SAP ERP, Private Edition, Transition Option” – essentially an ECC in the cloud subscription – for the 2030-2033 period as a last resort. Customers with complex environments can pay for a special SAP ERP Cloud subscription to keep their ECC 6.0 system running on SAP’s cloud with support through 2033. This is not a cost-effective option (SAP has stated that this bridge will come at a premium cost compared to a standard S/4 cloud subscription), and it’s only available to those who have migrated their ECC to HANA and into SAP’s private cloud by 2030. In other words, if you cannot go to S/4 by 2030, SAP will let you convert ECC into a subscription for up to 3 more years – but you’ll pay more for deferring the full S/4 upgrade. This underscores that SAP’s ultimate goal is S/4HANA Cloud for all, and interim measures will incur additional costs. As a CIO, factor these timelines into your roadmap: every year past 2027 is likely to increase costs (either via maintenance premiums or expensive bridge contracts).
Real-world scenario:
Imagine a large manufacturer running ECC, annually paying $5M in maintenance.
If they moved via RISE in 2021, they might have received approximately $4.5M in credits, essentially making the cloud subscription nearly cost-neutral compared to maintenance for a while.
If the same company waits until 2025 or 2026, it might only receive $3M or less in credit, meaning it will effectively carry some double-spending during the switch.
Multiply this over multi-year contracts, and the difference is huge.
That’s why many enterprises are now seriously evaluating RISE deals, even if they intend to execute the migration over several years. Locking in the incentives early can save millions.
On the other hand, don’t rush solely by incentives: ensure your organization is prepared for the move. A failed or hasty migration will cost more than any credit savings.
Some companies use the threat of third-party maintenance (after 2027) as leverage in negotiations.
Still, SAP’s posture is fairly firm since they know that eventually, customers will need the innovation that is only available in S/4HANA.
Read more about the cost comparison between RISE, Cloud ERP, and self-managed.
Enterprise Contract Impacts and Risks in the Cloud Model
Moving from traditional SAP licensing to a RISE or SAP ERP Cloud contract isn’t just a technical change; it’s a fundamentally different contractual relationship with SAP.
Here are key contract implications and potential risks that CIOs and procurement heads should consider:
- Loss of Perpetual Rights & Vendor Lock-In: In the on-prem model, if you own a perpetual SAP license, you can use the software indefinitely (even if you stop paying maintenance, you just don’t get support/updates). In the subscription model, if you stop paying, you lose access – period. There is no perpetual fallback. This dramatically raises the stakes of vendor lock-in. SAP is essentially hoping to have customers on lifetime subscriptions. Exiting a RISE/Cloud contract after five years would likely require either renewing (at whatever terms SAP offers at the time) or migrating to something else (which, for core ERP, is a massive undertaking). As a result, negotiating an exit strategy upfront is important. For example, some customers try to negotiate contract clauses that, if the subscription isn’t renewed, they can convert it to a traditional license for S/4HANA (so they’d at least have a running system on their own thereafter). SAP doesn’t offer this by default, but savvy negotiators at least discuss it. At a minimum, be aware that once you’re in SAP’s cloud ecosystem, your leverage in future negotiations may decrease – you can’t easily threaten to walk away because the cost to re-platform is prohibitive. This means lock-in risk is higher, and you need to mitigate it by securing favorable renewal terms (see next point).
- Renewal and Price Increases: A common mistake is focusing only on the initial subscription term price. Traditional SAP maintenance was relatively predictable (maintenance typically increased at a fixed % or CPI each year). With cloud subscriptions, SAP has more leeway to raise prices at renewal, unless the contract limits this. Always negotiate price protections for renewal. For example, insist on a clause capping any renewal price increase (e.g., no more than 5% increase, or even locking the same price for one renewal term). If you sign a 3-year RISE deal without such a cap, you could face a significant surprise in year 4 if SAP announces a new rate that is 20% higher. Additionally, clarify the renewal process – specifically, how far in advance SAP must notify you of renewal terms and what your rights are if you choose not to renew. Having the ability to adjust your subscription at renewal (like reducing the FUE count if your user numbers fall) is another point to negotiate. Standard RISE contracts don’t allow for mid-term or at-renewal reductions without re-signing, but you can attempt to insert flexibility for known events (e.g., divestitures or downsizing). The bottom line is to treat renewal like a part of the deal you’re making now; lock in what you can while you have negotiating leverage.
- Inability to Scale Down: Unlike many cloud services that tout elasticity, the standard SAP RISE contract is “rigid up and down”. You commit to a set number of users and a certain system size for the full term. You can always pay more to scale up (add users, extra storage, etc.), but you generally cannot scale down your commitments until the contract ends. This has serious implications if your business changes – for example, if you spin off a division that had 20% of the SAP users. You won’t automatically save money; you’re still stuck paying for those FUEs for the term. To address this, some customers negotiate a one-time adjustment or include a clause that allows for a decrease in subscriptions in the event of a divestiture. It’s not standard, but it’s worth a try if you foresee such scenarios. At the very least, carefully size your initial subscription – don’t overbuy “just in case” because you can’t trim it later. Start with what you truly need, and remember that you can always purchase incremental FUEs if usage grows.
- Audit and Compliance Considerations: One might think moving to a cloud subscription means the end of SAP license audits. Indeed, some aspects (such as named user audits) are eliminated, but usage levels still restrict you, and SAP can monitor or audit your compliance with the subscription terms. For instance, they might check how many user accounts are active and what type to ensure they align with the FUEs purchased. Alternatively, if your contract restricts you to specific SAP modules or environments, using something outside that scope could trigger compliance issues. The contract likely includes language allowing SAP to verify that you’re not exceeding your usage or only using what you have subscribed to. The cloud model’s biggest “audit” risk is indirect use/document licensing. If your contract doesn’t explicitly cover digital access, SAP could later claim you owe fees for documents created by non-SAP systems. Proactively negotiate a resolution – often, SAP will include a certain number of document licenses or a blanket waiver for known interfaces as part of a RISE deal (especially if you bring it up). Do not assume that “cloud = all you can eat”; clarify things like: Are third-party add-ons allowed? Are there extra fees for APIs or integrations? Cover these in the contract to avoid surprises.
- Support and SLAs: Under RISE, support is included; however, please note that the support terms may differ from those in your existing SAP support agreement. Ensure you understand the SLA (Service Level Agreement) commitments, such as RISE production downtime credits, response times for issues, and maintenance windows. Verify if SAP’s standard 99.7% uptime is sufficient, or if you require 99.9% (higher availability often incurs additional costs or necessitates an add-on for a high-availability setup). Also, clarify what happens if SAP misses an SLA – typically service credits – but negotiate for meaningful credits if uptime is mission-critical. Another aspect is how updates are handled: in the S/4HANA Cloud public edition, SAP automatically applies updates and upgrades according to the schedule. You have more control in the private edition (RISE), but SAP manages the technical updates. Your contract might specify the upgrade policy. Ensure it aligns with your business’s ability to absorb changes (for instance, at least one upgrade every 5 years might be mandated to keep support). Knowing these details helps avoid conflict later – for example, you don’t want to be caught off guard by a forced downtime for upgrades outside your blackout windows.
- Scope of Services (Avoiding Gaps): A RISE contract can be quite complex in terms of its bill of materials. Not everything is automatically included. For example, a disaster recovery (DR) environment might be optional – if you need a warm standby system in another region, that often incurs additional costs. Advanced security or compliance features, specific integration services, or solutions such as SAP archiving may need to be added. It’s essential to review the contract line by line and confirm all the components you assume are included in the service. If it’s not listed, it’s not provided. Many enterprises engage SAP advisors or licensing experts to help review the contract to catch omissions. Common things to verify include the number of environments (dev, test, and prod), DR systems, backup retention policies, included storage, the cost of overages, network connectivity responsibilities, and any migration services SAP is bundling. Ensure that any promise made during the sales process (“Yes, we’ll help migrate your data” or “Sure, that extra sandbox is possible”) is written into the contract. Once signed, change requests for missing pieces can be very expensive.
- Flexibility and “Swap” Rights: Given the long-term lock-in, try negotiating flexibility where possible. Some companies have negotiated the right to swap a portion of their subscription for other SAP services over time. For example, if you need fewer ERP users but more SAP Analytics Cloud or BTP services in two years, you could swap some value from one to the other. SAP typically resists open swap rights but might allow one-time adjustments or a degree of cross-portfolio credit. The rationale for presenting is that your business might evolve during a 5-year term; flexibility keeps you investing with SAP rather than looking elsewhere. Even if you can’t get an explicit swap clause, consider negotiating add-on options at a set discount (for instance, you pre-negotiate rates for additional SAP cloud products if you adopt them, using your RISE as leverage).
In summary, enterprise contracts for SAP cloud require as much scrutiny as traditional SAP contracts – if not more, because of the operational control you’re ceding.
Key risk areas are lock-in, renewal pricing, and scope clarity.
Mitigate these by engaging in strong negotiation upfront: cap your future costs, incorporate any necessary flexibility, and document every service element.
It’s easier to get concessions before you sign than afterward.
Also, maintain governance during the contract by assigning someone to track usage (FUE consumption, etc.) and the value you’re getting.
This way, when it’s time to renew or expand, you’ll have data to discuss with SAP.
Learn about negotiating under the new Cloud ERP model.
Pricing Examples and Cost Considerations
SAP’s licensing changes also mean a change in how you evaluate cost.
You’re looking at all-in annual subscription fees instead of a one-time license fee plus 22% annual maintenance.
Let’s walk through a couple of simplified pricing scenarios to illustrate the differences and what to watch for:
- Mid-sized Enterprise Example: Suppose you are a company with 500 SAP users on ECC. Historically, you may have purchased $5 million in SAP licenses to cover those users and modules, and paid approximately $1.1 million annually in maintenance (22% of the license cost). You spend perhaps $200k annually on infrastructure and basic support to run the system (servers, storage, admins). So, roughly, your annual running cost might be $1.3 million, excluding periodic upgrade projects. Now, you consider RISE with SAP. SAP sizes your needs and offers a subscription to the S/4HANA Cloud private edition at $1.5 million annually for a 5-year term. This includes comparable functionality, hosting, and support. On paper, the cost is slightly higher than your current run rate. However, moving to S/4HANA will bring a costly migration project (perhaps a one-time $2 million services investment), which you’ll incur either way by 2027. SAP claims that by Year 3 or 4, the innovations and avoided hardware refresh costs will result in a more cost-effective overall solution. From a pure cost view, you need to compare a 5-year TCO on both sides: in this example, 5-year on-prem might be ~$6.5M (plus maybe hardware upgrades), vs 5-year RISE at $7.5M + migration cost. The gap might narrow if you were due for a data center upgrade or if SAP gave a discount in the early years. The lesson: Run the numbers for your specific situation and include all relevant factors (project costs, internal staff time, decommissioning old systems, etc.). Also, remember to budget for growth: if you expect to double user counts or data volume, get pricing for those scenarios now.
- Per-User Subscription Illustration: Let’s break down the cost per user in cloud terms. Real-world RISE pricing varies, but a ballpark public figure for the RISE private edition is around $170–$200 per FUE per month at the enterprise scale. So, if you have 100 FUEs contracted at $180 per FUE per month, that’s $18,000, or $216,000 per year. If those 100 FUEs cover 500 users (a mix of types), that averages about $430 per user per year for full SAP access, including infrastructure – a very attractive number. However, note that this is just an illustrative slice. Actual quotes depend on system size (which can increase the price significantly if you have large databases or high throughput). For the public cloud edition (where you have less flexibility), the per-FUE rate might be slightly lower (e.g., $150/FUE/month). Still, most large enterprises opt for the private edition for its flexibility. Another way to look at it is that some large companies have reported RISE deals in the tens of millions yearly range. These typically bundle more than just ERP (they may include multiple SAP cloud products, premium services, and other offerings). For a more typical large enterprise with a few thousand users, you might see something like $2 million/year as a RISE subscription quote versus their prior maintenance of $1.5 million – an increase, but one that includes roughly $500k-$1M worth of infrastructure and services they no longer have to provide internally.
- Cost Drivers and Savings Areas: Key cost drivers in the new model include user count, data footprint, and service level extras. If you can archive data and keep your database size lean, you may be able to fit into a lower-cost infrastructure tier. If you can categorize more users as “core” instead of “advanced,” you optimize FUE usage (e.g., five core users = 1 FUE, so it’s much cheaper if appropriate). These are areas to assess before negotiation – some companies conduct internal analysis or use SAP’s sizing tools to ensure they aren’t overshooting their needs. On the savings side, consider what costs you’ll no longer pay: third-party database licenses (if you were on Oracle/DB2 for ECC, moving to S/4 on HANA under RISE means the HANA license is included), hardware refreshes, data center operations, and potentially some IT staff time can be reallocated. SAP often claims a 15-30% TCO reduction with RISE, but your mileage will vary. Many customers find that the cloud option can be slightly more expensive in pure dollar terms over time. Still, they pursue it for strategic reasons (agility, avoiding technical obsolescence, getting access to innovations like AI features that SAP only releases in the cloud, etc.). Ensure your business case for relocation is not solely based on cost savings; also incorporate the qualitative benefits. Conversely, don’t accept a vague “20% TCO saving” claim at face value – ask SAP to demonstrate it based on your numbers and use that in negotiations (“If you truly save us 20%, then commit to a price that achieves that.”).
To put it plainly, cloud ERP is not automatically a cheaper ERP.
It can be, especially if you are facing large capital expenses or if you can streamline your operations in the process. However, it often shifts costs around.
Expect higher software subscription spending, offset by lower expenditures on infrastructure and internal support.
Expect significant one-time migration costs in the short term, hopefully, offset by lower upgrade costs later (since SAP manages upgrades in the cloud, you won’t have big upgrade projects every few years like with ECC).
Over a 5- to 10-year horizon, many enterprises find that the total cost difference is within ±10% of staying on-premises when all factors are accounted for.
However, they gain improved capability and avoid being on unsupported software.
Real-World Transition Insights and Recommendations
Many enterprises worldwide are currently grappling with these decisions.
As of 2024, only an estimated one-third of SAP’s ECC customer base has fully moved to S/4HANA, and even fewer have done so via RISE.
This means the majority are either in the planning or initial execution stages.
Here are some insights and examples from the field:
- Adoption is a Gradual Process: Large organizations, such as global banks, manufacturers, and public sector entities, tend to move cautiously. They often start with selective pilots or phased rollouts – for example, moving a subsidiary or a specific module to S/4HANA Cloud to test the waters. Licensing-wise, SAP has been flexible in some cases by allowing hybrid licensing during transitions (e.g., maintaining some on-prem licenses for parts of the business while using RISE for new parts). If structured well, you can avoid paying twice. Work with SAP to outline a phased migration plan – possibly locking in RISE pricing now, but ramping up users over time as you transition systems. Enterprises that negotiate multi-phase projects sometimes secure pricing such that in year 1, they pay for perhaps 50% of users, in year 2, 75%, and so on, aligning with their rollout.
- Success Stories (and Their Context): SAP often cites examples like Commerz Real (finance) or Fresenius (healthcare), which have adopted RISE and tout the benefits of innovation. These companies report faster deployment of new capabilities and smoother operations by letting SAP handle the technical heft. However, remember that these are usually private edition deployments where the customer still did significant work to adapt processes and remove custom code. The key takeaway from successful transitions is that strong executive commitment and effective change management are just as important as the technical contract details. CIOs who treated the RISE move as a business transformation (not just an IT upgrade) saw more value in leveraging bundled tools like Signavio for process improvement.
- Common Pain Points: On the other hand, some customers have faced challenges, such as unclear responsibilities between SAP, the customer, and the integrator. For example, during a RISE implementation, SAP manages infrastructure, but your internal team or your SI must still handle application configuration, data migration, and testing. If something goes wrong, finger-pointing can occur unless roles are well-defined. Ensure your contract or project charter delineates who is responsible for what (e.g., who is responsible for data conversion issues or tuning performance – SAP’s scope versus yours). Another complaint area has been cost overages: a few companies signed RISE and later discovered they needed much more data volume or additional services, which increased the cost. This goes back to thoroughly scoping and sizing at the outset.
- Audit Settlements and RISE: It’s worth noting that some customers have moved to RISE to resolve past compliance issues. For instance, if an SAP audit identifies indirect usage or user license shortfalls in ECC, SAP may waive those back-charges if the customer agrees to a RISE migration and includes the appropriate licensing in the new contract. This can be a win-win: you avoid a hefty one-time penalty, and SAP secures a cloud commitment. If you’re in that boat, leverage it – but ensure the new contract covers the risk areas so you don’t carry them forward.
- Global and Local Considerations: SAP’s push is uniform globally, but each region’s SAP team might have different flexibility levels. Some European user groups have been vocal about rising concerns (loss of transparency, potentially higher costs), and SAP has been responsive by adjusting offerings (like the 2025 “Cloud ERP” repackaging and better tooling). As an enterprise, engage with your SAP user group or peers in other companies; their experiences can inform your negotiation. For example, one company found that they could convince SAP to match it by referencing another company in their industry that had secured certain terms (such as a renewal cap or an extra test system at no cost). Knowledge is power in these negotiations.
Recommendations for CIOs and Procurement Leads:
- Do Your Homework on Sizing and Usage: Before requesting a quote, audit your SAP usage to ensure accurate sizing and usage. Clean up unnecessary users, analyze the distribution of heavy and light users, and examine trends in data growth. The better you handle your requirements, the less likely you’ll over-buy cloud resources or FUEs.
- Leverage Timing: If you are within a few years of SAP’s 2027 deadline, use that urgency as leverage. SAP has sales targets to bring customers to the cloud each quarter; you might secure a better discount if you engage when SAP is eager to close deals. Conversely, don’t sign a deal too early if you’re not prepared to start the project – coordinate contract commencement with when you can begin value realization (maybe negotiate that subscription billing only starts when your production system is live or similar milestone-based terms).
- Negotiate Key Protections: As detailed, push hard on renewal caps, change flexibility, and document inclusions. Also, negotiate post-term options – even if you can’t secure the right to perpetual use, perhaps you can obtain a clause regarding data extraction support or an extension at a predefined rate if you need a few more months beyond the term. Ensure any special discounts (like those maintenance credits or incentives) are explicitly written in, so there’s no ambiguity from year to year.
- Consider a Competitive Assessment: While SAP ERP is a category for many large enterprises (given how embedded it is), procurement might still analyze other cloud ERPs (Oracle, Workday, etc.) to understand the market pricing. Even if switching is unrealistic, having this info can help benchmark if SAP’s offer is within reason during negotiation. SAP recognizes that customers have limited alternatives, but larger organizations have successfully negotiated better rates by demonstrating that they’re considering all options.
- Plan for the Long Haul: The move to S/4HANA Cloud is not just a contract change but a reinvestment in SAP for potentially the next 10-15 years. Treat it as a strategic partnership reset with SAP. Align on the roadmap: get assurances of what innovations (AI, analytics, industry-specific functions) you’ll get and when. Build governance with SAP – quarterly business reviews to proactively monitor usage and resolve issues. A strong partnership can make a significant difference in value – SAP will be more willing to adjust your contract or provide assistance in a pinch if they view you as a long-term cloud reference customer.
Finally, keep the big picture in mind: SAP’s transition to ERP Cloud is part of a broader industry trend toward subscription models.
It offers opportunities for agility and modernization, but also puts the onus on customers to be vigilant with contracts and usage.
By understanding the changes to the licensing model, metrics, and incentives, as well as the contract nuances, you can turn this transition into an opportunity to optimize your SAP investment, rather than just a compliance exercise against a 2027 deadline.
With careful planning and negotiation, enterprises can effectively adopt SAP’s cloud future while safeguarding their interests and budgets.
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