Executive Summary
SAP's push toward cloud-based ERP has accelerated, evolving from the RISE with SAP offering toward a broader SAP ERP Cloud model. This transition fundamentally changes how SAP software is licensed and contracted. Traditional perpetual licences with annual maintenance are giving way to subscription models that bundle software, infrastructure, and services under one agreement. This guide examines the licensing structure changes, shifts in user metrics, incentive programmes for existing customers, enterprise contract risks, and strategic recommendations — providing independent, vendor-neutral analysis to help CIOs plan and negotiate effectively.
Learn more: Complete Licensing Guide for SAP ERP Private Cloud | RISE vs Cloud ERP Overview
In This Guide
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. Instead of purchasing software upfront and running it on your own infrastructure, you pay SAP an annual subscription fee that bundles everything together.
What RISE with SAP Includes
Software Licence
Rights to use S/4HANA Cloud (private or public editions) as part of the subscription. You no longer own perpetual licences — SAP manages a SaaS-like arrangement where access is tied to the subscription term.
Infrastructure and Hosting
SAP provides cloud infrastructure (via SAP's data centres or hyperscalers like AWS, Azure, or Google) and manages basic operations including system provisioning, updates, and backups.
Support and SLAs
Support and uptime guarantees are bundled — comparable to SAP Enterprise Support. Standard production SLA is approximately 99.7% uptime with defined maintenance windows.
Bundled Services
RISE contracts typically include extras: a starter pack of SAP Business Technology Platform (for integrations and extensions), transformation tools including Signavio process analysis, and limited SAP Business Network access.
RISE with SAP = SAP's ERP software + cloud infrastructure + services, all in one contract. This simplified single-contract model shifts SAP from a software vendor to a service provider role, accountable for running the system end-to-end.
SAP ERP Cloud: The Evolving Alternative
SAP ERP Cloud (emerging in 2024–2025) refers more generally to SAP's cloud ERP offerings outside the full RISE bundle. SAP has begun introducing new packaging — for example, the "SAP Cloud ERP Private" package in 2025 — which continues the push to cloud but potentially offers more flexibility.
Standalone Cloud Subscription
Enterprises can licence S/4HANA Cloud as a standalone subscription, excluding the full RISE bundle. You still pay a subscription for software and support, but may handle infrastructure contracts separately or through a partner.
Bundle vs Modular
RISE is a predefined bundle. SAP's Cloud ERP may be offered in more modular packages — choose a "Cloud ERP Private" package with transformation tools, or a leaner subscription with just the core ERP and essential services.
Contracting Parties
With RISE, SAP is your single vendor for everything (SAP subcontracts infrastructure). In non-RISE scenarios, you might sign a subscription for S/4HANA software from SAP but host it yourself or through a cloud partner — giving more direct infrastructure control.
Both RISE and the newer SAP ERP Cloud offerings represent a shift to subscription licensing. 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. Understanding exactly what a "Cloud ERP" package includes versus RISE's all-in-one approach is crucial before signing.
Shifts in User Metrics and Licensing Units
One of the most notable changes is how user access is measured. Historically, SAP on-premise licensing revolved around Named Users — Professional, Limited Professional, and Employee Self-Service — each with different price points. This model was complex and often led to shelfware or audit findings when users were misclassified.
The Full User Equivalent (FUE) Model
RISE with SAP introduced a unified user metric: the Full User Equivalent (FUE). This metric aggregates all user types into a single consumable unit to simplify licensing.
| User Type | FUE Ratio | Comparable To |
|---|---|---|
| Advanced User | 1 FUE = 1 user | Former Professional User (power user) |
| Core User | 1 FUE = 5 users | Former Limited Professional (operational) |
| Self-Service User | 1 FUE = 30 users | Former ESS user (time/travel entry) |
| Developer User | 1 FUE = ~2 users | Lighter usage — approximately 0.5 FUE |
Pooled Capacity Replaces Named Counts
You no longer purchase 100 Professional, 200 Limited, and 500 ESS licences separately. You contract for a pool of FUEs (e.g., 100 FUEs) and allocate them across user roles as needed. This eliminates the need to predict exact user type counts upfront — you have flexible capacity.
Usage-Based Measurement
Individual users aren't "named licensed" as they were on-premises. Instead, the system measures your usage against the FUE quota. If your mix of users effectively totals 110 FUEs but you've contracted for 100, you'll need to true up by purchasing additional FUEs.
Legacy Metrics Simplified
Engine metrics (number of orders, revenue tiers) generally don't apply in the RISE/S4 Cloud world for core ERP. The subscription is primarily sized on users (FUEs) and system size (memory/throughput translated into an infrastructure tier). You're not separately licensing the HANA database or specific modules.
Migration Mapping Required
Companies transitioning from ECC must map old user licences to FUE categories. SAP provides conversion guidance — one ECC Professional User typically maps to 1 Advanced user (1 FUE), while an Employee Self-Service user maps to ~1/30th FUE. Enterprises should analyse usage patterns: many casual ECC users may count minimally in FUE terms, potentially lowering cost.
Ensure you negotiate insight into how SAP will measure your FUE consumption and build in headroom for growth (pre-negotiate tiered pricing for additional FUEs). Insist on clarity around indirect usage: confirm if your subscription includes digital access documents or if that's extra — so you won't face surprise charges when a CRM or e-commerce platform connects to SAP and triggers documents.
Transitioning Existing Customers: Credits, Conversion Programmes, 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 financial and contractual migration. SAP has rolled out incentive programmes to ease the move, effectively crediting customers for their existing investments.
Maintenance Fee Credits (Declining Over Time)
Early RISE adopters (circa 2021) could apply up to 90% of annual maintenance fees toward the subscription cost. By 2024, the standard credit dropped to approximately 70%, and it continues declining roughly 10% per year. A customer paying $1M in annual maintenance who moved in 2021 received ~$900K credit; by 2025–2026, that same customer would receive only 50–60%. The message: the sooner you transition, the more credit you receive.
Cloud Migration Credits (Special Programmes)
Through 2024, SAP offered special migration credits: organisations moving S/4HANA on-premises to cloud received credits worth roughly 60% of annual subscription value, while ECC migrations received approximately 45%. Some mid-sized customers were offered up to 100% credit for a limited period (effectively a free first year). These programmes have specific end dates, but SAP often introduces new ones.
Conversion of Existing Licences
In a RISE conversion, on-premise perpetual licences are typically terminated or put into "shelf" status. You stop paying maintenance (saving that cost), but you also give up rights to use them going forward. SAP's contracts sometimes allow a grace period of dual usage during migration. Ensure your agreement covers dual-use to avoid compliance issues during the transition.
Extended Maintenance and Bridge Options
SAP's ECC support ends in 2027 (optional extended maintenance to 2030 at 2% extra yearly). For those who can't complete migration, SAP has unveiled a "SAP ERP, Private Edition, Transition Option" — essentially ECC in the cloud for 2030–2033 — but at premium cost. This bridge is only available to those who've migrated ECC to HANA and SAP's private cloud by 2030.
A large manufacturer running ECC pays $5M annually in maintenance. Moving via RISE in 2021 might have yielded ~$4.5M in credits — making the subscription nearly cost-neutral. Waiting until 2025–2026 might yield only $3M or less, meaning significant double-spending during the switch. Over multi-year contracts, the difference runs into millions.
That said, don't rush solely for incentives. A failed or hasty migration will cost more than any credit savings. Some companies use the threat of third-party maintenance (after 2027) as negotiation leverage, though SAP's posture remains firm — knowing customers ultimately need S/4HANA's innovation.
Every year past 2027 is likely to increase costs — either via maintenance premiums or expensive bridge contracts. Factor these timelines into your roadmap. Locking in incentives early can save millions, but coordinate contract commencement with when you can actually begin value realisation.
Enterprise Contract Impacts and Risks in the Cloud Model
Moving from traditional SAP licensing to RISE or SAP ERP Cloud is a fundamentally different contractual relationship. Here are the key contract implications and risks that CIOs and procurement leaders must address.
Loss of Perpetual Rights and Vendor Lock-In
In the subscription model, if you stop paying, you lose access — period. There is no perpetual fallback. This dramatically raises vendor lock-in stakes. Exiting after five years requires either renewing at whatever terms SAP offers or migrating to another platform — a massive undertaking for core ERP. Negotiate exit strategies upfront: some customers seek contract clauses that allow conversion to traditional licences if the subscription isn't renewed.
Renewal and Price Increases
A common mistake is focusing only on the initial term price. With cloud subscriptions, SAP has more leeway to raise prices at renewal unless the contract limits this. Always negotiate price protection: insist on clauses capping renewal increases (e.g., no more than 5% per year). Clarify the renewal process — how far in advance SAP must notify you, and your rights to adjust subscription quantities at renewal.
Inability to Scale Down
Unlike many cloud services, standard SAP RISE contracts are rigid. You commit to a set number of users and system size for the full term. You can always pay more to scale up, but you generally cannot scale down until the contract ends. If you spin off a division with 20% of SAP users, you're still paying for those FUEs. Negotiate one-time adjustment clauses or divestiture provisions.
Audit and Compliance in the Cloud
Moving to subscription doesn't eliminate compliance risk. SAP can monitor or audit usage against subscription terms — checking active user accounts and types against FUEs purchased. The biggest audit risk remains indirect use and document licensing. If your contract doesn't explicitly cover digital access, SAP could later claim fees for documents created by non-SAP systems. Proactively negotiate resolution before signing.
Support, SLAs, and Update Control
Verify if SAP's standard 99.7% uptime is sufficient, or if you need 99.9% (typically costs extra). Clarify what happens if SAP misses an SLA — negotiate meaningful service credits. In the private edition, SAP manages technical updates; confirm the upgrade policy aligns with your business's ability to absorb changes and doesn't conflict with critical business periods.
Scope Gaps — What's Not Included
Not everything is automatically included. Disaster recovery environments, advanced security, specific integration services, and archiving solutions often carry additional costs. Review the contract line by line. Common things to verify: number of environments (dev, test, prod), DR systems, backup retention, included storage, overage costs, and migration services. Any promise made during the sales process must be written into the contract.
Flexibility and Swap Rights
Given long-term lock-in, negotiate flexibility where possible. Some customers have secured the right to swap a portion of their subscription for other SAP services — for example, trading unused ERP FUEs for SAP Analytics Cloud or BTP capacity. SAP typically resists open swap rights but may allow one-time adjustments or cross-portfolio credits for strategic customers.
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 through strong upfront negotiation: cap future costs, build in flexibility, and document every service element. It's far easier to get concessions before you sign than afterward.
Pricing Examples and Cost Considerations
SAP's licensing changes also mean a shift in how you evaluate cost. Instead of a one-time licence fee plus 22% annual maintenance, you're looking at all-in annual subscription fees. Here are simplified scenarios to illustrate the differences.
Traditional model: $5M in perpetual licences + $1.1M/year maintenance (22%) + ~$200K/year infrastructure = approximately $1.3M annual run rate (excluding upgrade projects). Over 5 years: ~$6.5M plus potential hardware upgrades.
RISE model: $1.5M/year subscription for 5-year term (includes comparable functionality, hosting, support). Over 5 years: $7.5M plus migration costs. The gap may narrow if you're due for a data centre upgrade or if SAP provides early-year discounts.
The lesson: run the numbers for your specific situation. Include all factors — project costs, internal staff time, decommissioning, hardware refreshes — in both scenarios.
Real-world RISE pricing varies, but ballpark figures for the private edition: approximately $170–$200 per FUE per month at enterprise scale. At 100 FUEs × $180/month = $18,000/month = $216,000/year. If those 100 FUEs cover 500 users (mixed types), that averages ~$430 per user per year for full SAP access including infrastructure.
For the public cloud edition, per-FUE rates may be slightly lower (~$150/FUE/month). Large enterprises with thousands of users may see RISE deals in the tens of millions annually, but these often bundle more than just ERP.
Key Cost Drivers and Savings Areas
Cost Drivers
User count, data footprint, and service level extras drive costs. If you can archive data and keep your database lean, you may fit a lower infrastructure tier. Categorising more users as "Core" instead of "Advanced" optimises FUE usage (5 Core users = 1 FUE vs 1 Advanced = 1 FUE).
Savings Areas
Consider eliminated costs: third-party database licences (if migrating from Oracle/DB2 for ECC), hardware refreshes, data centre operations, and some IT staff reallocation. SAP often claims 15–30% TCO reduction, but results vary. Don't accept vague TCO claims at face value — ask SAP to demonstrate savings based on your actual numbers.
Cloud ERP is not automatically cheaper ERP. It shifts costs around: higher software subscription spend offset by lower infrastructure and internal support. Over a 5–10 year horizon, many enterprises find total cost difference is within ±10% of staying on-premises. The strategic value comes from capability improvements, avoiding unsupported software, and access to cloud-only innovations (AI, analytics).
Real-World Insights and Strategic Recommendations
As of 2024, only an estimated one-third of SAP's ECC customer base has fully moved to S/4HANA, and even fewer via RISE. The majority are in planning or initial execution stages. Here are key insights and strategic recommendations for CIOs and procurement leaders.
Audit Your SAP Usage Before Requesting a Quote
Clean up unnecessary users, analyse the distribution of heavy and light users, and examine data growth trends. The better you understand your requirements, the less likely you'll over-buy cloud resources or FUEs. Internal analysis before negotiation gives you the data to right-size and push back on SAP's sizing recommendations.
Leverage Timing and SAP's Sales Targets
If you're within a few years of the 2027 deadline, use that urgency as leverage. SAP has quarterly and annual sales targets for cloud conversions — you may secure better discounts when SAP is eager to close deals. Conversely, don't sign too early if you're not prepared to start the project.
Negotiate Key Contract Protections
Push hard on renewal caps, change flexibility, and document inclusions. Negotiate post-term options — even if you can't secure perpetual use rights, perhaps secure data extraction support or an extension at a predefined rate. Ensure maintenance credits and incentives are explicitly written into the contract.
Conduct a Competitive Assessment
While switching from SAP may be unrealistic for many, analysing alternative cloud ERPs (Oracle, Workday) provides market pricing benchmarks. Even if switching isn't viable, demonstrating that you're considering all options gives you stronger negotiating position with SAP.
Plan Phased Adoption
Large organisations tend to move cautiously — starting with selective pilots or phased rollouts. SAP has been flexible in allowing hybrid licensing during transitions. Negotiate multi-phase pricing: year 1 at 50% of users, year 2 at 75%, ramping with your actual migration progress.
Treat This as a Strategic Partnership Reset
The move to S/4HANA Cloud is a reinvestment in SAP for potentially the next 10–15 years. Align on innovation roadmap: get assurances about AI, analytics, and industry-specific functions. Build governance with quarterly business reviews. A strong partnership makes SAP more willing to adjust contracts or assist when issues arise.
Engage Independent SAP Licensing Expertise
Independent advisors bring deep knowledge of SAP's contract terms, FUE calculations, credit programmes, and negotiation tactics that most internal teams don't maintain. They can validate compliance positions, identify optimisation opportunities, support audit defence, and ensure SAP's proposals accurately reflect your entitlements and usage patterns.
SAP's transition to ERP Cloud is part of a broader industry trend toward subscription models. It offers opportunities for agility and modernisation, but puts the onus on customers to be vigilant with contracts and usage. By understanding the changes to licensing models, metrics, and incentives — as well as contract nuances — you can turn this transition into an opportunity to optimise your SAP investment rather than just a compliance exercise against a 2027 deadline.
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Fredrik Filipsson
Fredrik Filipsson brings over 20 years of experience in enterprise software licensing, including senior roles at IBM, SAP, and Oracle before founding Redress Compliance. His direct SAP experience gives him deep expertise in RISE with SAP negotiations, FUE optimisation, migration credit programmes, and cloud ERP contract terms — helping organisations from Fortune 500 enterprises to mid-market companies navigate SAP's cloud transition strategically.