In the past, most companies that purchased SAP could control the way they wanted to use it. From customizations and add-ons to the choice of database, hardware or any additional cloud services, customers had the freedom to select the options that were right for them.

Today, with the move to RISE with SAP, SAP is paring down these options and implementing the following step-by-step strategy for themselves:   

1. Set an end date for SAP ECC systems maintenance (2025-2027).
2. Remove the option to use old contracts when moving to S/4HANA and only offer S/4HANA contracts. SAP will not support most old agreements and specific customer terms and conditions as of July 2023.
3. Offer either the S/4HANA on-premises solution at a significantly greater cost than RISE with SAP (especially for those customers who have no existing agreement in place) or don’t offer it at all.   

If you wondered if there was a typo in Step 3, there wasn’t. SAP really is charging more for the on-premises solution than for RISE with SAP, despite the additional software, databases, services and tools that come with RISE with SAP. 

RISE with SAP is a great, comprehensive solution. It’s a complete bundle of software, processes, analytics and services. It is faster to install than S/4HANA on premises and requires fewer customer resources. This speed and convenience, however, comes at a price.

RISE is available in two different editions: Public and Private Cloud Edition. While Public Cloud Edition does not offer any flexibility at all, Private Cloud Edition offers at least some flexibility. Overall, RISE with SAP is significantly less flexible than the on-premises solution. For those organizations which have customer specific requirements or processes, RISE with SAP might not be the right option. Unfortunately, SAP will not have a solution available for all cases. The recent sale of SAP IS-Health is a great example. This solution worked quite well for many healthcare providers, and it’s no longer an option with RISE with SAP.

Additionally, RISE with SAP includes cloud services — Microsoft Azure, AWS or Google Cloud — so bundling those solutions with other services to get better prices is no longer possible. SAP makes this choice for you.

Customers can still choose between the Public Cloud Edition and Private Cloud Edition, and the Private Cloud Edition does offer somewhat more flexibility. However, SAP provides no opt-out option. This means that customers who have gone the path of RISE with SAP are stuck with this choice. SAP will be in control over your data, pricing, measurements and all future changes in the solution, including taking away solutions where SAP does not see any value or where the costs of maintenance are too high.

One additional consideration is that RISE with SAP is treated as an OPEX (operation expenditure) and S/4HANA on-premises is treated as a CAPEX (capital expenditure). In the long term, a rental is more expensive than a purchase combined with maintenance.  

What can organizations do when faced with this situation? There are companies who have experience with these transitions and financial discussions, and they can support you and give you the right insights, tips and tricks while avoiding any pitfalls in your contracts or missing any optimization opportunities. 

There are also several steps you can take yourself to ensure you are prepared:

1. Determine your current entitlements and needs. Fully understand the package you can bring into the negotiations with SAP and make sure your assessment is comprehensive.
2. Optimize your landscape. Get rid of your “shelfware” — those licenses you don’t need anymore — and don’t bring them into the new contract. Match your user licenses with the appropriate functionality to avoid negotiating the wrong package for future licenses.
3. Look at your upcoming needs and make a roadmap for the next 3-5 years. Starting with a larger package will help you negotiate better terms.
4. Simulate the pricing options upfront. Most often, the SAP offerings will be in favor of SAP. Even the STAR services simply provide a general direction for the number of licenses that could be required rather than a clear indication of what you really need.
5. Clean up your roles and authorizations. These will potentially have a big impact on your licenses in the future. It would benefit SAP for their customers to set licenses based on roles and authorizations rather than on actual usage.
6. Ask for several packages to understand the differences and find out which package best fits your requirements.

What you sign today could have an impact on your organization for the next 17 years; your S/4HANA contract or RISE with SAP contract might last until the end of life of S/4HANA in the year 2040. However, if you follow these steps, you will be in a position of strength to start your negotiations for the transition to RISE with SAP or S/4HANA and secure an agreement that will benefit your organization for years to come.

The post Who Truly Takes Control in Today’s SAP Agreements? appeared first on Snow Software.

There is some debate, however, as to how many customers have already made the switch. Just last quarter (Q2 2023), SAP removed the product conversion to SAP S/4HANA from their pricelist, stating that most customers had already migrated their contracts to S/4HANA.

However, the DSAG Investment report for Germany recently stated that of all SAP ERP solutions used, SAP ERP ECC is still clearly in the lead with 79 percent, ahead of S/4HANA On-Premises with 41 percent. This is followed by S/4HANA Private Cloud with 8 percent and S/4HANA Public Cloud with 3 percent. That leaves thousands of customers who have yet to transition and likely do not have new contracts in place.

To encourage adoption of the latest technology, SAP has quietly introduced another significant change with the release of their new Q3 2023 price lists — a gradual, time-based reduction of credits customers could receive with S/4HANA conversion.  

Converting now vs. later

Prior to the release of the latest price list, customers were getting up to 90% credit from their previous investments if they changed their contract to S/4HANA. Alternatively, customers could choose to receive 100% credit if they increased their maintenance base to 111%.

Going forward, SAP is reducing this credit to only 80% (or 100% with an increase to 125% maintenance base). Beginning in 2024, it drops to 70% (143% maintenance base). SAP customers routinely have contract values in the tens of millions of dollars, so 10% of that value results in a meaningful financial impact for those customers who haven’t yet transferred their contracts.

Plans for the future

SAP has a clear vision of where they see their customers in the future — on HANA and in the cloud — and they have a set strategy to get there.  

Their primary product will become RISE with SAP. SAP S/4HANA Cloud Public Edition and SAP S/4HANA Cloud Private Edition will still be accepted options. On-premises will not be the model for the future. SAP CEO Christian Klein made that clear when he stated that SAP’s newest innovations will be available only in these cloud options.

Your quick conversion prep plan

With the changes in credits, 2023 is suddenly attractive timing for a new S/4HANA contract. After all, 80% credit is better than 70%. Additionally, Q2 results fell short of expectations, so it’s possible the next two quarters will represent attractive timing for negotiations. 

To prepare for these negotiations effectively in the tight timeframe, it’s important to have a clear view of both your current and your desired future licensing situation. To get that view, we recommend the following steps:

1. Compare the packages from SAP. Understand how they fit to your requirements and identify any possible gaps.
2. Clean up your roles and authorizations. The licensing will be based upon the assigned authorizations rather than on usage. Eliminate any shelf-ware (unused products), and only buy what you need.

It sounds simple, but there are many potential pitfalls. Getting support with experienced consultants and tools could provide you with the right information in just a couple of days. You’ll need the extra help to get the best package for your requirements in the shortest possible time and with the most possible credits for your efforts.

The post The Clock Is Ticking: Getting the Most From Your S/4HANA Conversion appeared first on Snow Software.