Dr. Michael Sandmeier has spent the last fifteen years advising companies on how to prepare for complex SAP investments. His company, Sandmeier Consulting, is the market leader for SAP license consulting and management in Germany. In this second in a series of interviews with Dr. Sandmeier, I wanted to explore his thoughts on RISE with SAP and what customers should do if they are offered a RISE with SAP contract.
Q: SAP launched RISE with SAP in 2021, intending to provide organizations with the applications, platforms, tools, and services required to adopt continuous business innovation offered by the cloud. The idea is that it is simple with all products bundled together for a single price under one contract. However, when I’ve spoken to customers, there seems to be some confusion about what RISE with SAP actually is and whether it is right for them. What is your view on RISE with SAP as an overall offering?
Dr. Sandmeier: With RISE with SAP, SAP offers a total price for the package of licenses, operations, and services without providing detailed transparency about the breakdown of costs. RISE with SAP differs from the in-house operation essentially in two respects: Commercially, an SAP customer switches to a rental model (cloud). Technically, they outsource the SAP operation with operational services provided externally. When looking at the business case, it is often forgotten that there are comparable models (best of breed) that should be considered as alternatives. Above all, SAP dictates the costs of license migration at RISE with SAP itself without considering a real negotiation result.
I advise calculating the comparison of the self-operated, on-prem solution in the first step. Even if this is not the preferred solution from an IT strategy point of view, it provides a realistic base cost to work from. The decisive factor for the business case will be whether SAP prices the entire RISE with SAP package in a way that it satisfies a business case in comparison to the necessary license and sufficient operating requirements. Our experience shows that the SAP price for RISE with SAP does not generate the right business case, but an objective business case can generate a price for RISE with SAP that corresponds to the SAP promise. At the beginning of the year, we saw just a few companies evaluating RISE with SAP as a real alternative. Since then, almost all the major customers we speak to are dealing with the topic and want to compare the business case for RISE with SAP to the on-prem variant and objectify the numbers.
Q: What is your recommendation for organizations considering RISE with SAP as a way to migrate to S/4HANA?
Dr. Sandmeier: Always get an on-prem offer first even if you have no intention of going down that route. If SAP wants a customer to become a RISE with SAP customer, then they must undercut their own offer. Additionally, ask for swap rights to become more flexible during the subscription. Business changes and licenses should reflect that and not prohibit it.
Q: What do you mean by swap rights and how have you seen these work for customers?
Dr. Sandmeier: Swap rights are the configuration rights in the cloud. In the RISE with SAP model, this is no longer necessary amongst users due to the FUE metric, which makes it possible to constantly switch users between the different license types. However, if the need for engines changes, it makes sense to agree on a swap right with other cloud products especially at the beginning when it is not yet clear what you want to use at the end of the S/4 migration and to what extent.
Q: How can you help customers evaluate a RISE with SAP offer? What steps do they need to take to make sure it is the right way of migrating for them?
Dr. Sandmeier: To evaluate a RISE with SAP offer, we compare the cost proposed with the respective product conversion or contract conversion on-prem model. Operations and services must be added to the license and maintenance costs. To do this, we assess the customer’s operating costs, or we can work with a partner to determine customary hosting costs as reference costs.
Q: Are there any downsides to using RISE with SAP? If so, how should customers avoid them?
Dr. Sandmeier: It is almost impossible to go into all the disadvantages because they can be very customer specific, which also applies to the advantages. One of the future issues could be that if companies decide to move to RISE with SAP, they will convert all their on-premises licenses to cloud-based licenses. This means that ownership is waived, and the licenses are only leased. In the event of termination, the customer no longer owns anything (licenses or system) and must purchase new licenses from the provider who wants to see the customer in the cloud. Also, there are hardly any possibilities to reduce the cost of licenses during the subscription period.
Get more expert thoughts on RISE with SAP
You’re invited to join us for a live webinar on October 20, 2022, where we will be discussing licensing challenges in greater depth with Dr. Michael Sandmeier.
SAP is the trademark or registered trademark of SAP SE or its affiliates in Germany and in several other countries.