Who Truly Takes Control in Today’s SAP Agreements?
Your ERP systems and data are perhaps your most critical IT assets; your business can’t function without them. Safeguarding control over these assets is never something to take lightly, which is why recent changes from SAP immediately grabbed our attention. To navigate these changes successfully, organizations should approach them with tremendous caution.
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:
- Set an end date for SAP ECC systems maintenance (2025-2027).
- 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.
- 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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.