header background image

Bodyguards for the journey to the cloud?

March 12, 2024

by

Peter Rattey

#

SAPCompliance

#

SAPS/4HANA

Companies have been talking about the cloud for years now. More and more companies want to use this alternative or are at least considering transferring parts of their company structure to the cloud. SAP offers a special product that most people are now familiar with: "RISE with SAP".

SAP suggests that the purchase of so-called "Full User Equivalents" (FUE) as user licenses include everything and are already paid for – reducing infrastructure costs. Only certain extras need to be added. This is also a change to the old license model in the on-premise world. There, user licenses were purchased and a maintenance fee was charged each year.

Renting instead of buying - a good idea?

Almost all companies are currently mainly on-premise with their infrastructure and license landscape. In most cases, it is also an often untidy conglomeration of many different contracts that have accumulated over the years. The associated terms of use are not clearly regulated and very often provide the basis for service and contract discussions with SAP.

There is the option of contract conversion when the company switches to S/4HANA. The result is ultimately a standardized contract for the licenses and, if it goes into the cloud, the cloud infrastructure is provided.

In the case of contract conversion and further payment for usage rights, only the infrastructure is rented. Therefore, two sides must be treated semi-independently here: The licensing landscape, which is again purchased by SAP or one of its service providers, and the infrastructure costs, which are now migrating to the cloud.

WHITE PAPER – enhance your knowledge!

S/4HANA Migration - Blessing or Curse?

Understand key SAP S/4HANA licensing risks

Tablet showing the cover page of the document

The licensing landscape

Here, the user licenses are migrated from old license types to the new S/4HANA license types, or the existing licenses continue to be used in the event of a possible product conversion. Which option makes the most sense should be analyzed. High-cost savings are possible here if this is carefully planned and executed. Extreme caution is required when switching to the new license types: SAP services, especially the service with STAR, should not be used unprepared under any circumstances. The result would usually be excessive license costs, which would then again form the basis for the next maintenance fees in the coming years.

License optimization in advance is unavoidable, as the transfer to S/4HANA is already very cost-intensive. The fact that SAP only charges 70% of the old license portfolio makes contract conversion unattractive in most cases. Some companies insinuate that this is SAP's intention. They would rather offer companies cloud licenses with FUEs under RISE with SAP. These are rented over a certain period (usually 3 or 5-year contracts) and the corresponding infrastructure costs are already included.

The advantage of FUEs is their flexibility. You don't rent licenses, but flexible FUEs, which can then be used according to user usage and can also be flexibly switched from one user type to another - without asking SAP.

Here is an example: In the past, when Professional licenses became available due to reorganization in the company and there was an increased need for Worker licenses, it was not possible to simply "return" the Professional licenses. You kept them and ordered additional Worker licenses. So, you had unnecessary licenses or used licenses that were too expensive for minor functionality.

This is history with the FUEs. If an advanced user is no longer required, the one FUE needed for this can be used for 5 core licenses or 30 self-service licenses, for example, without informing SAP. The total stock of the license value can therefore be moved back and forth flexibly.

But here, too, it is extremely important to determine your own requirements for the future licence landscape before switching to FUEs in order to save costs. You should also check which additional cloud products are required and which storage capacities are needed. Experience has shown that the amounts for products in addition to the FUEs require a further 40% of the rental costs for the FUEs.

As a rule, it is not worth switching to "RISE with SAP" at the list prices offered - the costs are very high. However, SAP is currently also offering extremely high discounts - over 50% in some cases. Switching to RISE in the cloud can therefore be worthwhile.

BROCHURE – the benefits of our products!

visoryQ - Business Case Builder for SAP® Contracting Strategies

visoryQ Business Case Builder for SAP contracting strategies provides the decision criteria and financial framework you need to prepare, visualize, and justify your decision-making about the future of your ERP.

Tablet showing the cover page of the document

No items found.

Past and future

Let's take a brief look at RISE's past and then take a look into the future: in recent years, the FUE rental price has risen disproportionately.
While an FUE still cost € 215 in Q1/2021, it already cost € 381 in the same volume category in Q3/2022. That is an increase of over 77% in just under 2 years. Anyone who concluded a rental contract at the beginning of 2021 therefore has a current cost advantage of 77% compared to a company that is now moving to the cloud with RISE.

If the rental contract expires at some point and the company has opted for RISE because of the favorable costs, it could be in for a rude awakening. Not only will prices continue to rise, but the former discounts are not binding for the next lease. What is binding, however, is the current dependency on SAP, which describes nothing about remigration from the cloud to a new landscape in its general terms and conditions.

The infrastructure

There are several providers on the market, and almost all of them are cheaper than the SAP offering. Here you should get help with the selection because the rental details are difficult to compare from provider to provider. We have already integrated corresponding comparison options in our tool "visoryQ - Business Case Builder for SAP® Software".

My conclusion on the cloud

A clear cost advantage is currently only visible with extreme discounts when switching to the cloud. In most cases, moving to the cloud does not mean immediately switching off your own infrastructure - the cost reductions there are often very sobering. Migrating data to the cloud can be costly, but with the right partner it can also lead to a significant and long-term "clean-up effect". Companies have established themselves on the market that do amazing work in this area. We can provide links here to where such services can be obtained. We have a large partner landscape that also uses our products for license optimization, which is highly recommended before data migration. The future must not be lost sight of when moving to the cloud, otherwise, you will pay a bitter price later for decisions that were made without all the necessary information. The decision path to the cloud is a complex one and should always be accompanied by experts.

ABOUT THE AUTHOR

Peter Rattey

Peter Rattey is the founder of VOQUZ Labs. He invented samQ and is still intensively involved in samQ's further development. Peter is one of our most experienced advisors.

SEND US A MESSAGE

Do you have any questions or something to add? Just leave us a message, please! Your message will be delivered by e-mail to us and will not be published.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Illustration of a woman editing documents

Register for our newsletter now!
Keep yourself up to date!

Thank you! Your successfully signed up for our newsletter.
Oops! Something went wrong while submitting the form.

MORE RELEVANT ARTICLES

Thumbnail that links to the post below

Fraud Epidemic: Auditors Gear Up for Heightened Fraud Detection Responsibility

11.4.2024

|

SAPsecurity

Thumbnail that links to the post below

SAP Authorizations and Access Violation

12.3.2024

|

SAPAuthorization

Thumbnail that links to the post below

The STAR analysis can help, but - if used incorrectly - it can also burn money

29.1.2024

|

SAPLicensing