(Industry: Energy & Utilities – Country: Brazil – Employees: 60,000)
Challenge
As part of a major IT modernization, this Brazilian energy conglomerate planned to move to RISE with SAP, a subscription-based cloud offering bundling SAP S/4HANA and related services.
However, the company’s technology landscape is vast and highly hybrid, spread across on-premises SAP ERP systems and new cloud solutions.
The leadership faced a dilemma: SAP’s standard “RISE” contract demanded a one-size-fits-all migration to the cloud, which didn’t align with their operational realities.
Key challenges included:
- Phased Migration Needs: The conglomerate could not immediately migrate all systems and business units to the cloud. Some critical SAP modules (for example, certain billing and plant maintenance systems) had to remain on existing on-prem infrastructure for regulatory and performance reasons. A rigid RISE contract (typically requiring all users to be under the cloud subscription) would force them to pay for cloud licenses even for those still on legacy systems, effectively double-paying for licenses during the transition period.
- License Investment at Risk: Over the decades, the company invested heavily in perpetual licenses and annual maintenance as an SAP customer. Under a normal RISE deal, those existing licenses would be surrendered in favor of the subscription. The company was concerned about losing the value of those investments and having no safety net if the cloud transition ran into issues. They needed a way to carry over or credit their prior spend into the new model, and ideally a fallback option if parts of the business stayed on-premise longer.
- Integration and Hybrid Operations: Running a hybrid landscape (with some systems on RISE and others on-prem) can introduce complex licensing questions. For instance, if an on-prem SAP system exchanges data with the cloud S/4HANA, would SAP consider that “indirect use” requiring additional licenses? The standard contracts weren’t unclear, and the company feared compliance trouble if these integrations were not explicitly covered. They wanted assurance that their many interfaces, e.g., between the cloud ERP and on-prem trading systems, would not trigger unforeseen costs or violations.
- Contract Flexibility: SAP’s out-of-the-box RISE contracts are known to be inflexible in terms of user counts and pricing. The provider typically locks in a fixed number of users (or Full User Equivalents) for the entire subscription term with no reductions, and renewal terms that could allow steep price increases. Given the volatile nature of the energy sector and the possibility of organizational changes, the conglomerate needed more flexible terms. For example, suppose they divest a business unit or improve process efficiency. In that case, they want the ability to adjust their subscription downwards or repurpose those licenses, options not usually permitted mid-contract.
- Value for Cost: The quoted cost for RISE was substantial. To justify the expense, the company needed to ensure the deal accounted for local requirements (data residency in Brazil, high availability needs due to critical operations) and supported a hybrid cloud architecture. Simply accepting SAP’s standard proposal could lock them into a high-cost, all-cloud arrangement that didn’t fully suit their needs.
The challenge was negotiating a RISE with SAP agreement that acknowledged the conglomerate’s hybrid reality, allowing gradual cloud adoption, protecting past investments, and baking in flexibility—so the transformation could proceed on the company’s terms, not just SAP’s.
Read Top 20 Things Every Enterprise Needs to Know About RISE with SAP.
Solution
To address these challenges, the Brazilian enterprise undertook a rigorous contract negotiation with SAP, guided by specialized advisors.
The negotiation strategy focused on securing custom terms explicitly designed for a hybrid, phased migration.
Key solutions achieved were:
- Dual-Environment “Bridge” Clause: The company negotiated a formal dual-use provision allowing them to run legacy SAP systems and the new RISE environment in parallel for an extended period. Users could access the on-premise ECC system and the new S/4HANA cloud system for an agreed transition window without incurring double licensing costs. In practice, SAP granted a “freeze” on additional license requirements for the legacy system while migration was underway. This bridge clause was critical; it guaranteed the business could migrate gradually, plant by plant and unit by unit, without paying for two systems simultaneously. SAP typically doesn’t offer dual-use by default, but the team leveraged SAP’s migration programs and the importance of the account to obtain this concession.
- Migration Credit for Existing Licenses: Recognizing the conglomerate’s significant existing investments, SAP agreed to convert prior license value into credits offsetting the RISE subscription fees. Essentially, a portion of the money the company had already spent on SAP licenses and pre-paid maintenance would count against the cost of the new RISE contract. Concretely, the deal included a maintenance conversion credit: the remaining value of their on-prem maintenance contract was evaluated and translated into a discount on the first years of the RISE subscription. This ensured the company “didn’t pay twice” for the same software. It also comforted executives that they were not throwing away past investments – a portion of their legacy SAP spend was being reutilized to fund the transformation.
- Flexible User Count and Phasing: Instead of a static user count for the entire term, the contract was tailored with a phased ramp-up structure. In the early years, the subscription covered fewer users (reflecting only those businesses moving to S/4HANA Cloud initially). The contract then allowed an incremental increase in licensed users as additional waves of migration occurred. This schedule was aligned with the company’s project roadmap. Importantly, the pricing for these additional users was locked in upfront, removing uncertainty. The company also secured the right to reallocate user licenses internally; if one division reduced usage, they could transfer that capacity to another division or a new SAP module, providing much-needed flexibility.
- Integration Safeguards: The negotiated terms explicitly addressed the hybrid integration scenario. It was documented that data flows between the RISE cloud components and the company’s remaining on-prem SAP systems would not be treated as unlicensed indirect access, as long as both sides (cloud and on-prem) were appropriately licensed for their respective users. In other words, the contract drew a clear boundary preventing SAP from claiming extra fees later because the customer’s on-prem system talked to the cloud system. This safeguard was vital given the number of interfaces in the energy company’s environment (for example, synchronizing customer data and meter readings between old and new systems). With this in place, the company could operate a hybrid landscape without fear of hidden licensing traps.
- Local and Custom Service Terms: The conglomerate’s unique requirements were written into the RISE agreement. For instance, they obtained guarantees on data center location (to host their SAP cloud instances in Brazil for compliance with data sovereignty laws) and enhanced support SLAs due to the mission-critical nature of their operations. They also negotiated custom terms around system modifications and partner add-ons, ensuring that their extensive custom developments and third-party add-ons in the on-prem world would be supported in the cloud or allowed to run concurrently. SAP had to tailor its standard cloud service descriptions to fit the hybrid model. It included commitments to support integrations with on-premise systems and provide technical advice during migration.
- Commercial Protections: The contract included provisions to protect the company’s long-term interests. They secured a cap on future price increases for subscription renewals, so that after the initial term (when more of their landscape would be in the cloud) SAP could not impose exorbitant hikes. They also built an option to revert certain workloads to on-premise licensing or infrastructure if needed, without penalty – a contingency that gave them leverage and peace of mind. These commercial terms ensured that the move to RISE would remain cost-effective over time and that the company retained some control rather than being entirely at SAP’s mercy in three or five years.
By tackling the negotiation comprehensively, the Brazilian energy conglomerate obtained a RISE with an SAP contract bespoke to its needs. Timing and leverage bolstered SAP’s willingness to accommodate these terms.
The company engaged in talks near SAP’s fiscal year-end, which helped secure extra discounts. They also demonstrated they had alternative plans if SAP couldn’t meet their requirements. This strategic approach turned what could have been a rigid, risky contract into a flexible partnership agreement.
Outcome
The finalized agreement for RISE with SAP was a breakthrough, enabling the company to proceed with its cloud transformation on its terms.
The custom-tailored contract delivered several important outcomes:
- Seamless Hybrid Operations: The company can now confidently run a hybrid SAP landscape. As they migrate business units to S/4HANA Cloud, they are covered under the RISE subscription. At the same time, divisions still on the legacy SAP ECC can continue under their existing licenses without conflict or overlap costs. Both environments coexist smoothly. This means the IT team can execute the migration step-by-step over multiple years rather than through a forced big-bang cutover. Operational risk is greatly reduced, since critical systems will only move when ready, and there is no pressure to rush due to licensing constraints.
- Cost Savings and Avoided Duplication: The negotiated credits and dual-use allowances translated into major financial savings. The company estimates it saved several million dollars in redundant fees thanks to the contract’s provisions. For example, during the first year, as only 30% of users moved to the cloud, the effective cost of RISE was proportionally lower, and maintenance on the remaining systems was credited back. There was no double payment during the overlap. Over the full migration program, these savings accumulate significantly. Moreover, by capping future price increases, the company has cost predictability for the long term – a stark contrast to the uncertainty they would have had under a standard contract.
- Protected Investment & Flexibility: The value of the company’s prior SAP investments was preserved. Management took comfort in that years of license fees didn’t go down the drain; that sunk cost helped fund their transformation. Additionally, if business conditions change (e.g., if a planned cloud move is delayed or if a part of the company is spun off), the flexible terms allow them to adapt the SAP deployment without incurring penalties. This built-in flexibility is exactly what a dynamic conglomerate needs – the SAP environment can evolve with the business.
- Successful Transformation Enablement: The conglomerate’s S/4HANA cloud migration with a supportive contract is underway. Early phases have already been completed under budget and without disruption. The hybrid model functions as intended: the company’s on-premise trading system feeds data to the new cloud ERP for financial consolidation, all in compliance. Users report that the experience is seamless, and behind the scenes, the IT team isn’t having to constantly juggle license issues. The focus is on transformation and process improvement, not arguing with SAP about terms. In essence, the custom RISE terms removed what could have been a major obstacle to progress.
- Strategic Partnership with SAP: By securing a tailored agreement, the company’s and SAP’s relationship became more of a partnership. SAP demonstrated flexibility in accommodating the customers’ needs, and in return, the customers were sensibly committed to SAP’s cloud vision. Internally, stakeholders view the negotiated outcome as a win-win: the business gets the cloud innovation it wants with minimal risk. SAP gives a cloud customer a clear, achievable path to full cloud adoption. This positive footing sets the stage for collaboration in other areas (like exploring SAP’s analytics or industry cloud offerings) because trust was built during the negotiation.
In summary, the Brazilian energy & utilities leader achieved a transformative SAP migration on a secure foundation. The custom RISE with SAP contract is a blueprint for how big enterprises can embrace cloud benefits while catering to their specific landscape needs.
By avoiding a cookie-cutter approach, the company ensured its critical operations continued uninterrupted and cost-efficient throughout its digital transformation journey.
The case is a testament that with expert negotiation, even large vendors like SAP will bend from standard terms, allowing customers to realize cloud innovation without compromising flexibility or value for money.
