Cost Structures in SAP Cloud Licensing
- Subscription Fees: Paid monthly or annually.
- User-Based Pricing: Fees depend on the number of users.
- Consumption Costs: Charges based on data usage or resources consumed.
- Add-On Features: Extra costs for specific functionalities.
- Integration Expenses: Costs for linking with external systems.
Cost Structures in SAP Cloud Licensing
Navigating SAP Cloud Licensing can be tricky, especially when understanding the cost structures involved. SAP offers a range of cloud services, and the pricing can differ significantly depending on various factors.
This guide will break down the cost components, explain the licensing options, and provide practical examples to clarify how costs add up.
Let’s dive into each aspect of SAP Cloud Licensing.
1. Types of SAP Cloud Licensing Models
SAP Cloud Licensing comes in different flavors, each impacting the cost differently.
Below are the major types of licensing models:
- Subscription-Based Licensing: In this model, you pay a fixed fee per user or service over a defined period (e.g., monthly or annually). This is typical for SaaS solutions, such as SAP SuccessFactors or SAP Ariba.
- Consumption-Based Licensing: You pay based on how much you use the service. It often applies to infrastructure or platform services like SAP Business Technology Platform (BTP). Charges are made based on resources consumed, such as CPU hours, data usage, or transactions.
- Bring Your Own License (BYOL): This model allows customers with existing on-premise SAP licenses to use them in the cloud. It offers cost savings for those already invested in SAP’s traditional licenses.
Each model brings unique cost implications, which can add complexity to SAP licensing.
2. Key Components of SAP Cloud Licensing Costs
Several components influence the overall cost of SAP Cloud Licensing:
A. Subscription Fees
This is the core cost for accessing SAP services. The subscription fee typically depends on the following:
- Number of Users: Costs increase with the number of licensed users.
- Service Tier: Basic services come at a lower cost, while advanced features are priced higher.
For example, a business subscribing to SAP SuccessFactors may have a pricing structure like this:
- Basic Plan: $100/user/month.
- Professional Plan: $150/user/month (includes additional functionalities like advanced reporting).
B. Resource Consumption Costs
For platforms like SAP BTP, the cost depends on the level of resource consumption:
- CPU Time: Processing power consumed by applications.
- Data Storage: Amount of data stored.
- API Calls: Charges may also apply for API usage.
For example, if an application hosted on SAP BTP consumes a significant amount of database space, the cost of additional storage will impact your total bill.
C. Data Transfer and Integration Costs
Another cost component is related to the data you move between systems:
- Integration Services: Using SAP Cloud Integration services to connect SAP with non-SAP systems can incur additional charges.
- Data Transfer: Moving data between the SAP system and external applications may incur additional fees.
D. Support and Maintenance
Some SAP Cloud licenses include different levels of support, impacting costs. SAP offers support tiers, such as:
- Basic Support: Comes with the standard license.
- Advanced Support: Costs extra but includes better service-level agreements (SLAs) and faster response times.
3. Factors Affecting Cost Structure
Understanding which factors directly influence the cost structure can help you manage your SAP cloud expenses more effectively.
A. Number of Users and Roles
Licensing costs are often driven by the number of users and their roles. SAP categorizes users as:
- Professional Users: Users who need full access to multiple modules. They are often more expensive.
- Limited Users: Users who only need specific functions. The cost for these users is lower.
Example: A company with 100 employees might license 20 professional users and 80 limited users, keeping costs under control.
B. Data Storage and Usage
The amount of data being stored or processed also affects the overall cost. Businesses using SAP HANA database services in the cloud should be mindful of storage limits, as exceeding the base allocation can quickly lead to additional costs.
C. Integration Complexity
The more complex the integrations you need, the higher your costs. For example, if you need multiple third-party systems linked to SAP BTP, the additional connectors and API usage will increase your expenses.
D. Contract Duration
SAP often provides discounts for longer contract commitments. Signing up for a 3-year contract can sometimes offer lower per-user costs than a month-to-month commitment.
4. Hidden Costs to Watch Out For
SAP licensing can include some hidden costs that businesses need to be aware of:
- Overage Costs: Going beyond your initial license scope, such as extra data or additional users, can result in significant overage fees.
- Integration Fees: Charges for integrating with non-SAP applications.
- Customizations: If you need specialized customizations, these can lead to extra costs that aren’t always covered by the base license.
Example: A business adding a custom user interface to an SAP application might involve additional subscription costs and custom development fees.
5. Practical Tips for Cost Management
Keeping SAP cloud costs under control requires proactive management:
A. Rightsizing the License
Licensing the right number of users and choosing the correct roles is crucial. Overestimating the number of professional licenses can lead to unnecessary expenses.
- Audit User Roles: Regularly audit your users’ roles to ensure they still require the assigned license. Downgrade licenses for users who need limited functionality.
B. Monitor Consumption
For consumption-based licenses, monitoring is key:
- Use SAP Cloud Metering Tools: SAP provides tools to track usage, helping you avoid unexpected costs.
- Set Alerts: Configure alerts for data usage or API consumption thresholds to help prevent cost overruns.
C. Contract Negotiation
You can also reduce costs through effective contract negotiation:
- Longer Contracts for Discounts: Commit to longer terms to benefit from discounted rates.
- Flexibility Clauses: Ensure your contract allows flexibility, such as switching user licenses or reducing user counts without penalties.
6. Examples of Cost Structures in SAP Cloud Licensing
A. SAP SuccessFactors
- Core HR: Costs $100/user/month.
- Additional Modules: Recruiting or Onboarding might be charged separately, each at $30/user/month.
- Example Scenario: A company with 50 users subscribing to Core HR and Onboarding would pay:
- Core HR: 50 users × $100 = $5000/month.
- Onboarding Module: 50 users × $30 = $1500/month.
- Total: $6500/month.
B. SAP Business Technology Platform (BTP)
- Base Subscription: Includes a certain amount of data and CPU usage.
- Overage Fees: Additional charges for exceeding CPU time or storage limits.
- Example Scenario: If the included base CPU usage is 100 hours/month but your system consumes 150 hours, you might incur overage charges for the additional 50 hours.
7. Cost Optimization Strategies
A. Optimize User Allocation
- Match Users to Correct License Types: Ensure employees only have licenses that fit their roles. For example, giving a read-only user a full professional license wastes resources.
- Retire Unused Licenses: Deactivate licenses for users who no longer need access to the system.
B. Optimize Consumption
- Move Non-Essential Workloads Off-Peak: Running intensive processes during off-peak times can lower costs.
- Archiving Data: If storage is a big part of your cost, consider archiving older data inaccessible regularly.
C. Bundling Services
SAP may offer bundle discounts for purchasing multiple cloud products together. If your business uses SAP Analytics Cloud and SAP SuccessFactors, bundling them could lower overall costs.
8. Comparing SAP Cloud to On-Premise Licensing
When weighing cloud against on-premise, several cost aspects come into play:
- Hardware Costs: With the cloud, you avoid the cost of purchasing and maintaining servers.
- Upfront Licensing Fees: Traditional SAP licenses come with a high upfront cost, whereas cloud solutions spread the cost over time.
- Maintenance and Upgrades: In on-premise models, these are additional costs. Cloud subscriptions often include these services.
Example: Over five years, a mid-sized company running SAP ERP on-premise might spend hundreds of thousands of dollars on server hardware, maintenance, and support. The cloud equivalent would split these costs into predictable monthly fees.
9. Future Trends in SAP Cloud Licensing
SAP is continually adapting its cloud strategy. Here are some upcoming trends that may affect the cost structure:
- Pay-as-You-Go Models: SAP will likely expand its pay-as-you-go options, giving businesses greater flexibility to pay only for what they use.
- AI and Machine Learning Costs: Integrating AI features will add another layer of cost. For example, using SAP AI services to automate business processes may incur separate charges.
- Modular Licensing: SAP may move towards a more modular approach, where customers can license only specific microservices instead of whole products, offering better cost control.
FAQ: Cost Structures in SAP Cloud Licensing
What is SAP Cloud Licensing?
SAP Cloud Licensing is a subscription-based model where customers pay for cloud solutions provided by SAP.
How is user-based pricing calculated?
It depends on the number of users with access and the roles assigned to them.
What are consumption-based costs?
These costs vary based on the resources used, such as storage, API calls, or processing power.
Are there hidden costs in SAP licensing?
Hidden costs can arise from integration needs, add-ons, or unexpected data usage.
What are add-on features in SAP cloud services?
These include optional functionalities like advanced analytics or machine learning modules.
How can customers manage costs effectively?
Regularly monitor usage, optimize user licenses, and review contract terms.
What is the difference between standard and custom licenses?
Standard licenses cover general features, while custom licenses are tailored to specific business needs.
Are there penalties for underutilization?
Underutilized licenses may lead to paying for unused resources without refunds.
How does contract length affect pricing?
Longer contracts may provide discounts but lack flexibility for adjustments.
What are integration costs?
Costs incurred to connect SAP cloud services with other software or platforms.
How does SAP handle overages?
Overages typically result in additional fees based on excess usage.
Can license terms be renegotiated?
Yes, businesses can renegotiate terms during renewal or upgrade periods.
What are the costs for data migration?
Data migration may require extra fees, depending on the volume and complexity.
Are training costs included in the license?
No, training for SAP systems is usually charged separately.
What support levels impact pricing?
Higher support levels, like 24/7 assistance, may add to overall costs.
