Evaluating the Financial Impact of the ECC Transition Option

Evaluating the Financial Impact of the ECC Transition Option: Cost-Benefit Analysis for Enterprises

Why the ECC Transition Option Demands Financial Scrutiny

SAP has introduced the ECC Transition Option as a “bridge” for customers who are not yet ready to fully transition to S/4HANA. On paper, it sounds like a relief—an interim path that allows you to continue running ECC in a private cloud for a few more years.

However, this option carries significant long-term cost trade-offs that demand scrutiny. For CFOs and CIOs, it’s not a simple technical extension; it’s a strategic total cost of ownership (TCO) decision that can ripple through budgets for the next decade.

Read our comprehensive guide to the SAP Transitioning option.

SAP often pitches the transition option as a convenient stopgap. But CFOs must ask: at what price? Choosing this path means committing to a subscription model for ECC now, followed by a second migration to S/4HANA later.

That translates to potentially two rounds of major spending. Higher cumulative costs in the long term may offset the seemingly predictable costs in the short term.

For example, one global manufacturer calculated that if they took SAP’s ECC Transition Option for five years and then migrated, their total expenditure would be approximately €50 million.

By contrast, moving directly to a RISE with SAP S/4HANA subscription immediately would cost approximately €42 million over the same period. They ultimately skipped the transition step—and saved an estimated €8 million.

This kind of analysis is exactly what every enterprise needs to perform: treat the ECC Transition Option not as a default safety net, but as a financial trade-off to be rigorously evaluated.

Comparing Subscription Cost Scenarios

When weighing the ECC Transition Option against a direct move to S/4HANA (whether on-premises or via RISE with SAP), it is helpful to model different cost scenarios.

Let’s consider two primary paths and how they play out over time:

Scenario 1: Transition Option – Stay on ECC Now, Migrate Later

In this scenario, the company opts to keep its existing ECC system but converts it into a subscription in SAP’s private cloud (using the transition option). They defer the full S/4HANA migration to a later date (e.g., 3–5 years from now). For the interim period, they pay subscription fees to run ECC in the cloud.

Initial costs in the first year or two are moderate, since the business is essentially paying a known amount similar to current ECC maintenance (plus some cloud hosting charges). There’s no large S/4 project expense yet—only some technical work to move ECC to the cloud platform.

However, because a full S/4HANA transformation is only postponed, not avoided, this path incurs a “double migration” cost.

The first migration involves moving ECC into the cloud environment; the second migration occurs later, when the transition from ECC to S/4HANA is finally completed.

Over a multi-year horizon, the spending under Scenario 1 tends to grow rapidly:

• 3-year view: Only ECC subscription fees are paid for three years, with no S/4 costs yet. Total spend remains modest and is likely to be lower than a full S/4 migration scenario in the short term.
• 5-year view: By year 5, S/4HANA migration activities are underway. Migration project costs now stack on top of the ECC subscription fees, causing cumulative spend to catch up to (or exceed) the direct migration scenario.
• 7-year view: Over seven years, an ECC subscription, plus a belated S/4 migration, results in a total spend higher than if the company had migrated early. The costs from two separate projects and the extended ECC fees compound.

Ensure you read the Technical Readiness Checklist for the SAP ECC Transition Option.

Scenario 2: Direct Early Adoption of S/4HANA (or RISE with SAP)

Scenario 2 involves migrating directly to S/4HANA, without an interim ECC extension.

This approach demands significant upfront investment but only requires one major migration:

• 3-year view: Significant upfront spending on the migration project and new S/4HANA system. These first years are more expensive than staying on ECC because of the one-time migration and new subscription costs.
• 5-year view: The cumulative cost over five years includes the initial migration, as well as a few years of S/4HANA operation. By this point, there is no second migration looming, and total spend is on track to be lower than the transition path (which is just then incurring major migration costs).
• 7-year view: Over the past seven years, the company has been on S/4HANA and has optimized its costs. Total spend remains lower than the scenario that delayed the move, which is now paying for the earlier deferral with interest.

In summary, Scenario 1 (Transition Option) offers short-term cost deferral and predictability, but often at the expense of higher costs later due to the double migration and extended fees.

Scenario 2 (Direct S/4HANA adoption) requires a higher budget initially but typically yields a lower total cost over the multi-year span.

Pricing Dynamics and Timing Considerations

Timing is everything in SAP’s pricing landscape. SAP has structured various incentives and penalties around when you choose to migrate, which can greatly impact the cost equation:

• Early-Bird Incentives: Moving to S/4HANA sooner can unlock special incentives. SAP often offers to credit some of your maintenance or give initial discounts to early adopters. These deals diminish or expire over time, so acting early means capturing savings that latecomers will miss.
• Late-Entry Penalties: The longer you wait, the more you pay. After 2027, standard support ends, and extended ECC maintenance costs more (for example, an extra 2% on annual fees through 2030). If you only commit to S/4HANA around 2030, SAP may offer a pricier deal. We’ve seen late movers get quotes 10–15% higher than those who migrated earlier.
• Cost Predictability vs. Escalation: Ask yourself if you’re trading stability now for a steep climb later. The transition option provides a predictable cost for a few years (with no significant short-term fluctuations), but it can set you up for potential cost escalations in the future. When the grace period ends, you may face both significant migration expenses and higher subscription rates. Deferring the migration is not a free lunch – it often comes with interest in the form of higher costs later.
• Leverage in Negotiations: Your leverage is highest before SAP’s 2027 deadline. SAP is more generous with discounts and concessions while you still have time. After 2027, if you remain on ECC, your options will become more limited, and SAP will be less flexible. However, simply reminding SAP that the transition option exists can encourage them to sweeten their deal to get you onto S/4HANA now.

In short, timing your move is a balancing act: early movers may invest sooner but often at lower rates and with more support, whereas late movers keep costs flat for now but face a steeper bill later.

Total Cost of Ownership Modeling

To thoroughly evaluate the financial impact, build a multi-year total cost of ownership model for each path.

Consider all major cost components over the transition period:

• Subscription/License Fees: Annual fees paid to SAP – either ECC maintenance or cloud subscription.
• Hosting/Infrastructure: Costs to run the systems, whether in your data center or included in SAP’s cloud subscription.
• Migration Projects: One-time costs for migration efforts. In the transition path, there are two projects (ECC to cloud, then ECC to S/4 later); with a direct move, there’s just one big project.
• Support & Maintenance: Support costs related to maintaining the system’s operation (annual maintenance on ECC, which increases if extended support is purchased). In S/4HANA or RISE, support is included in the subscription.

Now, let’s compare an illustrative 5-year TCO for the two paths. Suppose a company wants to estimate costs over five years under each scenario:

In this example, over five years, the Transition Path costs approximately €8 million more than the direct move. The double migration drives up project expenses, and running ECC in a private cloud for several years adds extra subscription and support costs.

Meanwhile, the direct S/4HANA move avoids duplicate effort and begins yielding the benefits of the new platform sooner.

Every enterprise’s situation will differ, so it’s vital to run your numbers. Often, you’ll find that the “cheaper” short-term path can become the more expensive long-term route.

Procurement Questions to Challenge SAP

As you approach negotiations or strategy meetings with SAP, ask tough questions to ensure you’re not locking into a plan that favors SAP more than your organization.

A few pointed questions to pose:

• “Are you trading predictability now for higher costs later?”
• “How will SAP price our eventual S/4HANA move after ECC transition?”
• “Does the Transition Option lock us into Private Edition without flexibility?”
• “What are the penalties if we accelerate or delay migration?”

Example Scenario — CFO Weighs Transition vs. Direct Move

To illustrate the financial trade-off, consider a hypothetical enterprise with 10,000 SAP users. The CFO compares two options side by side:

Option 1: ECC Transition Path (Stay on ECC until 2030, then S/4HANA)

• ECC Subscription (Private Cloud) – €6 M per year
• Initial ECC-to-Cloud Migration Project – €5 M (one-time in 2026)
• Extended ECC operations – 5 years (2026–2030) = €30 M total subscription
• Deferred S/4HANA Migration Project – €8 M (one-time in 2031)
• New S/4HANA Subscription – €7 M per year (from 2031 onward; assume only 2 years within our 7-year window, ~€14 M)
• Total 7-Year Cost (Option 1) ≈ €40 M

Option 2: Direct S/4HANA Move (Migrate by 2026)

• S/4HANA Subscription (RISE Private Cloud) – €8 M per year
• S/4HANA Migration Project – €10 M (one-time in 2025–2026)
• Legacy ECC Maintenance – €4 M per year (continue paying until cutover in 2026; ~€8 M for 2 years)
• Total 7-Year Cost (Option 2) ≈ €31 M

In this scenario, the direct move (Option 2) is projected to save approximately €9 million over seven years compared to the transition path. Beyond the savings, the CFO also considers qualitative factors:

• Only one major transformation project instead of two, reducing execution risk.
• The company starts gaining benefits from S/4HANA sooner (better analytics, automation, etc.), which could improve productivity and offset costs.
• In negotiations, committing early to S/4HANA enabled SAP to provide a migration credit (e.g. a €2 M credit off the first year) and lock in subscription pricing, which would not have been offered if the company chose to wait.

With these points in mind, the CFO chooses the direct S/4HANA path.

The enterprise uses the existence of the transition option as leverage to negotiate a better deal for the immediate migration, then moves forward confidently, knowing they’ve minimized long-term costs and complexity.

ECC Transition Option Evaluation Checklist

Before deciding on the ECC Transition Option, run through a checklist like this to ensure you’ve covered all bases:

☐ Build a multi-year TCO model for transition vs. direct move. Include all cost elements (subscriptions, infrastructure, project costs, etc.).
☐ Factor in migration duplication costs if you take the transition path (since that likely means two migrations instead of one).
☐ Examine timing incentives vs. penalties. Are you early enough to get discounts, or will you pay a premium for delaying?
☐ Assess long-term lock-in risks. Once in the transition program, how constrained are your future deployment choices?
☐ Benchmark SAP’s proposal against what other companies are doing or independent estimates to ensure the offer is competitive.

5 Recommendations for Finance & Procurement Leaders

Here are five recommendations to guide CFOs, CIOs, and procurement teams through this decision:

1. Model the full journey, not just year one. Always project costs out over at least 5–7 years. A short-term bargain can turn into a long-term burden — a detailed model will make that clear.
2. Use the transition option as leverage, not a default. Treat it as a plan B or a bargaining chip. Request pricing for both the transition path and a direct S/4 move. Knowing you have an alternative may lead SAP to sharpen its offer for an immediate migration.
3. Align the plan with business strategy, not just SAP’s timeline. Don’t let the 2027 deadline dictate a move that doesn’t financially or operationally make sense. If moving to S/4 sooner unlocks business value (such as analytics and process improvements), that favors a direct migration. If waiting avoids disruption during a major business change, the bridge might be justified — but weigh it against the cost premium.
4. Negotiate migration incentives. Whether you move now or later, ask SAP for help. This could be credits for unused maintenance, fixed future pricing, or funding for migration services. If you’re going the two-step route, consider including provisions for the eventual S/4HANA conversion in your contract now.
5. Revisit the decision periodically. Don’t set your strategy in stone and forget it. Reevaluate each year as SAP’s offerings, pricing, and your business conditions evolve. New incentives or changes in your organization might tip the scales, and you want the flexibility to pivot if needed.

FAQ

Q: What is the ECC Transition Option in SAP licensing?
A: It’s a special offering under RISE with SAP that lets you run your existing SAP ECC in SAP’s cloud beyond the normal end-of-support deadline. In essence, it allows you to extend ECC usage (to 2030 and even 2033) by paying a subscription instead of standard maintenance while you prepare to move to S/4HANA.

Q: How does its cost compare to a direct S/4HANA migration?
A: Often, it costs more in the long run. You might spend less immediately by deferring the S/4HANA project, but you’ll pay for two migrations (one now, one later) and likely face higher fees when you eventually move. In contrast, a direct S/4HANA migration incurs higher upfront costs, but avoids duplicate effort and enables you to start gaining efficiencies sooner.

Q: What are the hidden costs of taking the transition path?
A: They include having to execute two migrations (incurring project costs twice), paying premium fees to keep ECC longer, and opportunity costs of delaying S/4HANA’s benefits. For example, you may postpone access to new automation or analytics that could save money, and any fixes or improvements made in ECC might need to be redone in S/4 later.

Q: Does the timing of our move (early vs. late) affect pricing that much?
A: Yes. Early adopters typically get better discounts or credits, while late adopters face extra costs (like extended support fees) and lose leverage in negotiations. Timing can significantly change your total cost.

Q: Can we use the transition option as a negotiation tactic?
A: Absolutely. If you’re negotiating a S/4HANA deal, let SAP know that you could also opt for the transition option. Many companies have secured better pricing for a direct move by making it clear they are willing to wait. Conversely, if you plan to use the transition, negotiate the terms of the eventual S/4 move now (e.g., credits or fixed pricing later). Use the possibility of “move later” versus “move now” to your advantage.

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