Challenge
A global electronics manufacturer headquartered in Japan (approximately 90,000 employees worldwide) was evaluating a major digital transformation with RISE with SAP – SAP’s bundled S/4HANA cloud offering.
The promise of RISE was appealing: a unified subscription covering ERP software, infrastructure, and basic managed services under one contract. However, when the initial RISE with SAP proposal came in, the price tag raised serious concerns at the company’s executive level.
The Total Cost of Ownership (TCO) over the planned five-year term appeared significantly higher than expected, even when considering the elimination of on-premise costs.
Procurement and IT leaders feared they were being offered a premium, “one-size-fits-all” deal that didn’t reflect market rates or the company’s actual requirements.
Key concerns driving the pushback included:
- Pricing and Discount Level: SAP’s proposed discount on the RISE subscription was modest, leading to an overall cost that seemed inflated compared to running S/4HANA on a public cloud or keeping the status quo. The company suspected that better deals were attainable, as industry peers had reported steeper discounts in their SAP cloud contracts.
- Vendor Lock-In: Adopting RISE meant entrusting SAP with both software and hosting. The CIO’s team worried about being locked into SAP’s ecosystem and pricing. They had questions about what happens after the initial term – would they face hefty renewal hikes with little alternative but to pay up or undertake a complex migration off RISE?
- Scope of Services: The initial proposal left ambiguity around which services and components were truly included. There were concerns that important elements (like certain advanced support, extra non-production environments, or specific migration assistance) might be out-of-scope, leading to unforeseen expenses later. The company wanted clarity to avoid “hidden” costs.
- Comparative Value: Finally, leadership wanted to ensure that RISE was the right strategic choice. They weighed it against other scenarios – for instance, purchasing S/4HANA licenses outright and using a hyperscaler (AWS/Azure) for infrastructure, or even delaying the move. If RISE with SAP couldn’t demonstrate clear cost-effectiveness and flexibility, they were prepared to consider alternatives.
Process
Facing these uncertainties, the company took a data-driven, negotiator’s approach before committing. The procurement and IT strategy teams collaborated to perform a comprehensive benchmark analysis. They gathered data on recent RISE with SAP deals through third-party advisors and industry contacts (under NDAs).
This research yielded valuable insights on typical discount ranges, bundled services, and contractual safeguards other enterprises had secured. For example, they learned that comparable large enterprises often achieved 40–50% off SAP’s list prices for cloud subscriptions, and some had negotiated caps on future price increases to mitigate long-term lock-in.
The company also analyzed internal usage projections, determining exactly how many Full User Equivalents (FUEs) and what cloud resources they would need to spot any unnecessary components in SAP’s offer.
Armed with these benchmarks and a clear picture of needs, the company negotiated with SAP with a firm stance. Contract Benchmarking & Preparation: Before even voicing their counteroffer, the team identified discrepancies in SAP’s proposal.
They discovered, for instance, that the RISE package included certain SAP services they did not require. In contrast, some needed items (like a specific integration service and additional test environment) were absent or billed separately.
They documented these findings to avoid paying for things they wouldn’t use, and to request inclusion of missing elements.
Next, the team crafted a negotiation strategy highlighting the gap between the initial offer and market reality. In executive-level meetings with SAP’s account team, they presented anonymized data showing that peers had received deeper discounts and more favorable terms.
This factual approach signaled to SAP that the customer was well-informed and prepared to walk away if expectations weren’t met. The CIO and Head of Procurement played good-cop/bad-cop: the CIO emphasized the company’s desire to proceed with SAP but only under a commercially viable deal. At the same time, the procurement director underscored that alternative paths would be available if SAP couldn’t align with market pricing.
Leverage and Alternatives: Concurrently, the company quietly evaluated an alternative scenario, continuing on their existing SAP ECC system a bit longer and potentially migrating to S/4HANA via a different route (e.g., hosting on a public cloud without RISE). This alternative plan, with cost estimates, gave them leverage.
They could credibly tell SAP, “We have other options,” which strengthened their negotiating hand. Eager not to lose a marquee customer to delay or competition, SAP took the feedback seriously and engaged in multiple rounds of proposal revisions.
During negotiations, the company pushed on all key issues:
- Price & Discount: They requested a significantly higher discount on the RISE subscription fees. Backed by benchmark data, they aimed for a double-digit percentage reduction in the annual cost. The procurement team said they aimed to bring the 5-year TCO down by at least 15–20% from the initial quote.
- Contractual Protections: The company insisted on provisions to avoid lock-in pain later. They negotiated for a cap on annual price increases after the initial term, so SAP couldn’t suddenly raise rates excessively at renewal. They also discussed flexibility to adjust user volumes or swap certain services if business needs changed, seeking to introduce a mid-term adjustment clause (a tough ask, but it signaled their focus on flexibility).
- Scope Clarity: Every component of the RISE offering was reviewed. The final negotiations included explicitly listing all services and deliverables in the contract. The company ensured items like data migration assistance, the number of sandbox/test systems, and integration to legacy systems were either included or accounted for. SAP agreed to include some additional cloud credits for SAP Business Technology Platform and to waive certain one-time setup fees, after these were pointed out.
- Transition Support: One negotiation point was the cost of running the old and new systems in parallel during migration. The company sought (and obtained) transition credits to offset a few months of dual operation, an important cost factor for their finance team.
Results
After a rigorous negotiation process, the Japanese electronics giant achieved a much-improved deal and demonstrated the power of pushing back with evidence. Pricing Revisions: SAP ultimately conceded a substantially higher discount on the RISE with SAP subscription.
The final agreement lowered the projected 5-year TCO by roughly 18% compared to the initial proposal, translating to multi-million dollar savings. This brought the cost more in line with what independent benchmarks suggested was fair for a customer of their size. SAP’s revised offer also included phased deployment pricing, meaning the customer would only pay for the user count as they ramp up, rather than all 90,000 potential users from day one. This step-in approach aligned costs with actual rollout, further reducing upfront expenditure.
Contract Modifications: Besides price, the company secured critical contractual improvements. The signed RISE contract incorporated a renewal price cap clause (capping any subscription price increase to a single-digit percentage), assuaged the lock-in fear by guaranteeing cost predictability beyond the initial term.
They also negotiated the right to re-evaluate certain service components at renewal, providing an option to drop or replace pieces of the bundle if they no longer fit the company’s needs in a few years.
Moreover, SAP agreed to formalize the inclusion of previously unclear items: the final contract explicitly listed all agreed services, leaving no grey areas that could result in surprise charges later. For instance, SAP added an extra non-production environment at no additional cost and confirmed that standard data migration tools and support were part of the package.
Perhaps most telling, SAP offered transition credits that effectively subsidized the first six months of the new RISE service while the old systems were being phased out.
This concession acknowledged the overlapping costs and helped the company avoid paying double during the migration period – a win for the customer’s finance department.
Outcome and Alternatives Considered: The company gained strong negotiation leverage by leveraging peer comparisons and preparing an alternative action plan.
Ultimately, they chose to go forward with RISE with SAP, but on terms they felt were equitable and tailored. Had SAP not come to the table, the company was genuinely prepared to defer the move or pursue a more piecemeal cloud transition.
However, the improved RISE deal, with better pricing and safeguards, provided the needed value. The CIO noted that this outcome saves money and establishes a more trust-based partnership with SAP. The vendor realized this customer would not accept a boilerplate offer and was willing to push for what they needed.
Internally, the case became an example of strategic procurement excellence. The company’s executives were pleased that due diligence prevented them from overpaying or getting locked into an unfavorable contract. They now clearly understand their SAP costs and a contract that includes flexibility to adapt as their business evolves.
Equally important, this process raised awareness within the organization about the importance of regular market benchmarking for any major IT investment. The negotiation experience with RISE with SAP positioned the firm to continuously apply these lessons to future software and cloud deals.
Named Quotes
- Hiro Tanaka, CIO: “We approached SAP with facts and a willingness to walk away. Their stance shifted once SAP saw that we had done our homework and understood our usage and what other companies were paying. Benchmarking our RISE with SAP deal against the market gave us the confidence and leverage to secure terms that make both technical and financial sense for us.”
- Emiko Sato, Head of Strategic Procurement: “Our team treated the RISE with SAP proposal like any other major sourcing project: we gathered data, questioned everything, and didn’t hesitate to push back. The initial offer would have tied us into a costly, inflexible arrangement. By negotiating firmly, we achieved a win-win – a cloud transformation on our terms. We ended up with a better price and contract safeguards that protect us, which is exactly what due diligence is supposed to deliver.”
Key Results
- Significant Cost Reduction: Negotiated an ~18% lower TCO on the 5-year RISE with SAP contract, equating to substantial multi-million dollar savings compared to SAP’s initial proposal. The final deal leveraged a higher discount and phased user deployment to align costs with actual usage.
- Benchmark-Driven Deal Improvements: Used market and peer benchmark data to obtain a competitive pricing and terms package. Secured roughly 50% discount off list price on certain components after presenting evidence of peer deals, ensuring the company didn’t overpay relative to industry standards.
- Enhanced Contract Flexibility: Critical clauses to mitigate lock-in, such as a capped renewal increase (protecting against price hikes beyond a single-digit percentage) and the ability to adjust or re-scope services at renewal without penalty, were included. These modifications provide long-term cost predictability and options uncommon in standard RISE contracts.
- Scope Clarity and Added Value: Achieved a fully transparent scope of work in the contract. All necessary services (e.g., extra test environment, migration support) were explicitly included, and unnecessary components were removed. SAP also provided transition credits to cover dual-running systems, avoiding overlap costs during migration.
- Strategic Outcome: The company maintained leverage throughout and was prepared with alternatives that weren’t needed after SAP’s concessions. The final RISE with SAP agreement met the company’s total cost, service scope, and flexibility objectives, enabling a confident move to S/4HANA cloud with a strong business case.
