Negotiating S/4HANA Migration Deals: Avoiding Cost Pitfalls and Maximising Value
Why This Matters Now
Migrating to SAP S/4HANA isn’t just a technical project – it’s a once-in-a-generation chance to renegotiate your SAP contract.
With the support for SAP ERP Central Component (ECC) set to end in 2027, enterprises are under pressure to migrate, and SAP’s sales teams are eager to secure deals.
For an in‑depth overview of SAP negotiation topics, read our Ultimate Guide to SAP Contract Negotiations.
This creates a unique window where customer leverage is high. A well-planned S/4HANA migration negotiation can significantly cut long-term costs and secure better terms for years to come.
Conversely, poor negotiation now can lock in excessive costs and inflexible terms that haunt your IT budget for the next decade.
In short, now is the time to get SAP pricing negotiation tactics right, turning SAP’s urgency into an advantage for your organization.
Key Negotiation Levers in S/4HANA Deals
When planning an S/4HANA migration negotiation, focus on the levers that can maximise value and minimize cost.
Here are the primary areas to address:
- Leverage SAP’s Migration Incentives: SAP is offering various S/4HANA migration incentives to encourage customers to make the switch. These “carrots” can include steep discounts on software, limited-time price protections, and even credits applied to your new contract. For example, SAP has provided subscription credit deals (such as a significant percentage off the first year of a cloud subscription) for customers who migrate by a certain date. Use these incentives to your advantage – bring them up early in negotiations and ensure they’re written into the deal. Remember, these offers won’t last forever, so acting early helps you capture the best discounts.
- Swap Unused ECC Licenses for S/4HANA Credits: One of the biggest cost advantages of migrating is the ability to trade in your old ECC licenses for credit toward S/4HANA. SAP’s contract conversion programs let you apply the value of your existing ECC license investments as a credit towards new S/4HANA licenses or subscriptions. In practice, this means you shouldn’t have to “pay twice” for the same capability. Identify any shelfware – unused ECC licenses or modules – and negotiate to swap or credit those into the S/4HANA deal. A savvy negotiator will eliminate obsolete modules and excess users from the new contract while retaining the value you have already paid. Ensure the contract explicitly guarantees these credits (and their corresponding value) to avoid any ambiguity. This ECC-to-S/4HANA license swap can dramatically reduce your net new spend.
- Negotiate the Full User Equivalent (FUE) Metric Wisely: S/4HANA’s cloud licensing (especially in RISE with SAP contracts) uses a Full User Equivalent (FUE) model – a pooled metric that measures users based on roles and usage. FUE simplifies licensing by letting you purchase a lump sum of “user capacity” instead of individual named-user licenses. However, negotiating favorable FUE pricing is critical. Ensure you right-size the FUE count to your actual needs and don’t over-commit to more users than you’ll deploy. For instance, if you anticipate 300 active users in the first year, don’t let SAP force a 500 FUE minimum if you won’t use it. Push back on any minimum FUE requirements that don’t match your planned usage.Additionally, negotiate the cost per FUE unit down by showcasing your understanding of the user mix – if many of your users are light or self-service users (which consume less of the FUE pool), argue for a lower overall FUE count or better rate. The FUE model can be a cost-saver only if you manage it closely, so include provisions to adjust FUE allocations as your user base evolves. A good S/4HANA contract negotiation strategy will also lock in your discount for additional FUE purchases later, so SAP can’t charge a premium when you grow.
- Secure Dual-Use Rights During Transition: Another key lever is ensuring you have dual-use rights for ECC and S/4HANA during the migration period. You’ll likely run ECC in parallel with S/4HANA until cutover is complete. Obtain explicit permission to use both systems concurrently without incurring additional license fees. SAP often allows this as part of the migration process, but confirm it in writing. Dual-use rights prevent you from paying double (one license for ECC, another for S/4) for the same user during the transition. This not only saves money but also gives you flexibility to migrate in phases without rushing to avoid licensing issues.
Common Traps and Hidden Costs
Even with incentives on the table, there are hidden migration cost pitfalls to be aware of. SAP’s contracts can include traps that inflate costs if you’re not careful.
Here are some common ones and how to avoid them:
Overcommitting seats before full migration:
SAP may encourage you to license the full expected number of S/4HANA users from the start. This is a classic trap. If your migration will be phased over 12–24 months, don’t pay for all users upfront. Overcommitting means you’ll be paying for a large number of users who aren’t actually living on S/4HANA yet – essentially paying for shelfware seats. For example, imagine an enterprise commits to 1,000 S/4HANA users in its contract because that’s the end-state goal, but only 600 users go live in the first year.
That leaves 400 licenses paid for but unused, resulting in a wasted budget. The pitfall here is locking yourself into a higher cost base than necessary. The remedy is to align your license quantities to your rollout schedule (more on that in the recommendations section). Always remember: you can ramp up users over time, but it’s nearly impossible to reduce committed numbers mid-contract.
Paying for unused functionality:
S/4HANA comes as a powerful suite with numerous modules and features – but you may not need all of them on day one (or ever). A hidden cost pitfall is agreeing to a package that includes functionality you won’t use, yet paying for it as part of your subscription or maintenance. SAP sales might bundle extra modules or cloud services into your deal “for a great price,” but if those modules sit idle, that money is wasted.
For instance, don’t let a bundle convince you to license niche modules (e.g., advanced warehousing, treasury management, etc.) unless you have a concrete plan to implement them in your S/4HANA migration.
Avoid shelfware by tailoring the contract to include only what delivers business value in your roadmap. It’s perfectly acceptable to start with core modules and add others later once there’s a need – just negotiate pricing protections for future additions instead of over-buying now.
Support cost escalations post-migration:
Many customers focus on the upfront license or subscription cost and forget about the ongoing support and maintenance costs. SAP maintenance fees (for on-premise licenses) historically increase annually (and SAP has recently imposed larger hikes tied to inflation).
Likewise, cloud subscription deals often have auto-escalating costs year over year – for example, a clause that increases fees by 3-5% annually or a larger jump at renewal after the initial term.
If you’re not careful, these escalators can erode any savings you negotiated. Imagine signing a 3-year cloud deal with a comfortable first-year price, only to find that it increases by 5% each year – by year 4, you’re paying significantly more.
To avoid this trap, negotiate caps on annual increases and try to lock renewal rates in advance. Also, be wary of “special” first-year discounts that vanish later. Include a clause in the contract that any migration incentives (like credits or discounts) won’t be undone by huge support cost jumps later.
A good strategy is to align your contract length with expected stable pricing and include a clause that any extension or renewal will be at the same discount level or a predetermined price cap.
SAP Pricing Negotiation Tactics
Six Strategic Recommendations
To ensure you get the best S/4HANA deal and maintain enterprise SAP migration cost control, follow these six strategic best practices:
- Conduct a thorough license inventory before migration talks. Don’t go into negotiations blind. Audit your current ECC licenses, user counts, and usage levels to ensure optimal performance. Understand exactly what you’re paying for today and which licenses are underused or not used at all. This baseline inventory enables you to identify redundant or unused licenses that can be removed or converted. It also arms you with hard data when discussing conversion credits and future needs. Knowing your current entitlement and actual utilization is the foundation of any effective S/4HANA contract negotiation strategy.
- Use your ECC-to-S/4HANA license swap value in price discussions. Calculate how much you’ve invested in ECC over the years (original license fees plus the maintenance you’ve paid). This represents leverage – a credit value that you can insist be recognized in the new deal. Bring this up with SAP: for example, “We have $X million in ECC licenses; how will that translate into S/4HANA value for us?” Aim to maximize those conversion credits. It’s reasonable to push for nearly 100% credit of your remaining ECC investment toward S/4HANA licenses or cloud subscriptions. At a minimum, any unused ECC licenses (from modules or users you don’t need in S/4) should give you bargaining power to offset new costs. Ensure that SAP’s offers of credits or discounts are documented in the contract so you realize those benefits.
- Align the contract ramp-up schedule to your real deployment timeline. Structure your S/4HANA deal so that license volumes (or subscription FUE counts) increase in stages as you roll out the system. If year one is a pilot or partial go-live, start with only the necessary users and consider pre-negotiating an automatic ramp to higher counts in year two or three when the full user base is implemented. This way, you’re not paying for 100% of the seats from day one while only a fraction of users are live. Aligning contract ramp-up with project phases avoids overpayment for seats you aren’t using. It also provides a built-in check: if the project is delayed or scaled back, you can adjust future ramp-ups before those costs hit. In practice, you might negotiate something like 50% of users in year one, 75% in year two, and 100% by year three, tied to your deployment plan. The goal is to pay for licenses roughly when you need them, not far in advance.
- Negotiate FUE model caps and protections. If your S/4HANA deal involves the Full User Equivalent model, pay special attention to its terms. Negotiate protections such as the ability to true-down at renewal if your user count is lower than expected, or to carry over unused FUE capacity to the next year. Try to include a clause that allows you to adjust your FUE commitment if your business changes (such as through divestitures or downsizing) without penalty. Also, secure the right to add more FUEs at the same pricing and discount as initially agreed, so growth doesn’t come at a premium. Essentially, put guardrails around the FUE metric: you want flexibility to scale up and down, and assurances that you won’t be punished for forecasting errors or changes in your business. By capping your exposure (for example, no price increase for additional FUEs up to a certain threshold, or a right to reduce licenses at renewal), you prevent the FUE model from becoming a cost trap.
- Request staged payment terms linked to milestones. Beyond license counts, also negotiate when payments come due. If possible, align payment schedules with your go-live milestones or project phases to ensure a smooth transition. For instance, rather than paying the full contract value upfront or from day one, you might pay a smaller amount during the implementation period and then the balance when the system is fully live. Some customers negotiate to have subscription fees ramp up in parallel with user ramp-up (e.g., 50% fees in the first phase, 100% when fully deployed). If you’re buying on-premise licenses, consider spreading the payments across project milestones or tying the maintenance start dates to the actual usage start dates. The aim is to avoid hefty payments while the project is still in the development or testing stage. Staged payments or deferred start dates can improve cash flow and ensure you’re paying for value when you begin receiving that value (i.e., when users are live on S/4HANA).
- Build migration clauses into your long-term SAP strategy. Treat this S/4HANA negotiation as part of a continuum, not a one-time deal. Future-proof your contract where you can. For example, negotiate a clause that locks in your discount rates for any additional licenses or cloud services you might add later, so expansions don’t cost a fortune. If you think you might move more systems to the cloud or adopt other SAP products (like SAP Ariba, SuccessFactors, etc.), try to include Most-Favored Customer terms or at least a framework for adding those on under the same commercial conditions. Additionally, include clear language on how things like support fee increases will be handled in the long term (e.g., cap maintenance increases at the inflation rate or a fixed %). By embedding these protections and forward-looking terms now, you set yourself up for smoother negotiations in the future. The key is to align the S/4HANA deal with your broader IT roadmap – for instance, if you plan to be fully cloud in 5 years, ensure your contract has flexibility to transition to that without punitive costs. Good governance in the contract today will save headaches (and money) down the road.
Avoiding Pitfalls
Even with a strong plan, keep an eye out for the fine-print pitfalls that can undermine your deal.
Here are a few tips for avoiding costly surprises:
- Beware of automatic subscription cost escalators. If you’re signing a multi-year S/4HANA subscription (such as RISE with SAP), scrutinize how the fees can increase. Push back on any clause that automatically raises rates above a reasonable threshold. Ideally, negotiate a fixed fee or a very low cap on annual increases. Also, try to get a price lock for renewals (e.g., the rate for optional extension years 4 and 5 is pre-set or capped). This prevents SAP from hitting you with an exorbitant price hike once you’re fully dependent on their cloud.
- Get all credits and discounts in writing. Verbal promises or proposal-stage offers mean nothing unless they are included in the contract. If SAP offers you, say, a credit for unused licenses or a free extra year of maintenance on a component, ensure it’s explicitly documented. Migration credits, subscription credits, and special discounts should be quantified and reflected in the final agreement. Also specify when and how they apply (for example, a credit might be applied immediately to reduce license fees, or it might be spread across subscription invoices – be aware of the details). This guarantees you reap the benefits that were used to sell you on the deal.
- Avoid bundling that removes flexibility. Be cautious of “all-in-one” deals that bundle multiple products or services into a single package at a single price. Bundling can sound convenient and cost-effective, but it often reduces your flexibility. If later you realize you don’t need a particular component of the bundle, you can’t simply drop it – you’re locked into the whole thing. Wherever possible, keep modules and services modular in your contract. For instance, negotiate separate line items (with prices) for S/4HANA core, for each additional cloud service, for database or platform services, and so on. That way, you maintain the ability to scale certain pieces up or down without having to renegotiate the entire contract. And if SAP insists on bundling, at least ensure there are provisions to adjust the bundle makeup over time or remove parts at renewal. The goal is not to be handcuffed by a one-size-fits-all deal that overcommits you to things you might later skip.
Governance & Ongoing Management
Negotiating a great S/4HANA deal is only half the battle. The other half involves governing your SAP usage and contract, ensuring you continue to maximize value and stay in control after the contract is signed.
Here’s how to manage your investment in the future:
- Track and optimize license usage post-migration. Once you’re live on S/4HANA, implement a strong internal process to monitor actual license consumption. For on-premise, keep an eye on named user assignments and roles; for cloud, monitor your FUE consumption against your contracted amount. Regularly compare usage to what you’ve licensed. If you spot under-utilization, consider reassigning or downgrading user types to fit within what’s needed. Conversely, if you notice new usage trends, you have time to plan for additional licenses or FUEs before they are exhausted. Treat your licenses like a budget – actively manage it. This will also prepare you well for any future true-up or renewal discussions, because you’ll know exactly what you use and need (and what you don’t).
- Stay audit-ready and compliant. After migration, expect that SAP will audit your S/4HANA environment within a couple of years (SAP audits are a regular part of enterprise life). To avoid panic when that happens, conduct your periodic compliance checks. Use SAP’s tools or third-party license management software to verify that your user classifications and counts are within contract terms. Pay special attention to indirect usage (external systems or bots accessing SAP) and ensure that these are properly licensed via SAP’s Digital Access or other means. Keep documentation from your migration negotiation – for example, records of what was agreed upon in terms of license counts, as well as any special terms, such as grandfathered usage or conversion credits. If an audit arises, having this documentation and a clear internal record of usage will help resolve any questions quickly. Proactive governance is your best defense against surprise audit charges.
- Keep the negotiation mindset for future needs. Governance isn’t just about compliance; it’s also about continuously optimizing cost. Treat your SAP relationship as ongoing, and be ready to negotiate when circumstances change. If your company acquires another, or divests a division, or if you plan a big expansion of users, those are all triggers to revisit your SAP contract. Many contracts allow for adjustments at renewal or include clauses for business changes – utilize them. Also, keep an eye on SAP’s product roadmap and licensing changes. If SAP introduces new licensing models or if their policies change (for example, new cloud services or pricing models), follow up on your SAP account reps to discuss how those affect you. The contract clauses you fought for – like fixed discounts for expansions or flexibility to swap components – need to be exercised. By maintaining a vendor-skeptical, value-focused approach in all dealings with SAP, you’ll ensure that the advantages you negotiated during the migration continue to protect you in the future. In essence, never stop managing the relationship – continuous license management and periodic renegotiation should be integral to your SAP strategy going forward.
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