RISE with SAP vs On-Prem Licensing: OpEx vs CapEx From a CFO Lens
In 2025, CFOs face a critical choice: stick with traditional on-premises SAP licensing or transition to the RISE with SAP subscription model.
This decision isn’t just technical—it’s fundamentally financial. How you license SAP software impacts budgeting, cash flow, accounting treatment, and total cost of ownership (TCO) for years to come.
This article provides CFOs with a clear financial comparison of RISE with SAP (OpEx) versus on-prem SAP licensing (CapEx).
In other words, it’s a cost analysis viewed through the CFO’s lens, focusing on how each option affects financial flexibility, predictability, and long-term value.
The goal is to frame SAP licensing not as an IT purchase, but as a strategic financial decision. For a full overview, read our SAP Licensing guide for CFOs and Financial leaders.
Why CFOs Must Frame SAP Licensing as a Financial Strategy
SAP licensing choices directly influence budgeting models, liquidity, and long-term commitments.
The choice between RISE with SAP (a subscription OpEx model) and traditional on-premises perpetual licensing (a CapEx model) extends far beyond IT—it determines how cash flows through the business and how costs are accounted for over time.
From a CFO’s perspective, committing to one model or the other will shape financial metrics and risk profiles for years.
A large upfront license purchase (CapEx) affects the balance sheet and capital budgets, whereas a cloud subscription (OpEx) results in ongoing expenses that appear on the income statement.
Each approach can impact key metrics, such as operating profit, EBITDA, and cash flow, in different ways. Therefore, CFOs need to approach SAP licensing as a strategic financial decision. It’s about aligning the choice with the company’s budgeting practices, risk tolerance, and value creation goals—not just picking the cheapest option on day one.
Equally important, an ERP decision locks in a long-term path. Once you choose RISE or on-prem, changing course can be costly and complex.
That’s why looking beyond the first year and considering multi-year implications is crucial.
In short, the CapEx vs OpEx decision in SAP licensing will have ripple effects on financial flexibility, risk exposure, and IT strategy.
CFOs who understand these trade-offs can better guide their organizations in selecting the model that aligns with their financial objectives.
Read Smart Contract Clauses: CFO Checklist To Fortify SAP Agreements.
The OpEx Model — RISE with SAP Subscription
RISE with SAP is a cloud-based subscription offering that shifts your SAP investment to an operational expense. Instead of buying software outright, you pay a regular subscription fee for SAP as a service.
Key characteristics of the RISE (OpEx) model:
- Bundled services: The subscription fee combines the software license, infrastructure hosting, support, and upgrades into a single package. For the CFO, this means fewer separate contracts and one all-in cost for SAP – you don’t need to budget separately for servers or maintenance, as they’re included.
- Cash flow and budgeting: With no hefty upfront payment, the impact on cash flow is smoother. You pay as you go, turning what would have been a large capital outlay into steady periodic expenses. This improves budget predictability since you know your SAP costs each year and can plan accordingly.
- Accounting treatment: Subscription fees are treated as operating expenses on the income statement. There’s no asset recorded on the balance sheet for the software. This simplifies accounting and keeps the balance sheet lighter. Still, it also means the full cost is reflected in your profit & loss statement during the year, potentially lowering operating margins compared to a capitalized asset approach.
- Renewal risk: RISE contracts run for a term (often 3–5 years), after which you must renew to keep using the software. SAP often seeks price increases at renewal (e.g., proposing 10–20% hikes). Without negotiated caps, your costs could jump significantly in the future. CFOs need to factor in this “renewal inflation” risk and ideally negotiate limits on price increases upfront.
- Flexibility vs. lock-in: SAP manages the infrastructure and updates under RISE, thereby reducing your IT burden and making it easier to scale the system up or down. However, relying on SAP’s cloud also creates lock-in: if you stop paying, you lose access. Switching away (back on-prem or to another vendor) would be difficult. So, while the OpEx cloud model offers agility and convenience, it also means you’re dependent on SAP for the long haul, which can reduce your leverage over time.
In summary, RISE with SAP turns your ERP into a service with predictable periodic costs and a lot of included value (infrastructure and support). It’s attractive for preserving cash and ensuring you always have up-to-date technology.
The trade-off comes with long-term uncertainty (future price increases) and less direct control over the outcome.
A CFO considering RISE will weigh the benefit of no upfront investment and easier operations against the risk of vendor lock-in and potential cost escalations down the road.
The CapEx Model — On-Prem Perpetual Licensing
Traditional on-premise SAP licensing involves a one-time purchase of software licenses (CapEx) and running the software on your infrastructure (or a hosted one).
This model shifts costs to upfront capital expenditure, with smaller ongoing operating costs thereafter.
Key characteristics of the on-premises (CapEx) model:
- Upfront license cost: You pay a large one-time fee for a perpetual license to use the SAP software indefinitely. This significant capital investment becomes an intangible asset on the balance sheet and is depreciated over its useful life. It requires substantial cash or financing in Year 1, but thereafter, you own the rights to use the software without incurring additional costs (aside from support).
- Annual maintenance: In addition to the license, you typically pay an annual maintenance fee (around 20% of the license cost) for support and updates. This is a recurring operating expense, smaller than a full subscription fee, and it grants you access to SAP’s helpdesk and software upgrades. Maintenance costs tend to rise gradually (a few percent per year) rather than sudden jumps.
- Infrastructure & hosting: With on-premises solutions, the company is responsible for its own infrastructure. You need to invest in servers or cloud hosting and manage them (staff, data center costs, power, backups, etc.). Over several years, these infrastructure costs can be substantial, often amounting to millions for a large-scale implementation. If your IT team is efficient and infrastructure costs are low, running SAP in-house may be a more cost-effective option. If not, those costs can erode the savings of owning your license. (In RISE, these costs are bundled into the subscription fee; in on-prem, they are separate line items you must cover.)
- Control and customization: Owning and self-managing SAP gives you maximum control. You decide when to upgrade software, you can customize the system extensively, and you can optimize performance to your preferences. This is beneficial if you have unique business requirements or strict regulatory needs. The downside is you also bear all responsibility – if you postpone upgrades to save money, you accumulate technical debt and might face larger upgrade projects later. The pace of innovation is in your hands, which can be slower if budgets are tight.
- Asset perspective: The license (and any purchased hardware) is a capital asset. Some CFOs prefer this approach because it spreads the cost through depreciation and can improve short-term profit (since only depreciation and maintenance are recorded on the P&L annually, not the full software cost). However, the large upfront spend reduces liquidity. There’s also a risk of sunk cost: if the software or infrastructure becomes obsolete or underutilized, you’ve tied up capital in assets that no longer deliver value. On-premises solutions make financial sense primarily when you plan to utilize the investment fully over a long period.
In summary, the on-premises CapEx model requires more upfront cash and records SAP as an asset on your balance sheet.
It can yield a lower total cost of ownership in the long run (especially beyond the 5-7 year mark) because you’re not continually paying subscription premiums, and you have the flexibility to optimize costs internally.
But it also means less flexibility in the short term (money is spent Day 1), plus the need to manage upgrades and infrastructure internally. CFOs considering on-prem must ensure they account for all these ongoing costs and responsibilities in their planning.
Cost Modeling Scenarios (OpEx vs CapEx)
To compare OpEx vs CapEx, CFOs should model the total cost of ownership (TCO) over several years.
Let’s look at an illustrative 5-year scenario comparing RISE vs on-prem for the same SAP environment:
| Cost Category | RISE (OpEx) | On-Prem (CapEx) | Notes |
|---|---|---|---|
| Upfront License Fees | €0 | €12M | Perpetual license purchase in Year 1 |
| Subscription Fees | €18M | €0 | Five years of subscription payments |
| Infrastructure & Hosting | Included | €6M | Hardware or hosting costs (est. over 5 yrs) |
| Upgrades & Support | Included | €4M | Maintenance contract & upgrade costs |
| Renewal Escalation | €3M (15% increase) | N/A | Potential price hike at renewal (Year 5+) |
| Total 5-Year TCO | €21M | €22M | Nearly equal over 5 years in this example |
In this scenario, over five years, the costs are roughly comparable, with approximately €21M for RISE versus €22M for on-premises solutions.
The RISE costs were €18M spread over 5 years, plus an assumed €3M increase if renewed (15% uplift). In contrast, the on-premises costs included a €12 million upfront license, approximately €6 million in infrastructure/hosting, and €4 million in support/upgrades.
Key insights: In the first five years, the subscription and the traditional model end up costing nearly the same, just paid on different schedules. RISE had no significant upfront costs and bundled many expenses into the subscription, while on-premises had a large initial cash outlay but then lower annual expenses.
If we extend the horizon to, say, 10 years, on-premises could become cheaper overall, since after the initial license purchase, you mainly pay annual maintenance (and occasional hardware refreshes). In contrast, cloud subscription payments are made annually and may include rate increases.
However, the value of RISE is in what those euros buy: they include continuous updates and hosting services, and they preserve cash in the early years. On-prem’s potential savings beyond year 5 come with trade-offs in flexibility and internal effort.
CFOs should also consider the net present value (NPV) of cash flows – a large upfront payment versus spread-out payments have different present values depending on the discount rate.
The takeaway is that a multi-year TCO analysis is essential. By building 5- and 10-year projections (including potential RISE renewal uplifts and on-prem hardware/upgrade investments), CFOs can determine which option aligns better with their financial priorities and assumptions about the future.
FUE Dynamics & Renewal Inflation
Under RISE with SAP, licensing is often based on Full Use Equivalents (FUE).
This metric aggregates various types of usage into a standardized unit, and your subscription price is determined by the number of FUEs you require.
For example, a certain number of users or transactions is translated into an FUE count. The CFO’s concern is ensuring you’re contracting for the right number of FUEs – not overpaying for excess capacity you don’t use, and not underestimating (which would require an unplanned increase later).
It’s wise to audit your current SAP usage and growth projections so that the FUE count in the contract aligns with your needs. Also clarify how adding or removing users/modules over time will affect your FUE count and costs, so there are no surprises.
Now, about renewal inflation in the RISE model: as mentioned, SAP may push significant price increases at contract renewal once you’re dependent on their cloud. It’s not uncommon to see double-digit percentage uplifts after the initial term.
This poses a risk to cost predictability. A CFO must anticipate this and treat it as likely, not as a surprise. Negotiating price protections is critical – for example, capping any renewal increase to a single-digit percentage or pre-defining the renewal rate in the contract.
If you can’t get that, at least be sure to budget for higher costs in the years to come. Maintaining some leverage by keeping options open (even if theoretical, such as the ability to revert to on-premises or consider competitors) can also help when renewal time comes; SAP will be more cautious with increases if they know you have a plan B.
In summary, ensure the FUE-based subscription is right-sized to your actual usage and monitor it as your business evolves.
And don’t let the initial smooth ride of a subscription make you forget about the potential bump at renewal – plan for it and negotiate upfront to mitigate that risk.
Strategic Flexibility Considerations
When choosing between RISE and on-prem, CFOs should weigh the strategic flexibility of each option, not just the costs.
RISE (OpEx) gives agility and simplicity. SAP handles the infrastructure, updates, and technical operations, which means your company can adopt new SAP features faster and scale the system without worrying about backend limitations.
This is great for flexibility in operations and can reduce the need for a large in-house IT support team. The flip side is reduced control and increased vendor dependency. You’re on SAP’s timeline for updates (especially in public cloud deployments), and you rely on SAP for performance and problem resolution.
You also can’t easily switch providers or deeply customize certain aspects of the environment. In essence, you trade some control for convenience and agility.
On-Prem (CapEx) offers control and independence. You decide when to implement changes, you can tailor the system extensively, and you can negotiate with various vendors for infrastructure or support (introducing competition to manage cost).
This can be strategically useful if your business has unique processes or compliance requirements that necessitate strict control. However, this path can be less agile – adopting new capabilities may require significant internal projects and lead time.
If your team delays upgrades to save money or avoid disruption, you might fall behind on SAP’s latest innovations. Over time, on-premises customers may find themselves a version or two behind the cutting edge, which could carry an opportunity cost in terms of efficiency or capability.
From a financial strategy view, think of it like this: RISE is akin to outsourcing – you get predictable costs and less internal effort, but you also give up some control to the vendor. On-prem is like insourcing – you invest more upfront and in-house, which can pay off if executed well, but all the responsibility (and risk) is on you.
CFOs should align this choice with the company’s broader strategy. If being asset-light, agile, and having IT managed by a vendor aligns with your goals, RISE might be the better fit. If owning critical assets, maintaining maximum control, and potentially achieving lower long-term costs are priorities (and you can manage a complex system), on-premises could be more attractive.
Example Scenario — Balancing OpEx vs CapEx
To illustrate how these factors come together, consider a company that projects a 5-year cost of €21 million with RISE versus €22 million with an on-premises approach.
The CFO notes that, purely on cost, the two options are nearly equal over the five years. So the decision shifts to strategic and financial preferences rather than cost alone.
In this scenario, the CFO opts for RISE with SAP. The reasons include enjoying predictable annual costs and having SAP handle the heavy lifting of infrastructure and upgrades (allowing the company’s IT team to focus on business-facing improvements).
Crucially, the CFO also negotiates safeguards into the contract – for example, capping any subscription price increases at 3% per year at renewal – to control the long-term cost risk.
After 5 years, the company’s actual spend on RISE is indeed around €21M as expected. The company benefited from not having to deploy €12M in cash upfront, which preserved capital for other initiatives.
It also remained on the latest SAP software version throughout, as SAP handled regular updates in the cloud. The on-prem alternative, while it might have saved some money beyond the 5-year mark, would have required a large upfront expenditure and more internal resources to manage systems and upgrades.
This example shows how a CFO’s decision might prioritize financial flexibility and risk mitigation.
By choosing the OpEx model and negotiating favorable terms, the CFO ensured cost predictability and leveraged SAP’s services – essentially trading the possibility of slightly lower long-run costs for smoother cash flow and less operational burden.
The “best” choice will vary by organization, but the approach is the same: compare the multi-year costs, consider the strategic pros and cons, and negotiate the deal to align with your financial goals.
CFO Licensing Checklist — RISE vs On-Prem
It helps to use a checklist when evaluating SAP licensing options. CFOs should consider the following steps:
- ☐ Build 5-year and 10-year TCO projections: Don’t just look at first-year costs. Model the total cost of ownership for each option across multiple years, including all relevant expenses (licenses, subscriptions, maintenance, infrastructure, personnel, etc.). This reveals how the cost trajectory might change over time.
- ☐ Include renewal and inflation assumptions: If considering RISE, assume some annual increase or a bump at renewal (for example, 5–10% after the initial term) in your model. For on-prem, consider inflation on support fees and future hardware upgrades. Incorporating these assumptions makes your comparison more realistic.
- ☐ Account for infrastructure and support costs: Ensure the on-prem scenario includes hardware, hosting, and internal support staff costs. These can be substantial and are often overlooked when comparing to a cloud bundle that already includes them.
- ☐ Consider accounting impact: Discuss with your accounting team how each option would be treated. OpEx vs CapEx can affect EBITDA, net income, and balance sheet ratios differently. Be clear on how capitalizing a license versus expensing a subscription aligns with your financial reporting and goals.
- ☐ Align with company strategy: Tie the decision to your broader financial and business objectives. Are you aiming to conserve cash and remain agile, or to maximize long-term asset value and control? Ensure the chosen model (and the contract terms you negotiate) supports those goals.
5 Recommendations for Finance Leaders
To wrap up, here are five recommendations for CFOs evaluating RISE with SAP vs on-prem licensing:
- Treat the SAP licensing decision as a strategic financial choice, not just an IT procurement. It has major implications for your budgets and financial statements, so approach it with that in mind.
- Thoroughly model the long-term costs before making a decision. Don’t be swayed by a low Year 1 cost. Consider a multi-year horizon (at least 5 years), including potential cost escalations and additional project expenses.
- Plan for price increases in any subscription deal. If you opt for RISE (or any cloud subscription), expect the vendor to raise prices over time. Negotiate limits if you can, and budget for some increase so you’re prepared.
- Evaluate the impact on liquidity and the balance sheet. Decide if an OpEx (pay-as-you-go) approach or a CapEx (buy and own) approach better suits your company’s financial strategy. Each has its advantages, depending on your financial situation and investment plans.
- Negotiate key terms in the contract. Regardless of which model you choose, ensure you are involved in the contract. For RISE, push for caps on renewal hikes, flexibility to adjust usage, and clear service commitments. For on-prem, negotiate discounts, favorable maintenance terms, or options to transition to the cloud later. A CFO’s touch in the negotiation can save money and protect the company’s interests.
Ensure you read about Shelfware and Indirect Access Risks in SAP Licensing for CFOs.
FAQ
What is the difference between SAP OpEx and CapEx licensing?
OpEx licensing (such as RISE with SAP) involves paying for the software on an ongoing basis as a service. The costs are operational expenses (e.g., monthly or annual subscription fees), and you don’t own the software outright. CapEx licensing means you purchase a perpetual SAP license upfront, which is a capital expenditure that becomes an asset on your balance sheet. You then pay smaller ongoing fees for maintenance (an operating expense) to get support and updates. In short, OpEx is “renting” the software (no large upfront cost, but continuous payments), while CapEx is “buying” the software (a large upfront cost, but you own a lasting asset and only pay for upkeep).
How do RISE subscription costs compare to perpetual license costs?
In the first few years, a RISE subscription can appear cheaper or roughly equivalent to a traditional license deal because you avoid the hefty upfront payment. SAP often prices RISE so that the total cost over 3-5 years is comparable to that of on-premises solutions, once all costs are factored in. For example, instead of paying €10M upfront plus 20% per year in support (which would total €20M+ over 5 years), you might pay around €3M per year with RISE for a similar scope (which also totals about €15M in five years and includes hosting and upgrades). However, over a longer period, such as 7-10 years, continuing to pay subscription fees could ultimately cost more than the on-premises model. With a perpetual license, after the initial purchase, your costs drop to maintenance fees.
What risks do CFOs face with RISE renewal inflation?
The primary risk is that SAP could significantly increase the subscription price at renewal time, resulting in costs exceeding those outlined in your initial plan. When you’re invested in RISE, switching off it is difficult (you can’t quickly replace your core ERP), so SAP has leverage to impose price hikes. For the CFO, this means a risk of future budget strain or being forced to accept unfavorable terms because the business can’t operate without renewing. There’s also the risk that if your usage grows (more users, more FUEs), you’ll pay even more at the new, higher rates. To mitigate these risks, CFOs should negotiate renewal terms upfront (such as a cap on annual increases or a preset price for the first renewal) and incorporate the possibility of increases into long-term forecasts. Essentially, you hope for the best (perhaps SAP continues to increase modestly) but plan for the worst, so you’re not caught off guard by a significant jump in years 4 or 5.
Is on-prem licensing still financially viable after 2025?
Yes, it can be. SAP will support on-premises S/4HANA at least until 2040, allowing companies to continue running on-premises systems for the long term. If you’ve already invested in SAP licenses, staying on-prem and paying annual maintenance can be quite cost-effective, especially if you’re maximizing the use of the system and controlling infrastructure costs. Many enterprises in 2025 still run their SAP on-premises because it works for their financial and operational needs. The key is to manage it effectively: keep your hardware and software up to date, plan upgrades periodically, and compare the costs to those of a cloud alternative. On the flip side, SAP’s innovation focus is on cloud offerings, so over time, you might miss out on some benefits or new features that are cloud-only. However, from a purely budgeting standpoint, on-premises is still viable if the numbers make sense for you. It’s about comparing the TCO of continuing on-prem (license + maintenance + infrastructure) versus moving to subscription, and deciding which aligns better with your financial strategy for the coming years.
Can CFOs negotiate better terms under RISE contracts?
Absolutely. Just like any major contract, a RISE with SAP agreement is negotiable, and CFOs should be involved to secure the best financial terms. You can negotiate the subscription price (SAP often gives discounts for large or multi-year commitments), and you should scrutinize how the FUE count is calculated to ensure you’re not overestimating and overpaying. It’s also wise to negotiate caps on future price increases or even lock in prices for a certain renewal period. Additionally, seek flexibility clauses – for example, the right to reduce your subscription volume if business needs change, or favorable exit terms after a few years if the service isn’t meeting expectations. While SAP may not grant everything, customers have had success obtaining better terms by asking, especially if they have leverage (like the option to stay on an existing system or consider other solutions). In summary, don’t take the first offer as final. There’s room to tailor the RISE contract so that it aligns with your company’s financial interests, and CFO involvement can help achieve those more favorable terms.
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