S/4HANA Migration Case Study – U.S. Manufacturer Cuts SAP License Costs by 30%
Background
A large manufacturing conglomerate headquartered in the U.S. Midwest was running its business on an aging SAP ECC system.
With 12,000 employees and multiple divisions (from industrial equipment to aftermarket services), the company saw SAP S/4HANA as a critical step for digital transformation. However, moving to S/4HANA meant navigating a complex licensing transition.
The manufacturer’s SAP account team provided an initial proposal for S/4HANA licensing that came with a staggering price tag. Leadership knew they needed to upgrade to stay competitive, but they were alarmed that the S/4HANA licensing costs would far exceed their budget.
Challenges
The key challenges revolved around cost, complexity, and timing:
- Conversion Credits: The company had millions invested in existing SAP licenses and paid annual maintenance. They expected some credit or value transfer toward S/4HANA licenses, but SAP’s initial offer didn’t fully recognize their past investments.
- User License Mapping: In ECC, they had thousands of Named User licenses of various types. S/4HANA introduced new user categories and a different metric. SAP’s proposal seemed to overcount user needs, inflating the license count.
- Shelfware and Unused Components: Over ythe ears, the company had acquired SAP modules and engines it barely used. Yet the S/4HANA migration quote bundled equivalent modules, essentially charging them again for functionality they might not need in the new system.
- Timeline Pressure: SAP was pushing for a quick commitment (with looming maintenance support deadlines for ECC). The manufacturer worried that without S/4HANA negotiation help, they’d rush into a suboptimal deal, overpaying significantly.
Solution (How SAP Licensing Experts Helped)
- Baseline Assessment: SAP Licensing Experts first conducted a thorough inventory of the client’s current SAP usage. They identified which ECC modules and user licenses were actively used, underused, or completely shelfware. This baseline clarified what the company truly needed in the S/4HANA environment.
- License Conversion Strategy: The team formulated a conversion plan to maximize credit for existing licenses. They analyzed SAP’s conversion programs (like contract conversion options) and demonstrated how much value from the old licenses should carry over. For instance, if the client had 1,000 Professional User licenses but only 700 would be needed in S/4HANA, the plan ensured they weren’t paying for all 1,000 again. Unused licenses were highlighted as potential trade-ins.
- Competitive Benchmarking: To strengthen the negotiation, the experts benchmarked the proposed S/4HANA deal against industry standards and alternative solutions. They gathered data on what similar-sized companies were paying for S/4HANA. This provided leverage to argue that the manufacturer’s quote needed to come down by around 30% to be in line with the market.
- Phased Adoption Approach: SAP Licensing Experts suggested structuring the migration in phases. Instead of licensing every S/4HANA component upfront, the contract could stage certain modules for later, aligning costs with actual implementation timelines. This prevented paying for capabilities years before they would be used. SAP initially resisted, but the negotiation positioned it as a reasonable request for a customer of this size.
- Direct Negotiation & Discounts: Armed with the detailed usage data and benchmarks, the team entered negotiations. They clearly articulated where the original proposal overestimated needs and costs. By presenting a well-justified counter-proposal, they negotiated substantial discounts on S/4HANA user licenses and removed unnecessary components from the deal. SAP, eager to secure a marquee S/4HANA migration, ultimately conceded to a more palatable price.
Outcome and Savings
Thanks to these efforts, the Midwest manufacturer signed an S/4HANA license agreement at roughly 30% lower cost than SAP’s initial quote.
In real terms, this translated to multi-million dollar SAP contract savings – funds that could be redirected to the actual S/4HANA implementation (e.g., project services, data migration, and employee training).
The negotiated deal included only the necessary modules and an agreement to revisit additional licenses in later phases, which aligned the cost with the value received. Furthermore, the company received credit for its legacy investments: a significant portion of its ECC maintenance payments were acknowledged as credit, reducing the net new spend.
By seeking external S/4HANA negotiation help, the company ensured its transformation project stayed on budget. Equally important, the CIO and CFO now had confidence that they weren’t overbuying or double-paying for SAP software.
The project moved forward with executive support, viewing the negotiation outcome as a win-win partnership with SAP rather than a budgetary setback.
“SAP’s first proposal would have blown our budget. The experts helped us show SAP what we really needed – and what we didn’t. We ended up with a fair deal at about 70% of the original cost. Those savings were critical to funding our migration project,” — Chief Digital Officer, U.S. Manufacturing Company
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