SAP Cloud Licensing Migration Strategies
- Assess Existing Licenses: Review current ECC licenses.
- Choose Suitable License Models: Professional, Functional, Productivity.
- Utilize RISE with SAP: Lower migration costs and added services.
- Negotiate CAPEX Credits: Offset new licensing costs.
- Hybrid Deployment: Gradual cloud adoption for critical processes.
SAP Cloud Licensing Migration Strategies
The transition to SAP cloud licensing represents a significant shift in how organizations manage their SAP investments, bringing enhanced flexibility, cost management, and innovation opportunities.
However, migrating to the cloud requires a well-planned strategy considering various licensing models, financial impacts, technical requirements, and compliance factors.
This article explores key strategies and considerations for optimizing your SAP Cloud Licensing Migration, ensuring a smooth transition while maximizing value.
License Optimization Before Migration
Initial Assessment
Before initiating any migration to S/4HANA in the cloud, conducting a thorough review of existing ECC licenses is essential. An initial assessment helps organizations understand their current license inventory and usage, providing a solid foundation for optimization.
- Review Existing Usage: Understand the current distribution of SAP ERP Central Component (ECC) licenses, identifying underutilized licenses or opportunities for reallocation.
- Potential Savings: Optimizing license allocation before migration can lead to 10-30% savings, reducing the number of licenses that must be converted or replaced in the cloud environment.
New License Types
SAP’s S/4HANA Cloud introduces revised user license categories that differ from ECC licenses. These new license types provide more granular roles, ensuring that users only pay for what they need:
- Professional Use: Full access to all functions, suitable for users involved in core business processes.
- Functional Use: Targeted users who need access to specific functional areas, like finance or procurement.
- Productivity Use: Aimed at employees requiring limited data entry or reporting access.
- Developer Use: Provides necessary tools for customizations and development work within the S/4HANA environment.
These categories help organizations align their licenses more closely with each user’s actual needs, contributing to cost control and efficiency.
Read about SAP Cloud Licensing for SMEs.
RISE with SAP Program
Program Benefits
The RISE with SAP program, launched in January 2024, is an all-inclusive offering designed to simplify the cloud transition and accelerate digital transformation. The program provides several benefits that make it an attractive option for organizations migrating to the cloud:
- Migration Cost Reduction: By bundling services and providing migration tools, RISE with SAP can reduce migration costs by up to 50%.
- Access to SAP Joule AI Innovations: Leveraging AI capabilities through SAP Joule helps businesses automate processes, increase efficiency, and gain deeper insights.
- Carbon Accounting Integration: Integration with SAP Greenledger provides advanced carbon accounting capabilities that support sustainability goals.
- Enhanced Security and Compliance: SAP ensures that migration through RISE provides enhanced security features and meets compliance requirements.
Cloud Safekeeper Service
SAP offers the S/4HANA Cloud Safekeeper Service for organizations requiring extended migration timelines. This service allows organizations to maintain business continuity during the transition period, providing flexibility in adjusting timelines without impacting ongoing operations.
Financial Considerations
Licensing Models
The RISE with SAP offering includes two primary licensing models: authorization-based and usage-based. Each has distinct implications for costs:
- Authorization-Based Licensing: This model’s costs are based on the number of authorized users, typically leading to 50-150% higher costs than usage-based models.
- Usage-Based Licensing: Organizations pay according to the actual use of SAP services, which is often more cost-effective for environments with fluctuating user needs.
Choosing between these models requires a deep understanding of current user behavior and future expectations.
Cost Optimization Strategies
Several strategies can help reduce overall licensing costs during the migration process:
Consider Subscription-Based Models: Subscription licensing may be more predictable and scalable, particularly when organizations face significant uncertainty about future growth.
Capitalize on Existing License Investments: Fully use existing licenses to avoid unnecessary purchases.
Negotiate CAPEX Credits for Old Licenses: Many organizations can negotiate capital expenditure credits for licenses no longer in use, offsetting costs related to new cloud-based subscriptions.
Evaluate Cloud Extension Policies: Leveraging SAP’s cloud extension policy allows customers to extend existing contracts while testing cloud offerings, avoiding immediate full conversion costs.
Strategic Migration Options
License Conversion Paths
Several approaches can be pursued when migrating to the S/4HANA cloud environment:
- Direct S/4HANA License Conversion: This involves converting existing ECC licenses to S/4HANA directly, often providing a straightforward path with minimal disruption.
- RISE with SAP Subscription: Opting for RISE with SAP offers a managed service that includes infrastructure, software, and support in a single subscription, simplifying the overall management.
- Hybrid Deployment Models: Combining on-premises SAP systems with cloud solutions allows organizations to maintain critical business processes while gradually transitioning to other workloads.
- Cloud Extension Policy Utilization: Organizations can leverage SAP’s Cloud Extension Policy to extend current on-premises contracts while incorporating cloud features, reducing risks during the transition.
Technical Considerations
HANA Database Requirements
Migrating to S/4HANA means a mandatory shift to the HANA database platform. There are specific requirements and limitations:
- HANA Only: Migration requires adopting the HANA database, with no exchange options for existing MS SQL or Oracle Runtime licenses.
- HANA Runtime or Full Use Licensing: Depending on the use case, organizations need either HANA Runtime licenses for standard features or Full Use licenses for more advanced capabilities.
Digital Access Considerations
The new S/4HANA contracts introduce a revised framework for Digital Access licensing. This framework aims to eliminate ambiguities related to indirect access in earlier versions of SAP licensing.
Clear Obligations: Organizations must clearly define which users or systems indirectly access SAP data, ensuring that all digital access requirements are properly met and licensed.
Read about SAP Cloud Licensing and Third Party Integrations.
Cloud Platform Selection
Hyperscaler Options
Organizations implementing RISE with SAP can choose from various leading hyperscaler platforms to host their SAP workloads.
Available options include:
- Amazon Web Services (AWS)
- Microsoft Azure
- Google Cloud Platform (GCP)
Choosing the right platform depends on pricing, regional availability, specific integration requirements, and existing cloud strategies. Each hyperscaler offers different scalability, compliance, and cost management advantages.
Implementation Best Practices
Data Management
A successful migration to SAP S/4HANA Cloud requires a robust data management strategy. Key aspects include:
- Effective Testing Methodologies: Functional and user acceptance testing should be conducted in phases to verify that all processes work smoothly in the new environment. The cloud version of S/4HANA or bundling other products like SuccessFactors.
- Comprehensive Data Assessment: Understanding the full landscape of data to determine which data sets need to be migrated, archived, or deleted.
- Thorough Data Cleansing: Ensuring data quality through cleansing and deduplication to avoid migrating redundant or obsolete data.
- Validation and Testing: Rigorous validation and testing of data before final migration to prevent errors that could impact business processes.
Future Considerations
Innovation Access
Cloud-based S/4HANA deployments give organizations priority access to new features and innovations introduced by SAP. Organizations should plan for future technology enhancements that are available only through cloud deployments.
Compliance and Security
Regulatory Requirements
Compliance and security are top priorities when migrating to the cloud, particularly for organizations operating in regulated regions like Europe. Considerations include:
Security Compliance Standards: Implement security measures aligning with SAP’s standards and any regional regulatory frameworks to ensure compliance. On-premise but migrate other elements like analytics or procurement to the cloud.
Data Sovereignty Requirements: Ensure data is hosted per regional data sovereignty rules.
Optimization Opportunities
Post-Migration Strategy
Once the migration is complete, organizations should focus on continuous optimization to ensure the full realization of SAP S/4HANA Cloud’s benefits.
- Regular License Usage Monitoring: Regular monitoring helps identify unused or underused licenses, allowing for cost optimization.
- Continuous Service Optimization: Evaluate and adjust subscribed services to meet business needs, avoiding unnecessary expenses.
- Periodic Assessment of Business Needs: Review business processes periodically to determine if current SAP services align with changing organizational needs and goals.
Contract Management
Negotiation Considerations
Effective contract negotiation is crucial for SAP cloud licensing migration. Key aspects include:
- Support Terms and Scaling Provisions: Ensure support is scalable to accommodate future growth and organizational size or changes in needs.
- Contract Duration Flexibility: Negotiate contract durations that match business requirements, allowing for changes as circumstances evolve.
- Service Level Agreements (SLAs): Clearly define SLAs to ensure availability, support, and response times meet business requirements.
Risk Mitigation
Strategic Planning
To mitigate risks during the migration process, organizations must adopt a proactive and strategic approach:
- Detailed Migration Roadmaps: Develop clear roadmaps outlining each phase of the migration process, responsibilities, and timelines.
- Governance Frameworks: Establish governance structures that manage the migration and subsequent SAP cloud usage.
- Contingency Planning: Prepare contingency plans for potential challenges during migration, such as data loss or system downtime.
- Compliance Monitoring: Ongoing monitoring for compliance ensures that licensing and data use align with SAP and regional regulations.
SAP Cloud Licensing Migration Strategies FAQ
What are the key steps in SAP cloud licensing migration? The key steps include assessing existing licenses, choosing suitable license types, leveraging RISE with SAP for cost-effective migration, and planning for hybrid deployments to maintain business continuity.
How do I assess my current SAP ECC licenses? Review existing license usage and determine underutilized or unused licenses. This assessment can lead to cost savings during the migration and help determine which licenses can be optimized for the cloud.
What is RISE with SAP, and how does it help with migration? RISE with SAP is a managed service package that bundles infrastructure, software, and support to simplify cloud migration. It helps reduce migration costs and offers tools to speed the transition to S/4HANA Cloud.
Which license types are available in S/4HANA Cloud? SAP S/4HANA Cloud offers different license categories: Professional Use, Functional Use, Productivity Use, and Developer Use. Each type is tailored to different user needs to optimize costs.
What is the difference between usage-based and authorization-based licensing? Usage-based licensing charges are based on actual use, while authorization-based licensing is based on the number of authorized users, which can result in higher costs. Choosing the right model depends on your organization’s specific needs.
How can CAPEX credits be used in cloud migration? CAPEX credits can be negotiated for unused or retired on-premises licenses, helping offset the costs of new cloud licensing requirements and reducing the overall financial burden of migration.
Why is data management important in cloud migration? Data management ensures only relevant and clean data is migrated. This involves comprehensive assessment, cleansing, validation, and testing to avoid carrying over redundant or incorrect data that could impact cloud performance.
What is the role of the S/4HANA Cloud Safekeeper service? The S/4HANA Cloud Safekeeper service helps organizations with extended migration timelines, allowing them to maintain business continuity and manage the transition without disrupting daily operations.
Can SAP cloud migration be done in phases? Yes, a hybrid deployment approach allows organizations to migrate in phases, keeping critical business processes on-premises while gradually shifting less critical workloads to the cloud for testing and optimization.
What is the HANA database requirement in S/4HANA migration? Migrating to S/4HANA requires using the HANA database platform. Existing licenses for other databases like MS SQL or Oracle Runtime cannot be exchanged for HANA, and a HANA Runtime or Full Use license is required.
What should I consider when choosing a cloud platform for RISE with SAP? Organizations can choose from AWS, Azure, or Google Cloud. Consider regional availability, pricing, integration needs, and existing cloud strategies when selecting a hyperscaler for implementing RISE with SAP.
How can I optimize SAP licensing costs post-migration? After migration, organizations should monitor license usage regularly, adjust subscribed services to match business needs, and assess changing requirements to avoid paying for unused licenses or features.
What are the compliance considerations for cloud migration? Organizations must adhere to data sovereignty requirements, regional regulations, and SAP’s licensing policies. Compliance monitoring and security measures should align with SAP standards and local regulatory frameworks.
What are the financial benefits of RISE with SAP? RISE with SAP can significantly reduce upfront migration costs, bundle various services into one subscription, and offer ongoing support and access to SAP’s latest innovations, leading to long-term cost benefits.
Why is contract management critical in SAP cloud migration? Effective contract management helps ensure that contract terms, such as duration flexibility, service level agreements, and scaling provisions, align with your business needs, providing a clear framework for support and growth during and after migration.
