SAP Hybrid Licensing Case Study – Swedish Telecom Provider Saves 20%
Background
One of Sweden’s largest telecommunications providers, serving millions of customers, was at a crossroads with its SAP strategy. The company operated a mix of on-premise SAP systems for billing and network operations, and was evaluating cloud options for its corporate ERP and analytics.
SAP strongly advocated for a move to RISE with SAP – a fully cloud-subscription model – for the telecom’s upcoming S/4HANA upgrade. However, the provider’s IT leadership was wary of going “all-in” on SAP’s cloud.
They needed a hybrid approach: some systems would remain in-house or in a private cloud, while others might shift to RISE.
The challenge was getting SAP to agree to a flexible contract that didn’t force a one-size solution.
Challenges
In pursuing this hybrid model, the telecom firm faced:
- Rigid Offers: SAP’s initial proposals were rigid – either stick to traditional on-prem licensing (and face a big S/4HANA license purchase) or convert everything to a RISE subscription. There was little middle ground offered, and the pricing for each separate path was high. A combined approach wasn’t initially on the menu.
- Cost Justification: The telecom’s CFO demanded that any move to the cloud show clear cost benefits. The early RISE quote was expensive, and keeping everything on-prem meant a large capital outlay for hardware and licenses. Neither option alone delivered the cost-efficiency the company sought.
- Complex Licensing Mix: A hybrid approach meant navigating both subscription metrics and perpetual license metrics simultaneously. SAP’s sales team worried whether a mixed model could be managed compliantly. The company had to show it could handle a mixed environment without confusion.
- Exit and Flexibility Concerns: The telecom wanted assurances that if their strategy changed, for instance, if a division in the cloud needed to move back on-prem, or vice versa, they could do so without punitive costs. Standard contracts didn’t provide such flexibility, raising fears of lock-in.
Solution (How SAP Licensing Experts Helped)
- Customized Deal Framework: SAP Licensing Experts worked to design a hybrid contract framework. They outlined how the company could commit to a core set of S/4HANA modules on RISE (cloud) for certain corporate functions, while retaining other solutions (like SAP IS-Telecom modules and critical billing systems) under traditional licensing. This framework was presented to SAP as a cohesive plan rather than a fragmented ask.
- Benchmarks and Alternatives: To justify the hybrid approach financially, the team benchmarked the costs of similar companies. They also subtly reminded SAP that the telecom had alternatives: for example, they could keep leveraging their own data centers or consider other cloud providers for infrastructure if SAP’s offering wasn’t flexible. This competitive context pressured SAP to come back with a better offer.
- Negotiated Discounts & Credits: By negotiating the cloud and on-prem elements together as one package, they unlocked cross-portfolio incentives from SAP. In the final deal, SAP Licensing Experts secured a significant discount on the RISE portion (to make the cloud move economically attractive) – roughly 20% off the standard RISE rate. They also negotiated credits for the on-premise licenses the telecom would maintain; for instance, support fees on certain legacy systems were reduced since the customer was also investing in the cloud. Importantly, the contract included an option for the telecom to port some licenses between on-prem and cloud if needed (a novel flexibility that SAP granted to win the business).
- Flexibility Clauses: The resulting agreement had built-in flexibility: the telecom could scale its RISE user count up or down within agreed ranges without renegotiating each time, and it had a clause to evaluate the setup after 2 years. If certain cloud systems weren’t delivering value, the company could shift back to on-prem or alternative solutions with minimal penalty. This safety valve was key to making the board comfortable with the new deal.
Outcome and Savings
By breaking the mold of a typical SAP deal, the Swedish telecom provider achieved a tailored agreement that delivered roughly 20% cost savings compared to SAP’s initial proposals. This hybrid deal ensured the company paid only for what it needed on each side of the fence. The telecom avoided a costly all-cloud lock-in and also prevented overspending on on-prem infrastructure for parts of the business that could benefit from cloud.
The direct savings were seen in the discounted RISE subscription and reduced maintenance on retained systems, amounting to several million euros over the contract term. Equally, the intangible benefit was flexibility – the company now has the freedom to adjust its SAP deployment as market conditions and technology evolve, without being stuck in a rigid model.
This innovative negotiation proved that even a giant vendor like SAP can be persuaded to think outside the box. With expert guidance, the customer turned a “cloud vs. on-prem” dilemma into a solution encompassing both, achieving both modernization and SAP license cost optimization.
“We didn’t want to be forced into an all-or-nothing choice. The negotiation showed SAP that a hybrid approach could work – and it got us a better deal to boot. We’re saving about 20% from what we might have paid, and we have flexibility if our needs change. It’s a milestone agreement for us,” — Head of IT Strategy, Swedish Telecom Company
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