S/4HANA Migration: Rise with SAP – How to calculate the Business Case

S/4HANA Migration: Rise with SAP - How to calculate the Business Case

 

With “Rise with SAP”, SAP offers an all-round carefree package for the journey to the cloud. However, users should take more factors into account for the business case of their S/4HANA migration. […]

SAP is not known for low prices – neither for licenses and software rental and certainly not in operation. Has the cloud migration program “Rise with SAP” initiated a paradigm shift in SAP’s pricing policy, which the software company even proves in its offers with a very professional-looking business case? Or is the cloud offensive only accompanied by very good marketing, which lures the CFO with clever break even calculations and grabs the CIO with the (professional) honor? Whatever is behind it in the individual case: the decision for or against Rise with SAP is and remains a question of the business case.

Which scenarios do I compare with each other? In the comparison scenarios, licenses, operation and services must be considered together. With Rise with SAP, SAP shows a total price for the package without giving transparency about the cost composition in detail. In the business case, this overall package is usually compared with a license migration to S/4HANA in the on-premises version (new purchase with the old licenses credited) together with the costs of in-house operation (upgraded for the operation of S/4HANA).

Above all, however, SAP dictates the costs of license migration itself, without taking into account a real negotiation result. It is therefore advisable to realistically calculate the comparison scenario of the in-house-operated on-premises solution in the first step – even if this is not the preferred solution from the point of view of your own IT strategy. These questions should arise:

  • Does a change to the S/4HANA user model really make sense (contract conversion) or do my contracts offer me so many advantages in the user model that I would like to receive this (product Conversion)?
  • What is the optimal user distribution?
  • Are all supplementary products that I would like to use in a future S/4HANA solution taken into account?
  • Do I need the HANA Enterprise Edition (as it is calculated in Rise) or is the Runtime Edition also sufficient for my architecture?
  • Are all products really taken into account, for example Digital Access (on-premises still 90 percent discounted by the end of 2022) and the Solution Manager (in the cloud for a fee, compared to the license-free on-premises solution)?
  • Is the complete landscape taken into account or only selected products?
  • Do the products included with Rise have an added value in my architecture and would it therefore also have to be factored in for the self-powered solution for comparison?

Together with its own costs for operation and services, the Rise model can be compared with a comparable cost model on-premises – optimized with its own resources. I am no longer comparing (old) pears with (new) apples, but two future-oriented apples with each other.

Rise with SAP differs from the well-known in-house operation in two main respects: Commercially, an SAP customer switches to the rental model and technically, he outsources the SAP operation with operational services externally. In the business case, it is often forgotten that there are comparable models (best of breed) that should be considered as an alternative.

From a commercial point of view, in addition to stand-alone rental solutions, the well-known leasing model is still possible in order to achieve accounting / tax effects and relieve cash flow. The main difference from the pure rental model is that the costs decrease to zero after the lease term, while the rent usually increases after the lease expires. Given a sufficiently long period of consideration of a business case, a private cloud rental model can probably never win against an on-premises leasing model at the license cost level.

Also in operation, the question arises about the alternative operation of a private cloud via classic hosting providers or hyperscalers. SAP also offers its customers the option of a hyperscaler – but only under a general contract from SAP. So in order to get transparency in the cost allocation, it is worthwhile to obtain the alternative “Best of Breed” via an isolated offer for SAP operation.

The decisive factor for the business case will be whether SAP prices the entire “Rise with SAP” package in such a way that it also meets a business case compared to the necessary licensing and sufficient operating requirements. Experience shows that it is not the SAP prices for Rise with SAP that create the right business case, but an objective business case can result in a price for Rise with SAP that meets the SAP promise.

The “scalability” of a solution is considered a main argument for cloud solutions. If you consider a classic SAP landscape under S/4HANA, the scalability should not only relate to quantity frameworks, but also to the constellation of different SAP products. Users have to expect that cloud services will be added or replaced more often. This requires appropriate configuration options, as the SAP clientele knows from sales contracts.

For the S /4HANA customers, the configuration is already anchored in the user model, since they do not license user quantities but FUE’s (Full Use Equivalents), which provide for a quasi permanent configuration. For the volume-based cloud metrics, however, a comparable flexibility must first be contractually achieved.

A decision for Rise with SAP is a life decision (in the life cycle of an enterprise solution). When the contract ends, SAP customers only have the raw data. No further exit regulations are defined. In the past, changes of maintenance, service and hosting providers were common for cost and / or quality reasons, so with Rise with SAP you are bound to the one provider (SAP).

No business case will ever take this point into account – but it belongs in the overall consideration in order to take into account the non-monetary measurable risk factors.

Despite all caution and skepticism: the evaluation of alternative private and public cloud scenarios makes strategic sense and can also be commercially attractive. With Rise with SAP, SAP has taken a step in the right direction. The offer from Walldorf is worth checking. However, the comparison with the offers from the SAP ecosystem (SAP Partner) remains exciting in order to continue to ensure a good balance of quality, cost and flexibility.

*Michael Sandmeier is Managing partner of the management consultancy Sandmeier Consulting GmbH based in Oerlinghausen (East Westphalia) and Hamburg.

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