SAP offers big discount to lure on-prem S/4HANA customers to Rise

SAP is offering on-premises S/4HANA users a credit of 60% of their first year’s fees if they migrate to its all-in-one cloud-based offering, Rise with SAP.

The credit, to be spent on other SAP services, should be enough to offset around half of the overall cost of a typical migration, according to Jan Gilg, the company’s chief product officer for cloud ERP.

Last year, SAP faced criticism for leaving behind its most loyal customers, those that adopted S/4HANA early and ran it in their own environments, after CEO Christian Klein announced in July 2023 that only Rise customers would get new S/4HANA features, such as AI and carbon accounting tools. But treating customers with such disregard — forcing them to move to the cloud to access innovation, and raising support costs for those who won’t — hasn’t worked out, so now SAP is offering them the discount incentive if they move to its managed cloud.

In Q4 of 2023, when SAP sales staff were allowed to offer the 60% credit on a case-by-case basis, the carrot proved persuasive. “We were able to convince a lot of customers to take advantage of this offering and then move to Rise,” Gilg said. “It seemed to hit the right spot.”

Now the company is opening up the offer to all on-prem S/4HANA users signing up to Rise in 2024. That goes for users of SAP’s legacy ERP Central Component (ECC) software too — although in their case, the credit for migrating to S/4HANA is smaller, just 45% of the value of their first year’s Rise with SAP contract, he said. With the December 2027 deadline for the end of mainstream support looming, though, SAP may assume it’ll take less to persuade ECC and Business Suite 7 users to migrate.

User acceptance

User representatives cautiously welcomed the changes.

Paul Cooper, chair of the UK & Ireland SAP User Group, UKISUG, said the financial incentives will help current ECC customers make the business case for moving to the cloud. For those running S/4HANA on premises, the business case for migrating to the cloud in order to access innovation they thought they were already paying for is less clear-cut.

“We’ll canvass the opinion of members who made the move to S/4HANA on-premises to see if the financial incentives offset the additional costs they’ll incur by moving to the cloud in order to access the latest innovations,” Cooper said. “But this is definitely a move in the right direction.”

Even so, not all on-premises customers will want to move core SAP systems under the Rise umbrella. “For those organizations, being able to access the latest innovations through SAP’s Business Technology Platform (BTP) will be important if they’re not to be left behind,” he said. “This is an area we’ll continue to push SAP on, as we are led to believe there’s no technical reason why this isn’t possible.”

DSAG, the German-speaking SAP User Group, also appreciated the initiative and SAP’s willingness to recognize the investments its members had made in existing systems, while at the same time calling on SAP to further improve and expand the offering to take into account the complex requirements and challenges of enterprises opting for a transformation process to the cloud.

Managing migration costs

SAP is offering a credit against running costs — but the real problem is with implementation costs, according to Gilg.

“The ratio between what customers pay in subscription to us and what they pay to an implementation partner is still way off, in our perspective,” he said.

To rein in those migration costs and ensure the quality of the implementation, SAP has defined a standard methodology for moving to Rise it’ll expect partners to follow.

“We want to be very prescriptive,” Gilg added.

S/4HANA Cloud Public Edition, the version used in SAP’s managed environment, can’t be customized, so enterprises that have written custom code for S/4HANA on premises need to have the business logic translated to run on BTP.

The Rise with SAP Methodology calls for the provision of dashboards tracking whether such custom code is being rewritten according to SAP’s standards: calling the correct APIs, only using whitelisted objects, and providing adequate documentation.

Gilg said the methodology will give customers greater transparency concerning the migration process, indicating how close they are to the standard.

Partners also will be invited to validate their compliance with the new requirements, and the criteria for validation will be tightened over time, he said.

AI help on the way

In addition, SAP is working on improving the tooling it offers customers and partners to help with migrations to S/4HANA, including continuing to invest in Migration Cockpit.

“We’re looking into AI technology here as well,” Gilg said.

One area of focus is custom code refactoring, but the challenge here is S/4HANA is programmed in SAP’s own ABAP language. “The ABAP world is a little bit more proprietary than what’s available already with GitHub Copilot, for instance, in the Java world,” he said.

Nevertheless, SAP is working on just such a tool for internal use. “We’ll make this available externally as soon as we have some results that are really tangible,” he said.