“SAP’s newest innovations and capabilities will only be delivered in SAP public cloud and SAP private cloud using RISE with SAP as the enabler.” Christian Klein, SAP CEO, July 2023.
RISE with SAP is a central pillar in SAP’s future strategy, which is focused squarely on its various cloud offerings. In this article we provide an overview of what RISE with SAP is, drawing on our licensing expertise to highlight contractual considerations to be aware of. We also share insight and general observations from our RISE with SAP deals experience, some of this cautionary.
Introduction to RISE with SAP
SAP introduced RISE with SAP at the start of 2021 as a suite of software, tools, and services. It combines access to S/4HANA Cloud (public or private) with support and infrastructure management all under one contract. RISE with SAP is designed for existing SAP ECC customers and SAP S/4HANA On Premise customers looking to move to cloud as well as net-new SAP customers. It includes the following, which will be explained in more detail further in the article:
- SAP S/4HANA Cloud
- SAP Business Technology Platform
- SAP Business Network
- SAP Business Process Intelligence
- Embedded Tools and Services
RISE with SAP is SAP’s preferred approach for customers moving to S/4HANA. SAP also offers an S/4HANA On-Premise Contract Conversion. An S/4HANA On-Premise Contract Conversion fully terminates the current contract and a new S/4HANA contract will replace it. The old contract can be used as credit worth up to 80% of the new S/4HANA contract value. SAP plan to reduce the value of the credit over the next few years. More information about Contract Conversions can be found in our article SAP S/4HANA 2023.
From SAP’s 2023 Q2 Financial Results, it is clear that cloud is in and on-premise is out. Cloud revenue increased by 21% compared to 2022. Specifically, S/4HANA Cloud Revenue increased by 76%. On the other hand, Software License revenue decreased by 20% compared to last year, which is expected if customers are choosing cloud over on-premise. SAP have promised support for S/4HANA until 2040, however support for ECC on-premise systems will be ending in 2027, with an extended maintenance offering until 2030 for a premium price. This is an additional 2% in support fees. Customers would then need to make a choice of choosing a third-party company to maintain their software, move to S/4HANA cloud or move to another software vendor. Christian Klein, SAP’s CEO, has also publicly stated that SAP is a cloud-first organization and that RISE with SAP plays into that new strategy.
RISE with SAP Components
RISE with SAP includes several services designed to help customers migrate to S/4HANA cloud under one contract with SAP.
SAP S/4HANA Cloud
Customers have the choice of S/4HANA public cloud or S/4HANA private cloud. Here are some of the differences between both:
- Private cloud allows for some flexibility in customizations, however public cloud is based on standard processes.
- S/4HANA private cloud is generally more expensive than S/4HANA public cloud.
- The product offering for S/4HANA public cloud is smaller than S/4HANA private cloud.
- S/4HANA public cloud must be deployed in SAP, however S/4HANA private cloud can also be deployed with a hyperscaler or even in your own data center.
SAP Business Technology Platform
SAP BTP is a suite of applications which brings together data and analytics, artificial intelligence, application development, automation, and integration in one environment. Credits for this platform are provided as standard as part of RISE with SAP in the form of a Cloud Platform Enterprise Agreement (CPEA).
CPEA is a consumption-based model where the credits are prepaid and can be used towards any consumption-based products in the portfolio. This allows customers to consume different cloud services using credits, without having to purchase multiple licenses and subscriptions. These can be topped up if the customer requires more, however any unused credits expire at the end of the year. The BTP services catalogue can be found here.
If purchasing S/4HANA public cloud, customers would receive between 2,000 and 16,000 annual credit value for Cloud Platform Enterprise Agreement (CPEA). If purchasing S/4HANA private Cloud, customers are entitled to between 4,000 and 16,000 worth of CPEA credits. This can vary per customer as it is based on the annual contract valuation (ACV).
SAP Business Network
SAP Business Network is designed to connect people, processes, and systems across multiple enterprises in the areas of procurements, supply chain, logistics and asset management.
Customers receive 2,000 Ariba Network documents so that they can begin using the SAP Business Network when they purchase a RISE with SAP contract.
SAP Business Process Intelligence
SAP Business Process Intelligence provides analysis of business process performance, which combined with software, allows for enabling and restructuring the business process. This tool finds opportunities where there can be improvement, while providing the tools needed to make these changes.
RISE with SAP contracts can include SAP Signavio products to evaluate and improve the existing business processes when migrating to S/4HANA cloud. Signavio was a separate company that SAP purchased in 2021 to bolster the service offering in this area.
Customers can receive a report through Process Discovery, alongside tailored recommendations, included within their RISE with SAP contract.
Embedded Tools and Services
This is a range of services covering analytics, support, lifecycle management, and others providing important information about moving to SAP S/4HANA Cloud. This includes deployment assistance, readiness checks, and business scenario planning. Business Process Redesign allows understanding of the process chains, and areas for modifying the business, provided through a report called Process Discovery.
The RISE with SAP contract
In SAP’s RISE with SAP Overview 2021, found here, SAP provided the above visual to show customers how S/4HANA Cloud contracts may look. The diagram on the left indicates the path to S/4HANA cloud without RISE with SAP. Customers negotiate multiple commercial contracts, governance structures, SLA’s and support agreements from multiple different providers. RISE with SAP was introduced to combine the blue segments into one contract. The services are:
- Software Licenses
- Infrastructure (SAP, Microsoft Azure, Amazon Web Services (AWS), Google Cloud Platform (GCP), IBM Cloud and Alibaba)
- Technical Managed Services
- These are the services associated with running the ERP
- IT teams can focus more on business progress and transformation, while allowing SAP to take over the technical aspects of their ERP system
Advisory and Implementation services and Application Managed Services are not provided as part of the RISE contract and would be purchased separately through partners. Customers have the option of choosing SAP to host their S/4HANA Cloud solution or going through one of SAP’s partners.
RISE with SAP, Premium Supplier Option
For customers that want a simpler choice of one contract, there is the option of choosing to partner with IBM. BREAKTHROUGH with IBM for RISE with SAP, Premium Supplier Option provides all 5 segments in one contract as IBM offers services in all areas, apart from the S/4HANA cloud licenses. This provides customers the option to work with a single partner. IBM have been recognized as a premium supplier by SAP, and currently are the only partner that can provide this simplified model.
The benefit of having one sole supplier is that it makes it easy for the customer as they don’t have multiple suppliers to manage for a complex implementation. On the other hand, IBM may not be your chosen supplier in every area of the migration, meaning customers may need to compromise for the sake of simplicity. We also note that having your sole supplier as a close partner of SAP may lead to bias as it is in their interest to keep the SAP relationship strong.
Customer Data Center Option/Tailored Option
For customers who may be wary of a cloud solution due to sensitive data or security issues, there is the option of RISE with SAP S/4HANA Cloud, private edition, Customer Data Center Option, also known as Tailored Option. To be eligible for this, customers would need to have an annual contract value (ACV) of at least $3 million USD. This option is aimed mainly at large customers with heightened security requirements such as governmental institutions or financial industries.
This allows customers to host their systems and their data in their own data center. SAP is responsible for the setup, architecture, operations, and management. VPNs would be installed between two points, which encrypt the data in the customer’s data center and the IaaS environment. Multi-layer security defends against any threats and reduces risk, with tools like data encryption, user authentication, security audits, network security, and more.
GROW with SAP
In March 2023, SAP announced a new product focused on midmarket companies called GROW with SAP. It is aimed at customers with annual revenues below $1 billion USD. It is similar to RISE with SAP, helping businesses migrate to cloud ERP through SAP S/4HANA Cloud, Public Edition only. Due to being on public cloud, it is not very customizable, however smaller to mid-size companies may prefer this as it is simpler to set up, being prepackaged. As a result, SAP claims customers can go live in as little as four weeks. Processes and systems have been designed to scale to the customer. It is designed for those with smaller budgets, allowing customers to spend more on internal growth while being introduced and having access to the cloud ERP systems.
SAP Business Technology Platform is provided with GROW with SAP, allowing customers to access SAP Build Solutions. Users will be able to create enterprise apps, automate processes and design business sites without writing code. By being on public cloud, any updates SAP make will be automatically available for all customers.
ITAA’s RISE with SAP Insight
Our experience with customers receiving RISE with SAP deals has been mixed. The package of services can be useful for customers looking to migrate; however, the quality of the deal varies.
One company received a RISE with SAP offer and negotiated the following beneficial clauses:
- Beneficial pricing that resulted in a lower TCO over 5 years
- Beneficial terms to allow flexibility with the licenses they own
- Credits to minimize the dual running costs of the existing ERP on-premise environment
We worked with another customer on their RISE with SAP deal and found that SAP’s offer did not reflect the license requirements that they needed. Within the deal were products that the customer did not require, as well as an absence of products that the customer actively needed. We would advise customers to review their deal from SAP carefully to ensure that they are buying licenses that they need and in the correct quantities.
We have also observed a customer receiving a RISE with SAP deal, which they did not take. From this point the customer received more regular and in-depth audits from SAP. We caution customers to be wary about beginning negotiations with SAP for a RISE with SAP deal unless they are clear on their roadmap and timescales, as a rejected deal can have damaging effects to their relationship with SAP.
We have helped numerous customers negotiate and review their RISE with SAP deals. Below are some general observations that we have made:
- The contractual structure is simplified by moving to cloud as there will be one new order form. However, old contracts that customers had may contain beneficial terms which would need to be renegotiated.
- From our observations, SAP tend to reduce their discounts if the customer delays signing the contract.
- SAP can offer a step-in license model where customers only purchase a portion of their S/4HANA cloud licenses in the first few years. This is generally aligned to the roadmap and deployment plan. Not every product or all users will require access from day 1, therefore it is possible to decrease the S/4HANA cloud costs whilst migrating.
- The General Terms and Conditions (GTCS) which can reach up to 50 pages for on-premise software are now a 4 page contract which can be found here. This can be beneficial as it simplifies a complicated contract, however customers may need to be wary about the lack of specificity in some areas. Be aware that SAP is generally less willing to negotiate terms in the cloud GTCs as compared to the on-premise GTCs in previous years.
RISE with SAP is designed to help customers move from on-premise to S/4HANA Cloud smoothly and efficiently, while providing many of the necessary services needed to maintain the cloud software. As this is SAP’s sales focus, customers can take advantage of this to negotiate better pricing or terms on their deals; any other route will likely be a difficult negotiation with SAP. S/4HANA Cloud, Customer Data Centre Option has been introduced to provide an option to those industries or organizations that have concerns over data security. There is also the option of GROW with SAP for those mid-size companies that require a cloud licensing structure that is easy to set up and more inline with their budgets.
Whatever the case may be, ITAA can help with all SAP contracts and negotiations, and provide crucial insights to RISE with SAP and any other offers SAP approach you with. Please feel free to contact us to discuss further.