The Clock Is Ticking: Getting the Most From Your S/4HANA Conversion
Since SAP first released SAP HANA in 2010, end-of-life status has been in sight for its previous ERP systems. SAP sees HANA and especially the cloud as the future, and they are eager for customers to make the transition.
There is some debate, however, as to how many customers have already made the switch. Just last quarter (Q2 2023), SAP removed the product conversion to SAP S/4HANA from their pricelist, stating that most customers had already migrated their contracts to S/4HANA.
However, the DSAG Investment report for Germany recently stated that of all SAP ERP solutions used, SAP ERP ECC is still clearly in the lead with 79 percent, ahead of S/4HANA On-Premises with 41 percent. This is followed by S/4HANA Private Cloud with 8 percent and S/4HANA Public Cloud with 3 percent. That leaves thousands of customers who have yet to transition and likely do not have new contracts in place.
To encourage adoption of the latest technology, SAP has quietly introduced another significant change with the release of their new Q3 2023 price lists — a gradual, time-based reduction of credits customers could receive with S/4HANA conversion.
Converting now vs. later
Prior to the release of the latest price list, customers were getting up to 90% credit from their previous investments if they changed their contract to S/4HANA. Alternatively, customers could choose to receive 100% credit if they increased their maintenance base to 111%.
Going forward, SAP is reducing this credit to only 80% (or 100% with an increase to 125% maintenance base). Beginning in 2024, it drops to 70% (143% maintenance base). SAP customers routinely have contract values in the tens of millions of dollars, so 10% of that value results in a meaningful financial impact for those customers who haven’t yet transferred their contracts.
Plans for the future
SAP has a clear vision of where they see their customers in the future — on HANA and in the cloud — and they have a set strategy to get there.
Their primary product will become RISE with SAP. SAP S/4HANA Cloud Public Edition and SAP S/4HANA Cloud Private Edition will still be accepted options. On-premises will not be the model for the future. SAP CEO Christian Klein made that clear when he stated that SAP’s newest innovations will be available only in these cloud options.
Your quick conversion prep plan
With the changes in credits, 2024 is suddenly attractive timing for a new S/4HANA contract. After all, 80% credit is better than 70%. Additionally, Q2 results fell short of expectations, so it’s possible the next two quarters will represent attractive timing for negotiations.
To prepare for these negotiations effectively in the tight timeframe, it’s important to have a clear view of both your current and your desired future licensing situation. To get that view, we recommend the following steps:
- Compare the packages from SAP. Understand how they fit to your requirements and identify any possible gaps.
- Clean up your roles and authorizations. The licensing will be based upon the assigned authorizations rather than on usage. Eliminate any shelf-ware (unused products), and only buy what you need.
It sounds simple, but there are many potential pitfalls. Getting support with experienced consultants and tools could provide you with the right information in just a couple of days. You’ll need the extra help to get the best package for your requirements in the shortest possible time and with the most possible credits for your efforts. Contact us to get started.