SAP Licensing Challenges and Cloud Transition Concerns Highlighted by German User Group

The updated German-speaking SAP user group has raised alarms about the complications arising from SAP’s current licensing policies, which are hampering cloud migration and upgrade initiatives.

Licensing Complexity and Cloud Migration

Earlier this year, SAP launched a Cloud ERP Private package aimed at replacing the previous RISE with SAP framework, part of its lift-and-shift migration strategy. Gartner commented that this move was more than a rebrand; it significantly affects licensing negotiations because it introduces the Full Use Equivalent (FUE) license measure, differing from traditional on-premises and public cloud metrics.

This transition option is generally not suitable for most customers except in urgent situations, serving more as an emergency exit rather than a standard support extension.

Divergent Licensing Models Create Confusion

Michael Bloch, SAP licensing, contracts, and support board member, shared during the DSAG conference that having two distinct licensing models for public and private clouds complicates decision-making for customers.

He explained:

> "It's problematic to manage two different licensing approaches simultaneously... customers must navigate multiple licensing options and models, which becomes quite complex."

He also highlighted that the recently announced Business Suite cloud model (not to be confused with the older on-premises Business Suite 7) shifts from the FUE model to a more user-centric licensing approach, covering broader material based on the user's role, such as finance.

In contrast, private cloud licensing currently requires solutions to be licensed individually, leading to confusion over the optimal architectural choice.

The Future of Licensing and Cloud Strategy

Bloch advocates for SAP to harmonize public and private cloud licensing schemes to simplify processes. He emphasized that cloud migration, often linked with upgrading from legacy ECC to S/4HANA, faces challenges due to this licensing intricacy, especially with ECC support ending in 2027 (mainstream) and extended support in 2030 at a premium.

While SAP confirmed commitment to private cloud with no immediate forced migration within five years, Bloch stressed the importance of customers choosing their future cloud paths wisely, considering SAP’s innovation focus on AI and cloud-native developments.

Support Options and SAP’s Strategic Shift

Remaining on-premise appears less viable, as SAP increasingly favors cloud platforms. To avoid the 2030 ECC support deadline, SAP introduced an extension scheme in January, allowing support until 2033 under specific conditions—raising costs by about 20% and requiring expensive top-tier support plans.

Third-party support is another alternative, offering flexibility but potentially reducing future leverage with SAP. Bloch warned:

> "Once you switch to third-party support, SAP will have fewer incentives to assist you back to their cloud solutions, which could be costly in the long run."

Customer Concerns and Industry Responses

Jens Hungershausen, DSAG chair, noted that while companies are generally accepting SAP’s cloud migration plans, timing remains problematic due to geopolitical issues like US tariffs and economic uncertainties, necessitating more time for transitions.

An SAP spokesperson assured that the company aims to keep processes straightforward and continues close engagement with customers and user groups worldwide, believing they can collaboratively streamline the migration journey.

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