User group says SAP's licensing models make cloud migration harder

DSAG criticizes separate regimes for public, private cloud, says users need more time to upgrade in uncertain times

Updated SAP's German-speaking user group has warned that the enterprise software giant's current licensing regime is creating unwanted difficulties in launching cloud migration and upgrade projects.

Earlier this year, SAP introduced a Cloud ERP Private package to replace a package under RISE with SAP, its lift-shift-and-transform migration plan. At the time, Gartner said the move was more than just a rebranding. The analyst argued the new package significantly impacts negotiations for existing licensing deals because it introduces a new Full Use Equivalent (FUE) license measure, which differs from on-prem and public cloud metrics.

Basically, this transition option is not a good choice for most customers, but only for those who really need it. This isn't a support extension, call it some kind of emergency exit

Speaking to The Register this week during the conference of German-speaking user group DSAG, Michael Bloch, board member for licenses, contracts and support, said, "It's a problem that we have two different licensing models, both for public and private cloud, at the moment… because if SAP customers have to decide which way to go, they need to identify by all licensing options in all models, which obviously is quite complicated."

He pointed out that the Business Suite cloud model announced in February (and not to be confused with the old on-prem Business Suite 7) does not use the FUE model and instead adopts a more user-centric model of vertical integration.

"If you purchase for a finance user, as an example, you do not only get the basic cloud ERP, you get also additional materials from SAP's portfolio so that you can look at the work from a process perspective. The licensing covers all aspects of that, which is different from what we currently see in the private cloud, where you need to license all solutions individually. This is currently hard for the customers to understand how to handle both models, what the differences are and what would be the correct architectural decision for the future," Bloch said.

He said that he hoped SAP would harmonize the public and private cloud licensing models.

With cloud migrations often linked to platform upgrades from the legacy ECC ERP system to the current S/4HANA, Bloch said the added license complexity was a challenge for users trying to meet support deadlines. Mainstream support for ECC runs out at the end of 2027, while extended support - at a 2 percent premium - ends in 2030.

While Bloch welcomed SAP's recent commitment to private cloud, with the org reassuring users they will not be forced to move off the infrastructure in the next five years, he said this made it "more important that customers decide how to move to the cloud, which option to choose, and to also look out for innovations provided then by SAP in the different cloud options to decide on the best option for them in the future."

SAP has said that most of its innovation, in terms of AI and AI agents, will happen in the cloud, not on-prem, regardless of whether users are on an up-to-date S/4HANA platform, a message which angered users last year.

At the same time, Bloch said the idea of staying on on-prem "would not be the right decision for most of the customers because, as we see from a commercial point of view, SAP is moving away from this [model]".

Options for dodging the 2030 support deadline for ECC were unpalatable, he said. They include a scheme SAP introduced in January that extends support until 2033 under special circumstances, provided users sign up to an upgrade path and specific commercial arrangements in time.

Bloch warned the option comes with a 20 percent uplift in subscription costs for the specific systems to be covered by that transition option. "In addition, you will be forced to also subscribe to the most expensive support plan available at that time, for which we don't have the costs. Basically, this transition option is not a good choice for most customers, but only for those who really need it. This isn't a support extension, call it some kind of emergency exit."

A second option is third-party support, which some advocates have suggested gives SAP users options in maintaining current systems and building innovation around them with other vendors or hope that SAP changes its mind and extends support again. The downside is that users who then want to get back on the upgrade path with SAP will find they lost commercial leverage.

Bloch said: "The bad consequence of third-party support is that [once you've moved to it] SAP will not grant you any incentives if you want move to the SAP Cloud solutions. That's something customers should evaluate. From a financial point of view, it really hurts if you do not get these incentives and start with your credits. Basically, termination of SAP support to get third-party support, in most cases, means that you move away from SAP."

DSAG chairman of the board Jens Hungershausen told The Register that members no longer had issues with SAP's desired upgrade path and move to the cloud, but said time was still a challenge as businesses were also struggling with their response to US tariffs and other uncertainties.

"Companies still have a lot of reservations about the timing issue. They accept the SAP Cloud strategy more broadly than they did one or two years ago. But the timing factor in the air, making all the transitions towards cloud ... a big issue here, because the companies have a lot of things to consider right now, especially regarding the current geopolitical environment, and basically need more time," he said. ®

Updated to add:

An SAP spokesperson told us, "SAP has always been committed to making conditions for its customers as simple and straightforward as possible. We maintain close communication with our customers and user groups around the world to ensure processes run smoothly and with minimal effort. We are therefore confident that, together with our customers, we can shape these processes to their satisfaction."