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SAP Migration: Why Software Asset Management is essential

Photographic portrait of Florian Ascherl
Florian Ascherl

EY EMEIA IT Asset Management Leader

5 minute read 08 Nov 2023

Many SAP users are migrating to SAP S/4HANA and falling into the license trap, but Software Asset Management can lead the project to success.

Overview:

  • When it comes to SAP migration, it is important to consider not only the technical aspects but also the commercial side.
  • With the right approach, significant optimizations in license costs can be achieved in SAP migration projects.

Many SAP-reliant organizations are currently migrating from SAP ECC to the ERP system SAP S/4HANA, technical implementation for which is highly complex. The licensing and compliance-related aspects of this change are also extremely demanding, and the consequences of introducing S/4HANA improperly may result in increased license and maintenance costs and introduce long-term compliance risk.

An SAP transformation can unlock additional value for your organization. However, this transition also requires deep SAP licensing experience and a strategic implementation approach to mitigate business risk.

How EY can help

Why no transformation project should start without a true understanding of the scope

 

Pre-transition, it is critical to create transparency around the system-wide technical use and commercial license consumption to manage the changeover smoothly and cost effectively. Without such transparency, a cost-efficient mapping of existing users to the S/4HANA setup cannot be performed. To optimize your user-based technology investment, you must understand exactly how the software will be used and the compliance posture of the current ECC environment. Contractually, this also includes maintaining detailed knowledge of legacy contracts and usage rights of existing licenses.

 

The technical lens on license management

 

An important distinction for SAP S/4HANA licensing is between technical and contractual criteria. On the technical side, there are four primary pillars in the SAP S/4HANA landscape:

  1. Databases
  2. Users
  3. Applications
  4. Access (indirect use)

 

The SAP HANA database is often the most expensive part of the implementation. Knowing the advantages and considerations when selecting the license model for each database system and tenant (account) will allow you to evaluate if a HANA Runtime Edition license is sufficient for a system setup, or if a HANA Enterprise Edition (full use) license is required to remain legally compliant.

 

The SAP HANA database is often the most expensive part of an implementation. The right license model allows you to be strategic.

The next step is user migration. The transition to a completely new, user-based access model with only four S/4HANA user types is a great opportunity for many companies to drive cost optimization, as not all SAP software users require a user license in the S/4HANA world.

Applications and engines in S/4HANA are far more standardized and offer fewer options for customizing an S/4 software landscape than SAP ECC. However, using the new SAP software portfolio such that only necessary functionalities are enabled from the start allows organizations to optimize cost via appropriate license metrics and license models. Indirect use of SAP software remains a much-noticed topic in the S/4HANA world, and evaluating and deciding on a licensing model that covers all indirect usage scenarios has a high impact on costs and internal resources. Considering all four aspects of SAP licensing, the resulting S/4HANA transition can be optimized to drive a more secure risk posture.

The contractual lens on license management

SAP offers two license migration options for upgrading to S/4HANA:

  1. A contract conversion, which takes a holistic approach to the conversion and corresponds to a complete contract conversion
  2. A product conversion designed as a product transformation

It’s important for organizations to identify which option is the most sensible, cost effective and sustainable for their businesses.

Contract conversion allows for a fresh start: All prior contracts and agreements become null and void and are replaced by a new contractual arrangement. Thus, old contracts are migrated to a holistic SAP S/4HANA contract. A contract conversion can offer a unique opportunity to eliminate historically grown and complex license portfolios and monetize possible unused licenses (shelfware). However, there is the risk of terminating valuable historical licenses and rights of use in the business portfolio.

Contract conversation allows for a fresh start: All prior contracts and agreements become null and void and are migrated to a holistic SAP S/4HANA contract.

Product conversion, on the other hand, allows organizations the opportunity to transfer certain products in the existing SAP license portfolio to their respective SAP S/4HANA equivalent. In this scenario, the user keeps all of their legacy and framework agreements with SAP. Users focus on specific solutions and SAP engines to technically replicate the contracts of the old environment step by step in the new environment. SAP offers credits for existing licenses to enable the user to migrate certain products cost effectively.

Making your SAP transformation successful

When considering and preparing for your S/4HANA transformation, evalaute what licensing model might be right for you. Understanding your organization’s current licensing posture allows for an evaluation of future business needs, thus helping to determine the right licensing model for S/4HANA to mitigate risk and optimize cost. Consider your company’s business objectives and how S/4HANA will support them, and evaluate both the technical and contractual sides of your transition to step into your technology-enabled future.

Summary 

Often, the drivers of SAP transformations focus too much on the technical aspects. While this is understandable given the highly complex nature of the task, it carries the risk of neglecting license management. This can result in significant additional costs in SAP. Good Software Asset Management is the key to extracting the best commercial value from the project.

About this article

Photographic portrait of Florian Ascherl
Florian Ascherl
EY EMEIA IT Asset Management Leader
Passionate about client-centric teams. Delivers outcomes and fosters innovation. Family man; finds joy in work-life balance. EY professional focusing on ITAM. Committed to digital transformations.
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