SAP Licensing Practices

00:00:01: The podcast accompanying the E-three cover story is a critical and constructive discussion for the SAP community from the perspective of the E-three editorial team.

00:00:09: Two AI avatars are equipped with all the sources from the E-three editorial team and explain the challenges, tasks, and pitfalls to existing SAP customers.

00:00:18: The respective topics are discussed critically but constructively, with lots of tips and tricks.

00:00:25: This episode of the E-three cover story podcast covers SAP license management, including all aspects of rise with SAP, full-use equivalent, and cloud exit.

00:00:33: The topic of SAP License Management and SAP Customer Center of Expertise, CCOE, will also be discussed at the Competence Center Summit, twenty-twenty-sixth of the German-speaking SAP community for Germany, Austria, and Switzerland on June tenth and eleven twenty-twenty-sixth in Salzburg, Austria.

00:00:50: But now let's move on to the current E three podcast episode SAP License Management.

00:00:57: Welcome back to the deep dive.

00:00:59: Today, we are cutting straight through the noise.

00:01:02: We're going to deliver some strategic clarity on what is probably the single most expensive, complex, and, well, frankly, potentially dangerous migration facing major global enterprises right

00:01:15: now.

00:01:15: You're talking about the mandatory shift to SAP Sforana.

00:01:18: Exactly.

00:01:19: And we're not just talking about an IT project here.

00:01:22: We are navigating a commercial and, you know, a legal minefield where the stakes are easily measured in hundreds of millions of euros.

00:01:30: And the deadline is rushing toward us.

00:01:32: It really is.

00:01:33: That's the mission today.

00:01:34: We're diving deep into the... the commercial, the legal, and the operational complexities that are really hidden inside SAP's latest strategies.

00:01:42: Specifically RISE with SAP.

00:01:44: Specifically

00:01:45: RISE.

00:01:45: And the whole licensing model transformation that comes with it.

00:01:48: And our sources for this are, I have to say, highly critical and very technical.

00:01:52: We're drawing heavily from the SAD community, so E-three magazine, and this is crucial, the developing counterweights from European regulatory bodies.

00:02:00: Right.

00:02:00: The ones looking at cloud vendor lock-in.

00:02:02: And let's be absolutely clear about the the pressure cooker environment that you, our listener, are operating in.

00:02:10: This is not some optional upgrade.

00:02:12: This is a transformation imperative, and it's driven by a hard deadline.

00:02:17: The impending end of standard support for the old ECC system in twenty twenty seven.

00:02:22: With that final extended support deadline looming in twenty thirty, it's a financial cliff edge.

00:02:28: Yeah, absolutely is.

00:02:29: So you have

00:02:29: to move.

00:02:30: You have to.

00:02:31: And as our source material points out again and again, approaching this mandatory shift is just a technical or an IT upgrade.

00:02:38: That's the biggest mistake a company can make.

00:02:40: So it's not just about swapping out servers?

00:02:42: Not

00:02:42: at all.

00:02:42: It's a profound business transformation.

00:02:45: It forces you to rethink and redesign your core business processes.

00:02:49: And if you miss that chance, the chance to really anchor organizational changes during this migration.

00:02:54: you forfeit the primary value that S-FORING has even designed to deliver.

00:02:58: It demands a holistic company-wide view, though.

00:03:01: That's the

00:03:01: only way.

00:03:02: Okay,

00:03:02: let's unpack the technology that's forcing this massive organizational change.

00:03:07: Esparjana is, well, it's fundamentally different from ECC.

00:03:10: It's built on the Asian in-memory database.

00:03:13: That's the foundation.

00:03:14: So how does moving to an in-memory database, how does that foundation reshape what a company can do, and I guess, therefore, what they must change?

00:03:23: The change is all about two things.

00:03:25: Speed and real-time capability.

00:03:27: Yeah.

00:03:27: Your traditional ERP systems, they were constrained by disk-based architecture.

00:03:32: They were batch processors.

00:03:33: You'd

00:03:33: run reports overnight.

00:03:35: Exactly, you'd wait.

00:03:36: Asia flips that entire concept on its head.

00:03:39: It's an in-memory platform, so it's designed for instantaneous processing and real-time analysis.

00:03:44: So what does that mean in practice?

00:03:46: It means when you can perform your financial closing or your supply chain optimization or, you know, deep analysis in real time, you're no longer limited by yesterday's data.

00:03:56: And that changes everything from inventory management to controlling.

00:03:59: It sounds like a pretty fundamental architectural shift.

00:04:02: Oh, it is.

00:04:03: So fundamental, in fact, that the system is tied to Linux.

00:04:07: as the sole operating system for ADA.

00:04:10: And this isn't a trivial detail.

00:04:12: It really shows SAP committing to a very modern sort of open source aligned architecture for its absolute core platform.

00:04:21: So if the speed is different, the processes have to be different.

00:04:23: That makes sense.

00:04:24: But the data itself... It must also have to be organized differently to even support that speed.

00:04:29: It does.

00:04:30: And that's where this whole challenge of data readiness comes in.

00:04:33: You can't just, can you just port the old ECC database structure over?

00:04:37: You absolutely cannot.

00:04:37: And that's a hard stop for a lot of projects because S-IV uses a completely new, much simpler data model, which is what enables that real-time speed in the first place.

00:04:47: A straight one-to-one data transfer from an existing ECC system is, well, it's technically and functionally impossible.

00:04:54: Right.

00:04:54: And this is why data readiness is so critical.

00:04:56: Companies have to engage in a massive data cleanup effort.

00:05:00: Our sources call it eliminating legacy debt.

00:05:02: Legacy

00:05:02: debt.

00:05:02: I like that.

00:05:03: So it's all the junk you've accumulated.

00:05:05: Exactly.

00:05:05: It's all the irrelevant historical data, the duplication, the inconsistencies that have built up over sometimes decades.

00:05:13: And if companies neglect this preparation, they're just moving garbage into the Ferrari of ERP systems.

00:05:18: And

00:05:18: that completely undermines the entire value proposition of Sforana.

00:05:22: Completely.

00:05:23: And historically, data quality has been well.

00:05:27: It's been the main project tiller in these huge implementations, hasn't it?

00:05:31: What does the data tell us about how difficult this cleanup really is for organizations today?

00:05:36: It is still the Achilles' heel.

00:05:38: I mean, even as recently as twenty-twenty, a study showed that thirty-seven percent of respondents, that's more than a third, reported struggling significantly to ensure high data quality during their transition planning.

00:05:48: That figure is alarming.

00:05:50: It is, and it highlights that the complexity isn't just about deleting old records.

00:05:54: It's about maintaining proper data governance.

00:05:56: It's ensuring data context is preserved where you need it, and of course, securing sensitive information during the transfer.

00:06:02: This prep work on your data, it's mandatory for success in S-IV.

00:06:06: It really determines whether you get the promised real-time benefits or just a faster version of all your old problems.

00:06:12: That's the perfect way to put it.

00:06:13: So if the tech demands new data structures and the deadlines are tight, The conversion itself has to be viewed.

00:06:20: Holistically, it's not a tech fix.

00:06:23: It requires the organization to have the will to change how they actually work.

00:06:28: Exactly.

00:06:29: You have to use the conversion as the catalyst to redesign your core business processes.

00:06:34: If a company takes the easy route, the fast conversion, and just lifts and shifts its old inefficient processes into the new system.

00:06:42: They've missed the point.

00:06:43: They've missed the one-time huge opportunity for necessary organizational and process changes.

00:06:49: S-FOR is designed to enable process excellence, but the company has to commit to adopting those best practice workflows.

00:06:55: Without that organizational readiness, the technology is just an expensive high-speed bottleneck.

00:07:01: Okay, so once a company accepts this... Yeah.

00:07:03: This transformation imperative, they face what, three strategic pathways?

00:07:08: Greenfield, Brownfield, or something called selective data transition.

00:07:10: That's right.

00:07:11: Those are the core approaches.

00:07:12: Let's start with Greenfield, the new start.

00:07:15: It seems like the purest path, but maybe also the most disruptive.

00:07:18: Greenfield really is the gold standard if you're aiming for innovation.

00:07:22: It means fundamentally rebuilding your system landscape from the ground up.

00:07:27: A clean slate.

00:07:28: A completely clean slate.

00:07:30: And the biggest benefit is that opportunity to scrap decades of historical baggage, that wild growth or the messy customizations we talked about, and you get to implement processes based on globally unified concepts.

00:07:43: Aligning with SAP's modern way of doing things like Fiori first.

00:07:47: Exactly.

00:07:48: You maximize your chances of achieving what's called the clean core from day one.

00:07:52: which is just vital for any future flexibility.

00:07:55: Do we have a good example that shows the tangible, you know, the non-technical advantage of using Greenfield?

00:08:00: Yes, the Ricola case is a great one.

00:08:02: They use the Greenfield approach not just to switch systems, but to radically overhaul their core finance processes.

00:08:08: A cough

00:08:08: drop company.

00:08:09: That's the one.

00:08:10: By using the S-IV implementation to modernize their electronic vendor invoice processing, they achieved massive gains.

00:08:17: We're talking reduced.

00:08:19: manual effort, they sped up processing times by double digits, and their finance team gained immediate real-time transparency into the status of every single document.

00:08:29: So they didn't just meet the deadline, they actually extracted a substantial, measurable advantage for the business.

00:08:35: Precisely.

00:08:35: That's Greenfield Unright.

00:08:37: That sounds fantastic, but it also sounds lengthy and very resource-heavy.

00:08:42: And I imagine that pressure often pushes companies towards the other option, Brownfield.

00:08:47: the system conversion.

00:08:48: It does.

00:08:49: Many choose Brownfield purely to meet the deadline.

00:08:51: So what is the fundamental strategic risk of choosing Brownfield just for speed?

00:08:55: The risk is you're incorporating the past into your future.

00:08:59: Brownfield is faster.

00:09:00: And yes, initially it's less risky because you minimize the immediate business disruption.

00:09:05: However, our sources are very clear on this.

00:09:07: Choosing Brownfield just to hit that twenty twenty seven or twenty thirty deadline often means you risk incorporating all those past dependencies and customizations that legacy debt into the new system.

00:09:16: So you're not really transforming.

00:09:18: You're not.

00:09:18: As one expert put it, transforming old date and old data often just drags the dependencies of the past into the new systems.

00:09:26: This means you limit your future scope and you fundamentally forfeit a huge part of the innovation potential of Sforia.

00:09:33: So if you just convert quickly without that process overhaul, you've basically done a very complex technical upgrade, not a business transformation.

00:09:40: You've got it.

00:09:41: An expensive technical upgrade.

00:09:42: So we have the radical ideal with Greenfield.

00:09:46: and the fast but risky minimum with Brownfield.

00:09:50: That leaves this customized middle ground, the Selective Data Transition, or SDT.

00:09:55: This seems like it was designed specifically for complex global legacy customers.

00:10:00: It was.

00:10:00: SDT is the surgical approach.

00:10:02: SAP officially supports this software-supported method, and it allows for a really tailored migration.

00:10:08: You get the flexibility to focus specifically on migrating only the relevant processes and the selective high-value data.

00:10:13: And

00:10:13: what happens to the rest?

00:10:14: You intelligently leave behind the irrelevant or low-value historical data in an archive.

00:10:21: It's about being smart about what you actually need to carry over into the new world.

00:10:25: That sounds incredibly sophisticated.

00:10:26: It must require massive precision.

00:10:28: Does the complexity of SDT offset the time savings?

00:10:32: The complexity is high, no question, which is why skilled partners are absolutely crucial for this path.

00:10:38: But the results can be transformative because of that surgical focus.

00:10:41: Any examples?

00:10:43: Look at the work of a consulting firm called Seabees.

00:10:45: For Visman, they used SDT to migrate twenty-eight production units in thirty-four countries and seventy-eight sales organizations in a record short time.

00:10:54: Wow,

00:10:54: how much data are we talking about?

00:10:56: Over thirty billion datasets.

00:10:58: Their success came from focusing on relevant process innovation, only where it truly mattered.

00:11:03: and that selective data transformation.

00:11:05: So it's not all or nothing?

00:11:07: Not at all.

00:11:08: And for another company, SBS companies, they used SDT to harmonize cost and profit centers and transform the finance area specifically.

00:11:15: This gave them a clean, effective starting point without having to endure a multi-year, full greenfield project.

00:11:21: So SDT is complex.

00:11:23: technically.

00:11:24: But strategically, it's a way to get brownfield speed, but with a greenfield outcome, at least in the areas that count the most.

00:11:31: That's a great summary of it.

00:11:32: It's the pragmatic hybrid.

00:11:33: So the moment companies decide on their S-IV pathway, the conversation immediately turns to the cloud.

00:11:38: And specifically to SAP's flagship offering, Rise with SAP.

00:11:43: Inevitably.

00:11:44: It's marketed as transformation as a service or TAS.

00:11:48: If it's TAS, what exactly is bundled into this package?

00:11:51: Rise is really SAP's strategic consolidation play.

00:11:55: It bundles the Cloud ERP product that's typically S-for-HANA Cloud Private Edition, along with essential technical managed services and the underlying infrastructure.

00:12:03: And the infrastructure is from the big hyperscalers,

00:12:05: right?

00:12:05: Right.

00:12:06: It utilizes leading players like AWS, Azure, or IBM Cloud.

00:12:10: The marketing positions it as this one-stop shop, a holistic subscription package for your entire transformation.

00:12:15: But if they're marketing transformation, their primary motivation seems Well, it appears to be far more financial.

00:12:23: It looks like they want to change their entire revenue model, shifting away from those lumpy, big license sales to predictable, recurring income.

00:12:31: That is absolutely the core driver for SAP.

00:12:33: No question.

00:12:34: They've set aggressive financial goals, aiming for over twenty-two billion euros in cloud revenue by twenty-twenty-five.

00:12:41: And crucially, they want to push the share of predictable recurring revenue up to around eighty-five percent of their total revenue.

00:12:48: Which gives them massive planning stability.

00:12:50: For FAP, yes.

00:12:52: But here's where the strategic tension begins.

00:12:55: This desire for predictability on SAP side often translates into increased complexity and unpredictability for you, the customer.

00:13:01: Especially in the long-term contract and the licensing negotiation.

00:13:05: That's where the battle was fought.

00:13:06: So if it's transformation as a service, why does the customer still have to bear the primary burden for governance and compliance?

00:13:13: And why is the contract split?

00:13:15: It sounds more like cloud hosting with mandatory SAP tools as a service.

00:13:18: That's a very fair critique.

00:13:20: And you know, the sources really reflect this skepticism.

00:13:24: The contractual nature proves your point.

00:13:26: A rise contract is made of at least two parts.

00:13:29: Okay.

00:13:29: There's the conversion fee, which is for the move itself.

00:13:32: And then there's the cloud subscription, which is the ongoing operational rent.

00:13:36: So you were paying at least two separate bills to SAP.

00:13:39: It's certainly not a single clean service charge.

00:13:42: And

00:13:42: yet the adoption figures are impossible to ignore.

00:13:46: They are.

00:13:46: Nearly half of the German speaking user group, DSAG, The respondents are now using or actively planning to use Rise.

00:13:54: That's up from just sixteen percent the previous year.

00:13:57: So the market is clearly responding to the promise of reduced complexity, even if the underlying commercial structure is still really intricate.

00:14:04: The message is landing, yes.

00:14:05: When Rise first launched, the rhetoric was very much cloud only, but large customers, you know, with decades of legacy investment, they can't just flip a switch.

00:14:13: Did customer reality force SAP to pivot on that cloud only?

00:14:18: Oh,

00:14:18: absolutely.

00:14:19: Customer demand forced a major strategic pivot from cloud only to cloud first, which sounds similar, but is a world of difference.

00:14:27: A subtle but important distinction.

00:14:29: It is.

00:14:30: The reality is that the vast majority of existing customers rely on hybrid landscapes.

00:14:35: They have a combination of on-premise systems for certain functions, working seamlessly with new cloud solutions for others.

00:14:42: SAP was compelled to recognize this.

00:14:44: Their CEO even had to address it publicly, didn't he?

00:14:47: He did.

00:14:48: Christian Klein made public statements recognizing that customers with existing on-premise systems must receive equal treatment when it comes to new developments compared to the pure cloud adopters.

00:14:58: The community forced their hand.

00:15:01: So if most large enterprises are going hybrid, particularly here in Europe where data sovereignty is a huge concern, how do they technically manage the security and control of sensitive data that has to remain local while still integrating with the cloud ERP?

00:15:15: This is where specific architectural innovations become absolutely critical.

00:15:19: We have to talk about the SAP Edge Integration Cell, or EIC.

00:15:22: EIC.

00:15:23: The EIC.

00:15:24: is the technical necessity that was demanded by European data sovereignty rules and the complexity of hybrid environments.

00:15:31: It allows companies to execute APIs and integration services locally so, within their own data center or their private cloud environment.

00:15:38: And that's vital.

00:15:39: It's vital because, according to IDC research, European organizations strongly prioritize on-premise data storage for security, for sovereignty, for compliance, and for privacy reasons.

00:15:51: EIC provides that necessary control point, ensuring that your sensitive integration traffic doesn't need to traverse the public cloud perimeter unnecessarily.

00:15:59: Let's dig a bit deeper into the contractual and the operational pitfalls of Rise.

00:16:04: Beyond that dual billing structure, what specific implementation challenges should customers be anticipating, especially since the offering is still so new?

00:16:13: Well, the newness itself is the first pitfall.

00:16:16: Rise was only introduced in twenty twenty one and our sources highlight that there is still a significant learning curve involved for everyone,

00:16:22: including SAP itself.

00:16:23: Yes, including SAP itself, specific limitations, features or complex functional boundaries of the cloud services.

00:16:32: They often only become apparent as large complex legacy customers start to actually use rise in production.

00:16:39: So you discover the limits by hitting them

00:16:41: pretty much.

00:16:42: And this demands that customers invest heavily in educating their own technical teams to achieve full transparency and avoid nasty surprises down the line.

00:16:50: That seems a bit counterintuitive to the whole as-a-service promise.

00:16:54: I mean, if SAP is managing the technical transformation, surely the risk of a botched implementation should be minimized.

00:17:00: The risk is still significant, and it often relates to talent allocation.

00:17:04: The success of the Rise Change Management process is heavily dependent on the experience and the S-IV knowledge of the specific SAP team that gets assigned to you.

00:17:13: Ah, so it's a bit of a lottery.

00:17:14: It can be.

00:17:15: A customer who gets assigned a less experienced Rise team from SAP faces a real competitive disadvantage.

00:17:21: And moreover, the internal change management is still your responsibility as the customer.

00:17:25: The transformation profoundly changes internal roles.

00:17:28: So the Rise contract doesn't solve the people problem.

00:17:31: Not at all.

00:17:31: We saw in one case study Getting the right highly experienced people released from their daily business to dedicate themselves to the project is a major management challenge that has nothing to do with the contract.

00:17:43: This sounds like a gap that the traditional SAP partner ecosystem must be rushing to fill.

00:17:49: Given the complexity of managing an environment that's part rise, part legacy, and part third party, what role do partners play now?

00:17:57: Their role is more crucial than ever because they're the ones who provide the necessary holistic view.

00:18:03: SAP partners are essential because a customer's enterprise architecture is virtually never just SAP or just RISE.

00:18:09: Of course.

00:18:10: It includes non-SAP systems, bespoke applications, and non-RISE components that all have to operate seamlessly with the new core.

00:18:17: The partner has to provide vendor independent consultation, ensuring the continuous support and seamless operation of the full multi- and hybrid cloud platform.

00:18:26: So RISE addresses the SAP core, but the partner has to handle the complex integration of everything else that business actually needs to function.

00:18:33: Exactly.

00:18:34: End to end.

00:18:34: We've

00:18:35: established the technical path and the cloud strategy.

00:18:37: Now we have to enter the maze of licensing.

00:18:40: This is the area that causes the most commercial anxiety, I think.

00:18:43: Without

00:18:43: a doubt.

00:18:44: Legacy customers are sitting on decades of ECC license entitlements.

00:18:47: They have to convert these.

00:18:49: What are their options now that the simpler path is closed?

00:18:52: Right.

00:18:53: So the simple path, which is called product conversion, is definitively expired.

00:18:57: That's gone.

00:18:58: This is an irreversible milestone.

00:19:01: So customers must now navigate the significantly more complex mechanism known as contract conversion.

00:19:07: And they have to do this before twenty thirty.

00:19:09: They do, but strategically.

00:19:11: they need to do it as soon as their S-IV plans solidify.

00:19:14: Because this process requires reviewing, analyzing, and mapping every single element of their historical contract portfolio.

00:19:21: It's a massive undertaking.

00:19:23: What

00:19:23: exactly does contract conversion entail?

00:19:25: Is there any silver lining for companies with, you know, very old or unused licenses?

00:19:30: There is, actually.

00:19:31: Contract conversion works by aggregating the price you paid for all your existing old SAP products.

00:19:38: and then crediting one hundred percent of that sum toward the purchase price of the new S-Foreanna products.

00:19:44: Okay, so you get credit for past spend?

00:19:46: Yes, and the major financial benefit here is the ability to convert what we often call shelfware.

00:19:52: Licenses sitting on a shelf?

00:19:53: Exactly.

00:19:54: Licenses they bought, paid maintenance on for years, but never fully utilized.

00:19:59: This allows companies to finally salvage investments that might have otherwise been completely written off.

00:20:04: That's a decent advantage.

00:20:06: But the sheer complexity must come when you're trying to match the old world to the new one.

00:20:10: ECC functions aren't packaged the same way in S-IV.

00:20:13: And that is the greatest hurdle.

00:20:14: It leads directly to compliance risk.

00:20:17: The difficulty is defining the new S-IV and a billed material.

00:20:20: Old ECC functionalities are now often spread across many different S-IV priceless items.

00:20:25: And

00:20:25: that priceless list is notoriously complex.

00:20:28: It's over two hundred pages and contains more than three hundred line items.

00:20:32: Successfully converting requires a hyper detailed forensic level demand analysis before you sign that conversion agreement.

00:20:39: Because if you miss something.

00:20:40: If

00:20:40: you miss even a minor required function, it can force you to license it later as an additional product, which drastically and expensively changes the final cost calculation.

00:20:50: The negotiation here is fundamentally about mitigating risk through detailed mapping.

00:20:55: The complexity of that contract conversion.

00:20:58: seems to pale in comparison to the shift toward the cloud licensing metric, full use equivalent, or FUE.

00:21:05: Ah, FUE.

00:21:06: This is the new standard for the S-IV Enterprise Management Cloud.

00:21:10: We need to define FUE not just bureaucratically, but strategically.

00:21:14: What is it?

00:21:15: Strategically, FUE represents a fundamental shift in how SAP measures consumption.

00:21:21: Traditional licensing was based on who the named user.

00:21:24: FUE shifts the metric to what is consumed.

00:21:26: So one FUE user corresponds to a specific number of individuals who are authorized to access certain cloud service functions.

00:21:33: It's a complex regulatory framework that is designed to make companies cloud-ready in SAP's commercial terms.

00:21:40: That sounds like it massively increases the compliance risk.

00:21:43: If I move from counting people to counting access or consumption, my exposure to unforeseen licensing fees just skyrockets, especially in automated environments.

00:21:52: Precisely.

00:21:53: FUE is complex and it is opaque.

00:21:56: And the conversion to FUE in a cloud subscription carries an immense consequence.

00:22:00: The customer loses autonomy over its core ERP system.

00:22:05: You have converted a perpetual asset, your old ECC license that you owned, into a temporary rental agreement governed by a complex high-risk consumption metric, which is FUE.

00:22:14: This conversion effectively seals the path.

00:22:16: It makes the shift to the cloud often commercially irreversible.

00:22:19: This is the very definition of vendor lock-in.

00:22:21: It is enforced through the licensing model itself.

00:22:24: And even if you stay away from the FUE cloud model, customers still face that persistent, insidious risk of digital access licensing, which targets automated external systems.

00:22:33: Digital access is perhaps the most difficult compliance area to manage.

00:22:37: If a company licenses digital access, they are agreeing that SAP can charge extra fees for every document, or in some cases every document line item, that is created outside of a direct SAP dialogue.

00:22:49: So think about documents generated by an external web shop, or a robotic process automation bot, or a field service management system.

00:22:58: All of those.

00:22:59: And here's the trap.

00:23:00: This licensing obligation applies even if the user or the system creating that document externally already holds a valid already paid for named user license within SAP.

00:23:11: That's double jeopardy.

00:23:12: It seems specifically designed to catch integration points, which are.

00:23:15: Well, they're ubiquitous in any modern enterprise.

00:23:18: How can a company possibly budget for that?

00:23:20: It is extremely difficult.

00:23:21: Yeah.

00:23:21: It's hard to calculate your current and future costs because the methods available for automatically determining the number of licensed liable documents are often insufficient or even faulty.

00:23:30: So you're flying blind?

00:23:32: To a large extent.

00:23:33: Now, historically, SAP does grant huge discounts, often exceeding ninety percent off the very high list prices for digital access, but The customer has almost no control over the total volume of documents being generated by all those external systems.

00:23:48: The unpredictability is the risk.

00:23:49: An automated process gone rogue or a sudden spike in online sales

00:23:54: could generate thousands of documents overnight leading to a massive, unpredictable financial shock.

00:23:59: Give him this.

00:24:00: This trifecta of complexity, the contract conversion mapping, the opaque FUE metric, and the unpredictable digital access risk, does moving to rise as managed services mean a customer can finally disband their internal SAP expertise team, the customer center of expertise, or CCOE?

00:24:16: Absolutely

00:24:17: not.

00:24:17: And this is a crucial strategic point that many companies misunderstand.

00:24:20: Despite moving your infrastructure and your technical managed services to rise, the CCOE remained essential.

00:24:26: Why?

00:24:27: It's needed to achieve the full operational potential of S-FORANA and critically to manage compliance.

00:24:33: The responsibility for licensing compliance does not transfer to SAP or to the partner under a rise contract.

00:24:38: So

00:24:38: the customer still bears the primary responsibility?

00:24:41: The customer still bears the responsibility for ensuring they don't breach the FUE or digital access regulations even when they're running on the cloud.

00:24:49: So instead of being freed up, the CCOE's job has actually become vastly more difficult.

00:24:54: Where is the core friction point for them now?

00:24:56: The CCOE operates in a state of permanent tension precisely because of the complexity we just discussed.

00:25:02: They have to continuously develop sophisticated strategies and calculations to manage the technical, the contractual, and the commercial risks tied to all these licensing requirements.

00:25:12: And their main point of friction is that S-IV price list.

00:25:16: That two hundred page, three hundred line item document is not just a reference, it's a constant compliance risk indicator for them.

00:25:23: The CCOE has to proactively manage this complexity, particularly as automation solutions get deployed.

00:25:30: And those automation solutions aren't just for housekeeping anymore.

00:25:33: No, they're for actively optimizing and securing running SAP operations.

00:25:37: So if the CCOE also has to manage automated operations like security patching and hotfixes, does that mean they now have to audit the automation itself for compliance?

00:25:47: Precisely.

00:25:48: You've hit on the new frontier for them.

00:25:50: the CCOE's task has expanded from auditing human usage to auditing system behavior.

00:25:56: They're responsible for ensuring that the technical and automated deployment of solutions adheres to the specific contractual terms.

00:26:03: So they're ensuring that the systems meant to reduce complexity and risk aren't accidentally creating massive scaled licensing breaches under the FUE or digital access models.

00:26:12: A complex new world for the CCO.

00:26:13: Let's confront the core fear of this irreversible path.

00:26:17: The cloud exit question.

00:26:18: If a company has traded its perpetual licenses for a subscription-based FUE model under RISE, what mechanism exists to reverse that decision or move to another provider?

00:26:29: There's virtually none.

00:26:31: SAP currently offers no specific predefined cloud exit strategy.

00:26:34: So

00:26:35: it's a one-way street?

00:26:36: Commercially speaking, it's a one-way street, making it effectively irreversible.

00:26:41: To use an analogy, it's like trading your house's ownership papers.

00:26:45: your perpetual ECC license for a perpetual rental agreement, the cloud subscription.

00:26:51: You gain flexibility.

00:26:52: But you lose the right to take the core ERP functionality somewhere else.

00:26:55: You're locked in.

00:26:56: Yeah.

00:26:56: And every subsequent annual price increase becomes mandatory.

00:27:00: Why would SAP deliberately maintain this vacuum?

00:27:04: It only fuels customer anxiety and, well, regulatory scrutiny.

00:27:08: Because their entire financial future hinges on the stability of that predictable recurring cloud revenue.

00:27:14: If they offered a cheap, easy exit, their eighty-five percent predictable revenue target for twenty-twenty-five would be at risk.

00:27:21: They need to ensure high friction for departure.

00:27:23: So is there any option for customers to retain some semblance of autonomy?

00:27:27: The only option, according to our analysis, is an incredibly high cost maneuver.

00:27:32: You keep your old on-premise licenses perpetually through something called back maintenance, while simultaneously buying brand new expensive licenses for S-forhana in the cloud.

00:27:41: A dual licensing strategy.

00:27:43: which maintains your ownership rights, but at a massive redundant annual cost.

00:27:47: That's an untenable proposition for most companies.

00:27:50: It turns out the biggest risk of the cloud isn't security, it's commercial rigidity and price escalation.

00:27:56: And that sentiment is reflected directly in the feedback from customer groups like DSAG.

00:28:01: They've publicly criticized SAP's announced annual price increases for cloud services.

00:28:06: What was their main point?

00:28:08: They noted that this price escalation significantly complicates the shift to the cloud for companies, and it just reinforces the fear that once you're on that subscription treadmill, you are subjected to the vendor's unilateral pricing power.

00:28:20: And that's all exacerbated by the commercial lock-in.

00:28:23: So if the vendor offers no exit, what legal counterweights are emerging to protect customers from this kind of lock-in?

00:28:29: This is where the European regulatory framework, specifically the Digital Data Act, becomes intensely relevant.

00:28:35: It does.

00:28:36: The EU recognized this lock-in vulnerability in the SaaS world, SaaS services.

00:28:41: They occupy this unique legal space because they are simultaneously infrastructure, data processing environments, and integral parts of business processes.

00:28:50: Which makes vendor lock-in highly systemic and damaging.

00:28:53: Exactly.

00:28:54: So the EU is actively legislating against this.

00:28:56: What is the core mechanism of the Digital Data Act, the DDA, that targets these switching barriers?

00:29:03: The DDA's central objective is to dismantle those switching barriers and foster true interoperability between services.

00:29:10: It basically forces providers to design their systems with the customer's future flexibility and the right to switch in mind.

00:29:16: It mandates a degree of control that has historically been absent in standard cloud contracts.

00:29:21: What concrete obligations does the DDA impose on a SaaS provider like SAP to enable a customer to transition their data and processes somewhere else?

00:29:29: Well, the DDA dictates that SaaS providers are obliged to design their systems so that customers can export their data in a practicable form and seamlessly transfer it to a different service provider.

00:29:39: Practicable

00:29:40: form.

00:29:40: I like that.

00:29:41: It's

00:29:41: key.

00:29:42: Furthermore, the contracts themselves must explicitly detail the conditions for switching.

00:29:48: And crucially, transitions or data extraction cannot be hindered by imposing excessive fees or by the use of proprietary data formats that only the original vendor can read.

00:29:58: So it directly targets the two most common lock-in mechanisms.

00:30:03: Technical incompatibility and punitive pricing.

00:30:06: It goes right for the throat of the lock-in model.

00:30:08: This really sounds like the legal framework is finally catching up to the technical reality, prioritizing data sovereignty.

00:30:15: It is.

00:30:16: And this push for mandated data exportability aligns perfectly with the underlying strategic need of European organizations.

00:30:23: As we noted, based on that IDC data, they consistently prioritize on-premise data storage for security, sovereignty, compliance, and privacy.

00:30:31: They need to know their most sensitive.

00:30:32: business intelligence is safe and controllable.

00:30:34: And technologies like that SAP Edge integration cell, the EIC, become even more important then.

00:30:39: They become essential tools to satisfy both corporate compliance needs and the emerging DDA requirements for local data control.

00:30:45: OK, let's shift our focus to the state of the systems that are being converted.

00:30:50: We mentioned wild growth earlier decades of heavy customization in ECC.

00:30:55: Why is this legacy customization such a strategic impediment to the S-IV move?

00:31:00: Wild growth is a massive problem of accumulated technical debt.

00:31:05: Decades of using SAP Business Suite seven resulted in systems that are just rife with hard-coded ABAP modifications.

00:31:12: These modifications make the systems difficult to update manage and control.

00:31:16: In this tendency, it directly violates Hasso Platinum's own foundational advice for regular system cleanups, doesn't

00:31:23: it?

00:31:23: It does.

00:31:23: This heavily customized state becomes a massive anchor that drags down the migration project and makes future innovation almost impossible.

00:31:31: So CleanCore is the necessary antidote.

00:31:33: Define CleanCore for us and explain why it's so non-negotiable for future competitiveness.

00:31:38: CleanCore is the strategic imperative to keep the core ERP system as close to the standard SAP version as possible.

00:31:45: All necessary extensions, modifications, and customizations must be pushed out to external platforms like the Business Technology Platform or BTP.

00:31:52: And

00:31:53: why is that so vital?

00:31:54: For two reasons.

00:31:55: Future innovation and ease of updates.

00:31:58: If you maintain a clean core, SAP updates and patches become routine, manageable events.

00:32:04: If you don't, every minor update becomes a major, expensive integration project, which guarantees you will fall behind competitors who could adopt innovation faster.

00:32:13: But what is the practical fate of all that custom code?

00:32:17: You can't just turn off decades of proprietary ABAP development.

00:32:21: You can't.

00:32:22: And that's the problem.

00:32:23: A huge amount of customer-specific ADAP custom code is no longer executable in the SWAR environments because it was so tightly coupled to the old monolithic ECC architecture.

00:32:33: This requires complex, often manual, and certainly costly adjustment just to make the system functionally equivalent to what it was before.

00:32:40: That code modernization effort must consume a vast portion of the transformation budget.

00:32:45: It often does.

00:32:46: So

00:32:46: how are modern solutions?

00:32:47: managing this technical debt without bankrupting the whole project?

00:32:50: The path forward involves what's called intelligent code modernization and implementing a flexible target architecture.

00:32:56: There are specialized partners who use sophisticated tools to automatically analyze and modernize custom code to fit the new S-IV environment.

00:33:05: This can greatly accelerate the process and reduce manual risk.

00:33:09: And what about the architecture?

00:33:10: Well, platforms like Red Hat OpenShift, which is an open hybrid cloud platform, are used to integrate the SAP landscape with non-SAP systems via modern APIs.

00:33:20: This creates an open platform that supports agile end-to-end processes, enabling innovation to happen outside the core system, which is the essence of clean core, while still interacting seamlessly with S-Four.

00:33:32: Moving from technical cleanliness to operational management.

00:33:35: Managing these highly complex hybrid S-BOR landscapes seems impossible without pervasive automation.

00:33:42: Is automation just a cost-cutting measure or has it become an existential requirement now?

00:33:46: It's an existential requirement, especially when you factor in the skills cap.

00:33:50: Automation is now viewed as the king's way for reducing complexity and SAP basis and solving cross-company problems.

00:33:57: So it's not just about reducing headcount?

00:33:59: No, it's about increasing operational resilience and mitigating human error.

00:34:04: Eighty percent of companies agree that process automation is crucial and leaders site enhancing operational efficiency That's fifty two percent and critically enhancing risk mitigation at forty one percent as their top goals.

00:34:17: We've moved way beyond simple scheduled backups, haven't we?

00:34:22: How has automation evolved in the SAP basis world?

00:34:24: Dramatically it is moved far beyond simple housekeeping.

00:34:28: Automation is now actively managing and optimizing running SAP operations.

00:34:32: like what like automatically detecting, validating, and implementing security hot-sixes, and patching all SAP components across the complex hybrid landscape.

00:34:41: This continuous automated process significantly increases system security and availability, operating in a way human teams simply cannot manage manually.

00:34:51: So it's a proactive, not reactive approach.

00:34:53: Exactly.

00:34:54: Tools are now designed for this kind of comprehensive, hands-off operational management.

00:34:58: And finally, let's connect this back to the overwhelming skills crisis.

00:35:01: If specialized basis talent is so scarce, how does automation mitigate the impact of this shortage?

00:35:07: Automation is absolutely essential for managing the massive IT labor shortage.

00:35:11: I saw a study that projects a stunning shortage of around six hundred sixty-three thousand I.K.

00:35:15: specialists in Germany alone by twenty forty.

00:35:18: That's a staggering number.

00:35:20: Yes,

00:35:20: and automation offers a crucial mitigation strategy.

00:35:24: Simple, automated systems, often initiated via just mouse clicks rather than complex scripting, allow less experienced basis specialists to manage highly complex operations.

00:35:33: Like creating compliant SAP system copies.

00:35:36: Things exactly like that after minimal specialized training.

00:35:39: by scheduling these fully automated complex tasks during off-peak hours.

00:35:43: Companies maximize efficiency and minimize their reliance on an increasingly rare and expensive pool of highly specialized talent.

00:35:50: Automation, in a sense, democratizes complexity.

00:35:54: We've

00:35:54: concluded a deep dive into what is, really, an irreversible journey.

00:35:58: The move to Sforana is mandatory, and the path to the cloud via Rise is being strategically pushed by SAP for its own financial predictability.

00:36:06: This entire transformation is just, is defined by tension.

00:36:09: It is.

00:36:10: SAP seeks predictable cloud revenue while you, the customer, must desperately fight for operational flexibility and commercial security.

00:36:17: And this tension is concentrated entirely in those licensing models.

00:36:21: The conversion moving from a perpetual asset you own to a subscription-based FUE model you rent fundamentally alters the customer's risk profile and restricts their autonomy.

00:36:32: and the legal reality of that one-way street has prompted the European Union to step in.

00:36:36: With a digital data act which explicitly aims to counteract the vendor lock-in that SAP's cloud exit vacuum creates, for you, the listener, the commercial negotiation of that license conversion is now arguably the single most important strategic engagement your organization will undertake in the next three to five years.

00:36:54: We've established that the complexity of the FUE metric means compliance.

00:36:58: responsibility stays firmly with the Customer Center of Expertise, the CCOE.

00:37:02: But as the IT world speeds toward proactive, agentic AI systems that will autonomously make decisions about contract fulfillment, financial transactions, process optimization, this adds an entirely new layer of risk.

00:37:13: And this leads us to our final provocative thought for you to consider.

00:37:17: Given the inherent complexity and risk of the FUE model, and knowing that the human CQE team is ultimately responsible for compliance, how will organizations truly navigate legal risk when the system's making the key commercial decisions?

00:37:31: the AI agents themselves are automated.

00:37:34: Could this agentic automation which is designed for efficiency inadvertently generate unforeseen and high volume licensing breaches under the convoluted FUE or digital access rules?

00:37:44: Breaches that the human team will only discover months or years later resulting in massive unexpected financial exposure.

00:37:50: The challenge for the CKE in the age of agentic AI is not just managing human usage but auditing automated compliance at machine scale.

00:37:59: That was an E-III Cover Story podcast episode on the topic of SAP License Management.

00:38:04: This topic and the SAP Topic Customer Center of Expertise, CCOE, will also be covered at the Competence Center Summit, twenty-twenty-six of the German-speaking SAP community for Germany, Austria, and Switzerland on June tenth and eleven twenty-twenty-six in Salzburg, Austria.

00:38:24: We look forward to welcoming you in person to this must attend event.

00:38:27: for the SAP community in Salzburg.

00:38:30: Secure your ticket now on the E-three magazine website, e-threemag.com.

00:38:34: Thank you for your interest.

00:38:35: Best wishes from the E-three magazine editorial team.

00:38:38: See you on the next podcast.