Get more licenses for less with SAP price tiering, advise experts

German ERP vendor entices users to cloud, but be aware of how the system works, ITAM experts warn

SAP's tiered pricing sometimes means it is cheaper for users to buy more software licenses than they need under its RISE with SAP package.

Evidence presented to an ITAM Forum webinar shows how, under the pricing structure, buying 6,001 licenses would be cheaper than buying 5,000, something users should be aware of before they step into the enterprise application vendor's preferred elevator to the cloud.

Julien Roemers, senior solution sales engineer and team leader with software asset management company USU, pointed out that RISE with SAP tiered pricing was extremely steep. Those buying 135 units (a Full Use Equivalent, or FUE in SAP-speak) or fewer pay €716 ($782) per license, per month, according to listed pricing in Germany, Austria, and Switzerland, while those buying 25,001 units and more pay less than 5 percent of that per license figure each month.

If a user wants to buy 5,000 units, for example, they are better off paying for 6,001. RISE with SAP costs €64 ($70) per unit for between 4,001 and 6,000 units. However, tier pricing drops to €47 ($51.40) per unit from 6,001 to 12,000 units. So buying 5,000 units would cost €320,000 ($350,000) per month while buying 6,001 would cost €282,000 ($308,000).

"You save quite a lot of money by purchasing more than what you actually need. That's very important to keep in mind: know the tiers, and work with your account executive to get the better pricing for you. [It] will also give you some flexibility as you grow to scale, but more importantly, there [are] some direct savings that you can get," Roemers said.

Going up to a higher tier than you need can also mean users qualify for a higher grade database infrastructure, he pointed out.

The software asset management expert highlighted that SaaS-based RISE with SAP in the private cloud would be cheaper than the same on-prem licenses for an S/4HANA system.

Roemers offered the example of an organization requiring 10,000 users made up of 2,500 professional advanced users, 3,000 functional or core users and 4,500 self-service users. Over ten years, the licensing costs alone, excluding infrastructure, would be around €43.8 million ($48 million) for an on-prem system. The equivalent private cloud system would cost €42.5 million ($46.5 million), including infrastructure, at today's prices.

"Keep in mind that we did not apply any price increase. I would be surprised if you would still be paying the same price for RISE with SAP 10 years from now. We didn't take that into account, but the message is clearly, SAP is pushing you to the cloud, but it's also making it attractive from a pricing point of view," he said.

Despite these price sweeteners, SAP has been struggling to get users onto its latest S/4HANA system in the cloud. According to research from the German speaking user group DSAG earlier this year, legacy system SAP Business Suite (ECC) was used by 68 percent of users, down from 79 percent a year earlier. The latest S/4HANA system was used on premises by 44 percent of survey respondents. Meanwhile, only 11 percent relied on S/4HANA Private Cloud. ®