Demystifying Contracts and Licensing with RISE with SAP

Demystifying Contracts and Licensing with RISE with SAP

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By Akash Kumar, Solutions Architect, HCL

The 21st century economy demands organizations to be flexible, agile, and responsive. They are also under pressure to cut costs.  

Digital transformations can enable organizations to respond to the current market conditions while keeping costs under control. It can also help them meet customer expectations and help customers achieve high-value outcomes.  

With COVID-19 and other recent developments, organizations understand that change is constant and they must adopt new technologies quickly to thrive. For a holistic digital transformation, organizations will not only have to redesign business process but also adopt new technology to be more agile, intelligent, and efficient.

SAP understands these requirements and has released RISE with SAP, which combines the best of on-premise and cloud to transform your business. RISE with SAP includes such tools as SAP Readiness Check, custom code analyzer, and business process intelligence to expedite the transformation journey. 

Previously, an organization that wanted to move to the cloud or start the transformation journey had to sign software application licenses with multiple parties, find a hyperscaler for the cloud, and hire application providers for implementation and management services. As a result, the organization had to put in place multiple commercial constructs, governance structures, service-level agreements (SLAs), and support agreements. These created pain points for the organization (Figure 1). 

Some of the other transformation pain points included: 

  • Too many hands to shake and parties to hold accountable 
  • Diminishing support over time to help realize anticipated value
  • Long time-to-value proposition
  • Customers having to put solution stack layers together themselves 

Figure 1 - RISE with SAP - image

Figure 1: Challenges without RISE with SAP (Source: SAP) 

RISE with SAP Streamlines Implementation

With RISE with SAP, organizations arrange implementation and management services with the application provider and the rest is managed by SAP (Figure 2), reducing the number of SLA contracts, and other pain points. Figure 2 - RISE with SAP - image

Figure 2: Simplification of Contracts with RISE with SAP (Source: SAP)

I worked with a manufacturing customer whose systems crashed last year. To resolve the issue, I coordinated with multiple parties, i.e., SAP, a hyperscaler, and an application implementation and service provider. This not only complicated the process but also increased resolution time. With RISE with SAP, the process is simplified and takes less time to resolve issues because the number of involved parties is reduced and there is more accountability. 

RISE with SAP includes a cloud subscription and divides the licensing into four dimensions (Figure 3).  

Figure 3 - RISE with SAP - imageFigure 3: SAP S/4HANA Cloud Licensing (Source: SAP) 

The offering is based on a full usage equivalent (FUE) metric that takes different types of employees and their types of usage into account. Additionally, industry and lines of business add-on packages can be licensed with metrics that align to the business value of each solution: 

  • Direct user access to digital core: This is based on direct user-based access to the SAP S/4HANA and can be divided into self-service, core use, and advanced use based on the roles to be performed in the system. 
  • Digital access (aka, indirect use via APIs): This is based on the nine documents document listed in Figure 4.

Figure 4 - RISE with SAP - image

Figure 4: SAP S/4HANA Indirect Access Document Types (Source: SAP)

  • Industry and line-of-business (LOB) solutions: These are the additional solutions implemented in the organization as per the requirements in SAP Cash Management, SAP Transportation Management, and SAP SuccessFactors.
  • Infrastructure add-ons: These are the infrastructure components such as virtual machines, storage, etc., required while migrating to the cloud. 

Questions to Ask about RISE with SAP

With RISE with SAP, you should ask the following questions to optimize the licenses, costs, and discounts, wherever applicable: 

Q. How do I optimize digital access/indirect use? 

A. To understand digital access or indirect use, you should understand the meaning of SAP application access. Below is a flowchart (Figure 5) to understand if conversion is required from a user-based to an outcome-based document license. SAP is offering options to convert to an outcome-based document license. 

Figure 5 - RISE with SAP - image

Figure 5: SAP Indirect Access Flowchart (Source: SAP) 

Q. My SAP systems are already on Microsoft Azure. Is RISE with SAP beneficial to me? What will happen to my current hyperscaler licenses, system, etc.?  

A. RISE with SAP is still beneficial as it offers one contract and more accountability; however, the current hyperscaler negotiated offering/contract will not work with RISE with SAP. 

Q. What should I consider for the infrastructure FUEs? 

A. SAP calculates the required SAP S/4HANA database size for all the development, quality assurance, and production systems and then offers the corresponding FUEs. Customer can choose any hyperscaler (Microsoft Azure, Amazon Web Services, or Google Cloud Platform) and the cost is already included with the subscription. As a customer, some of the options you should explore include: 

  • Discussing data growth and optimization with the SAP sales team. 
  • The FUEs differ based on the hyperscaler, so choose according to your requirements. If you already have a hyperscaler, then select the same one for RISE with SAP to reduce cost, latency, etc. 
  • Discussing the system extension, upsell, and infrastructure packages with the SAP sales team instead of selecting the higher FUEs. Once selected, FUEs can’t be reduced for the contract duration. 
  • Disaster recovery is an optional service and has an additional cost so select it according to your business requirements. 
  • Network size and architecture are the customer’s responsibility, and the cost is not included in the price. 
  • SAP offers SLA availability of 99.7% for production and 95% for non-production system. There will be an additional cost if SLA availability of 99.9% is required. This should be discussed separately with the SAP sales team. Some of the other SLA provisions with RISE with SAP are mentioned in Figure 6. Figure 6 - RISE with SAP - image

Figure 6: SLA Provisions of RISE with SAP (Source: SAP) 

Q. What should I consider for direct user access? 

A. SAP has divided direct user access into four categories (Figure 7) based on the roles required for operations: 

  • SAP S/4HANA Cloud for advanced use 
  • SAP S/4HANA Cloud for developer 
  • SAP S/4HANA Cloud for core use 
  • SAP S/4HANA Cloud for self-serve use 

Figure 7 - RISE with SAP - image

 Figure 7: Categories of SAP S/4HANA Cloud User Access (Source: SAP) 

There are no named users in SAP S/4HANA, and FUEs can be used for all user types. For example, a manufacturing firm could have 20 SAP ERP Central Component (ECC) professional users. Those FUEs could be divided into different SAP S/4HANA user types (Option 1, Option 2, etc.). Organizations in the future could move from Option 1 to Option 2 to utilize FUE effectively and avoid shelf-ware during the contract lifecycle (Figure 8). 

Figure 8 - RISE with SAP - image

Figure 8: SAP S/4HANA User Type Options (Source: SAP)

Some of the options to optimize for customers are described below: 

  • Include user growth to calculate the FUEs 
  • Understand how the SAP on-premises users are mapped to SAP S/4HANA (Figure 9) and used to calculate the FUEs since SAP ECC user types do not exist in SAP S/4HANA.
  • Because the cost of SAP ECC and SAP S/4HANA user types are different, you should calculate the user count based on required authentication by end users instead of moving to higher bracket user types that will increase the FUEs and increase the overall license cost. 
  • Understand the impact of the following key performance indicators on licensing when calculating FUEs: 
  1. What is the number of users in the current system? 
  2. What is the count of multiple logons performed by users in the system? 
  3. What is the count of deleted users in the system? 
  4. What is the count of expired users in the system? 
  5. Check if any user IDs are shared among different users either concurrently or at different points in time. 
  6. Check the impact of cross-usage, which happens when a user licensed to carry out X set of transactions carries out both X and Y.Figure 9 - RISE with SAP - image

Figure 9: Comparison of User Types for SAP ECC and SAP S/4HANA (Source: SAP)

Q. What are the free offerings bundled with RISE with SAP? 

A. SAP offers free services with RISE with SAP that can be utilized to create an intelligent enterprise. Below are some examples: 

SAP Readiness Check provides customers with analysis tools and an interactive dashboard to evaluate an existing SAP ERP system in preparation for the transition to SAP S/4HANA. Some of the important benefits are: 

  • Provides an assessment of factors that influence the transition 
  • Provides a perspective on the timing of when the activity should be performed in relation to the conversion project 
  • Helps to reduce project risk by providing early scope clarification, limiting the potential for scope creep during the realization phase of the project 

SAP business process intelligence discovery reports. Most organizations don’t understand their own business processes and often do not have any proper business documentation. As a result, they are investing a lot to identify the process gaps and even to standardize and codify processes to drive efficiencies with SAP S/4HANA and bots for automation. These reports provide information on your current business processes benchmarked against industry standard, which can be utilized to understand the manual and inefficient processes. They can also be used to create a business use case showcasing return on investment (ROI) and during fit-gap workshops. I worked with a retail customer who invested a lot of effort and money to generate a processing mining report for its SAP system, a capability that is available free with RISE with SAP (Figure 10). 

Figure 10 - RISE with SAP - image

Figure 10: Overview of SAP S/4HANA Cloud (Source: SAP)

Other tools such as SAP Business Technology Platform services can be utilized to develop chatbots, Internet of Things, or blockchain application. You should check with SAP about the free services as offerings change with time. 

RISE with SAP has simplified the contract process and accountability; however, the SAP S/4HANA license has become more complicated, including indirect access. Customers should invest some time in doing an analysis of their current licenses and then map them to the SAP S/4HANA licenses to avoid high cost and unused applications. 

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