SAP S/4 Hana Contract Conversion

SAP’s new S/4 technology simplifies and speeds up business processes, improves customer satisfaction, and taps into new business potentials. Especially digital transformation is a fundamental prerequisite for a successful future. The migration to S/4 Hana not only gives companies a chance to get rid of outdated processes and technologies; it also gives companies an opportunity to update their licenses through contract conversion. This is an opportunity that companies should not waste.

However, it will not be easy to take this opportunity, with all the migration effort and costs surrounding S/4 Hana. Companies therefore need to thoroughly plan the migration. One of the first questions companies should ask themselves is, “Which products will we use in the future?” The products can be grouped as follows.

S/4 Hana products: SAP account managers will be eager to help with the selection, but there are also useful tools which facilitate the decision, like SAP Pathfinder or SAP Transformation Navigator. However, companies have to differentiate if they already operate an ECC predecessor or not, as this impacts the new processes and licenses and ultimately the contract conversion.

ECC products that will continue to operate: not every ECC product has a successor in the new S/4 world. This is subject to change, of course, but future contracts have to define how companies manage their licenses nonetheless.

Third-party products: whatever will come of the discussion centered around SAP’s licensing model Indirect Access, third-party systems will certainly continue to play a big part in every SAP environment. However, technological innovations like the cloud pose ever new questions. Where will the digital core be? In the SAP or non-SAP cloud or on-prem?

SAP cloud products: sooner or later, SAP customers will have no choice but to introduce cloud-based SAP products. Here, too, the customer has a choice: public or private cloud. These are usually excluded from SAP Contract Conversion and are treated specially, as they are not part of the actual license portfolio. The licenses can be billed in three ways: purchase plus maintenance, rental or according to consumption. Depending on the type of purchase, the measurement also changes. This applies regardless of where the SAP systems are operated (on-premises, private cloud or public cloud). However, each license type has its own measurement tools. In this context, you should definitely take a look at the "License Utilization Information Application (LUI)". Licenses can be billed according to one of three ways: purchase and maintenance, lease, or dependent on utilization. All three of these have different parameters to deal with—whether the systems are operated in the private or public cloud, or on-prem. Consequently, they all have their own measurement tools. In the context of contract conversion, the License Utilization Information Application (LUI) becomes crucial.

The new S/4 Hana users are especially important, as they hold a lot of potential for optimization. S/4 has three types user licenses: professional use, functional use, and productive use. Companies should evaluate which licensing type works best for them. Many costumers may not need all of them, and SAP might be open to negotiate with them. It is also important to note that not every user needs a professional use license.

The Contract Conversion

• Analyze your contract. Which licenses do you have?
• Analyze your tools. Which tools do you actually use?
• Analyze your need for tools. Which tools will you need in the future?
• Analyze your costs. Which model is more cost-efficient?

Only if you know your past and present can you successfully shape your future. Use the opportunity for contract conversion that S/4 Hana migrations grant and only buy licenses that you really need.