RISE vs Traditional SAP Licensing: Which Model Delivers More Value and Control?

Introduction – RISE vs Traditional SAP Licensing

SAP is heavily promoting RISE with SAP as the future of its ERP licensing – a shift from customers owning software to subscribing to an SAP-controlled cloud bundle.

Many organizations feel pressured to move to RISE, yet traditional on-premise SAP licensing remains a viable, and often more cost-effective, option. Read our overview article, RISE with SAP Contracts: Negotiation Guide & Key Considerations.

The decision comes down to convenience versus control: RISE promises simplicity and faster time-to-value, but that simplicity can come at the cost of flexibility, ownership, and long-term savings.

This comparison cuts through SAP’s “simplified cloud, lower TCO” messaging to help you evaluate which model truly delivers more value and control for your business.

Model Overview – How Each Licensing Framework Works

To start, it’s important to understand how RISE and traditional licensing fundamentally differ:

Key Observation: RISE is about consumption of a service. Traditional licensing is about ownership of the software.

In essence, RISE with SAP is an all-in-one cloud subscription – SAP provides the software, the underlying HANA database, the infrastructure, and standard support services for one price. You are “renting” the complete solution as long as you pay.

Traditional licensing means you buy the software upfront and run it yourself (or with a hosting partner), paying SAP a maintenance fee for support and updates. You own the licenses perpetually, giving you more autonomy over how you use and manage the software.

Cost Structure Comparison

RISE with SAP (Subscription):

RISE offers all-in pricing – the annual subscription includes the S/4HANA software license, infrastructure (servers, storage, cloud services), the HANA database, and SAP support. This OpEx model means no big upfront payment; costs are spread over the term (e.g., a 3- to 5-year contract).

In year one, RISE often appears cheaper and simpler because it avoids a large capital purchase of licenses and hardware. However, there are hidden cost factors: the subscription fee can rise over time (e.g,. at renewal or if you need more users/resources), and any growth in usage (additional users, extra data, higher workloads) will drive the cost higher.

It’s important to watch out for contractual uplifts – many RISE contracts have built-in price increases year-over-year or at renewal. Also, while infrastructure is included, if your usage exceeds certain thresholds (like storage or network usage, or if you need more SAP Business Technology Platform credits beyond the bundle), you may face extra charges outside the base fee.

Traditional SAP Licensing (Perpetual):

With the on-prem model, you make an upfront investment to purchase software licenses (CapEx), then pay annual maintenance (around 22% of license value) for support and updates (OpEx). You also must budget for infrastructure – whether it’s on-premise servers you buy or cloud hosting you arrange – and for internal resources to manage the system. The advantage is that over time, this model can become more cost-effective.

After the initial license purchase is absorbed, the ongoing costs (maintenance and infrastructure) are generally predictable and steady, and often lower than a RISE subscription would be in later years.

You also have more levers to control spend: for instance, you can decide to drop maintenance on unused modules to save costs, negotiate third-party support alternatives, or defer upgrades to avoid new license spend. Essentially, you pay more upfront but own an asset (the licenses) that continues to provide value without subscription fees.

Example Cost Trend (Hypothetical):

To illustrate the long-term cost difference, consider a simplified scenario where the RISE subscription costs €1M per year, versus a one-time €1M license for on-prem plus maintenance. Cumulatively, the crossover point occurs after a few years:

In this simplified model, RISE starts cheaper in Year 1, but the perpetual license model remains relatively stable after the initial purchase. By Year 5, the on-prem option has cost roughly half of RISE’s cumulative spend.

Insight: RISE looks cheaper in the first year — but by around Year 4, a perpetual license model can pull ahead in cost-efficiency and deliver lower Total Cost of Ownership (TCO) in the long run.

Real-world pricing bears this out. RISE subscriptions are often priced at a premium for the convenience they offer.

For example, some companies have seen RISE private cloud deals around $170 per user per month (or over $2,000 per user annually), whereas owning licenses and paying maintenance might equate to under $800 per user per year after the initial purchase.

Many analysts observe that over a 5-7 year period, RISE can cost 50%+ more than a traditional approach, unless SAP offers significant discounts. The key is to do a 5-10 year TCO projection for your scenario: include all costs (licenses, hardware, cloud fees, project implementation, internal support) and see which model yields lower cumulative spend.

RISE tends to shine for short-term cash flow and avoids upfront spikes, but perpetual licensing often wins on pure cost beyond the first few years.

Avoid double costs, RISE Migration Considerations for Existing SAP Customers: How to Transition Without Double-Paying or Losing License Value.

Flexibility & Control

Beyond costs, the two models differ greatly in how much control you retain over your SAP environment versus how much you outsource to SAP:

• RISE (Subscription) – SAP-Controlled Environment: When you go with RISE, you hand over much of the control to SAP. SAP (or their cloud provider partners) manages the infrastructure, decides the upgrade schedule, and enforces standardization. You cannot delay patches or upgrades indefinitely – for example, in RISE private cloud edition, SAP will coordinate to apply upgrades on a set schedule, and in the public cloud edition, you get continuous updates quarterly. Your flexibility to time changes around your business cycles is limited. Similarly, suppose you need to expand your system (add users, increase capacity, enable new modules). In that case, you must go back to SAP to modify your subscription – often at increased cost or under SAP’s terms. Integration flexibility can also be constrained: while you can integrate RISE with other systems, you might be limited in making low-level system changes or accessing the backend, since it’s a managed service. Essentially, SAP dictates the rules of the environment in exchange for bundling and managing it for you.
• Traditional (Perpetual) – Customer-Controlled Environment: With on-prem licensing, you own the software and have full control over how and when it’s implemented. You decide when to schedule upgrades or apply support packs – many companies intentionally delay upgrades to align with internal schedules or wait until new versions stabilize. You choose the infrastructure or hosting: you can run SAP on your own data centers, or pick any cloud/outsourcer that you prefer, often negotiating better deals or customizing the setup to your needs. This model lets you tailor the environment – if you have complex integrations, you can adjust configurations or timing without needing SAP’s approval. You also have the flexibility to implement third-party solutions or custom add-ons freely in your landscape. Changes to usage are under your control: for instance, you can decide not to deploy certain modules even if you own them (avoiding their maintenance costs), or to move an SAP system onto a different platform. In short, you maintain technical autonomy.

To decide how important this flexibility is, consider your requirements as a checklist:

• Do we need full control over the timing of SAP upgrades and maintenance? (e.g., to avoid disruptions during critical business periods)
• Are deep integrations or custom extensions with non-SAP systems critical to our operations? (Complex landscapes may require more control than a standard RISE setup allows)
• Do we have strict data residency, compliance, or security requirements that mandate in-house control? (Some industries require keeping data on-prem or have custom security needs)

If you answered “yes” to these questions, a traditional licensing model will likely serve you better. RISE’s standardized, SAP-managed approach can conflict with organizations that need high flexibility or have unique constraints.

On the other hand, if your environment is fairly standardized and you lack the IT resources or desire to manage SAP infrastructure, RISE’s simplicity could be beneficial.

Business Scenarios: When Each Model Fits

There is no one-size-fits-all – some business scenarios naturally align better with RISE, while others favor traditional licensing.

Here’s a side-by-side look at where each model tends to fit best:

Guidance: If your SAP landscape is simple or you’re looking for a quick, low-hassle deployment, RISE may be a good fit. But if your environment is large, complex, or highly customized, going with RISE could corner you into a rigid setup that doesn’t accommodate your complexity.

In practice, companies with straightforward needs or those just starting with SAP might lean toward RISE to get up and running quickly. Companies with a long SAP history, numerous integrations, or significant existing investments tend to prefer the control and freedom that on-prem licensing provides for optimization.

Migration & Conversion Considerations

If you’re an existing SAP ERP (ECC) customer planning the move to S/4HANA, the choice between RISE and traditional isn’t just about new vs. old model – it’s also about how you transition your current licenses:

SAP offers a Cloud Extension Policy (and similar programs) to help ECC customers transition to RISE. Essentially, you can convert your existing perpetual licenses into cloud subscription credits. SAP will give you a financial credit for the licenses you own, which offsets the RISE subscription price.

However, beware of the fine print: these conversion credits often undervalue your sunk investment. For example, early RISE adopters might have received credit for 80-90% of their original license value. However, in recent years, the credits have dropped to around 70% or less, and they diminish as 2027 (ECC support end) approaches.

This means if you trade in €10M of licenses, you might only get €6-7M credit toward RISE and be paying the rest as net-new spend. Always calculate the true value of what you’re giving up. You may find you’re effectively paying for software you already bought, just to move to the cloud.

By contrast, a traditional S/4HANA on-premise upgrade lets you preserve the value of your existing licenses. If you have already spent millions on ECC, you can likely technically convert those to S/4HANA (SAP provides a license migration path) without having to buy a whole new set of licenses.

You might need to purchase additional licenses for new S/4-specific products or extra users, but the core investment carries forward. This preserves your independence, too – you keep the perpetual rights.

Many customers choose to upgrade to S/4HANA on-premise (or in a hosted data center) precisely to maximize their prior investment and avoid the feeling of “starting over” with a subscription.

Negotiation Tip: SAP’s cloud conversion credits and trade-in offers will almost always be structured in SAP’s favor. Before agreeing to convert your perpetual licenses to RISE, get a second opinion. Verify the credit percentage and what you’re losing. You may discover that staying on-prem and perhaps negotiating a better maintenance deal (or using third-party support) yields more value than the credit SAP offers for the cloud.

Also consider the exit strategy: If you convert everything to RISE and later decide to go back on-prem, you may have to re-buy licenses (or have a clause upfront that allows reverting to on-prem S/4HANA licenses – which is something you’d need to negotiate specifically).

In contrast, if you stick with perpetual licenses, you maintain the ability to switch hosting providers or move to cloud infrastructure on your own terms without needing SAP’s permission.

Risk Comparison

Each model comes with different risk profiles. It’s not just about cost – think about compliance, lock-in, and operational risks:

Insight: With RISE, you trade one type of risk for another – you shift from license compliance risk to vendor control risk. You likely won’t worry about audits under RISE, but you are betting on SAP as your long-term host and caretaker of your systems. In the traditional model, you carry more responsibility for compliance and operations, but you also retain the freedom to pivot if needed (for example, to renegotiate support or switch infrastructure).

From a risk perspective, consider your company’s tolerance: Are you comfortable relying on SAP as a single vendor for everything, knowing it locks you in but reduces some internal burden? Or do you prefer the ability to control your destiny, even if it means managing more in-house responsibilities?

Some CIOs fear the “Hotel California” effect of RISE – easy to check in, but very hard to leave. Others fear the compliance risk of on-prem – having to ensure every user and indirect access is licensed correctly.

Mitigate whichever path’s risks through solid contract negotiation (for RISE, ensure exit clauses and price protections; for on-prem, ensure license compliance and perhaps audit protections).

Strategic Considerations for CIOs

For CIOs and IT decision-makers, choosing RISE vs. traditional isn’t just a cost or technical decision – it’s a strategic choice that should align with your business priorities and IT strategy. Key considerations include:

• Budgeting and Financial Strategy: If your company values budget predictability and OpEx spending, RISE provides a smooth expenditure pattern (no large spikes, costs tied to usage over time). It can be easier to approve and fit those avoiding capital expense. However, if long-term cost optimization is the goal, remember that owning licenses often leads to a lower TCO over 5+ years. Consider your financial horizon: a subscription might fit a 3-year plan, but over a 7-year plan, owning could save millions. Run the numbers for at least a 5-year period (ideally 7-10) to see which is financially wiser for your organization.
• Operational Focus and Resources: Evaluate your internal capabilities. RISE is attractive for organizations that want to offload the technical operations – SAP and its partners handle the infrastructure, backups, basic system admin, and you don’t need a large internal BASIS team for those tasks. This is great if your IT strategy is to outsource commodity operations and focus your team on business-facing improvements. In contrast, traditional on-prem is better if you have (or want to build) a strong internal SAP basis/administration capability or prefer to manage your own environment (perhaps for performance tuning, customization, or integration reasons). It gives you technical autonomy but requires you to have the skills (in-house or via a managed service provider). Think about whether running infrastructure is a core competency you want to retain or something you’re happy to let SAP handle.
• Negotiation, Leverage, and Future Flexibility: Owning your licenses can give you leverage in dealings with SAP. For example, if SAP raises maintenance fees or you’re unhappy with support, you can consider third-party support providers or simply run the system without updates for a while. You can also spread out upgrades on your schedule. With RISE, your leverage is limited because all aspects (license, support, hosting) are bundled – if you stop paying, you lose it all. Additionally, alternative providers can’t support you on RISE; you’re tied to SAP’s services. Consider how much bargaining power matters to you. Some CIOs like having an “out” (even if just as a negotiation chip). With RISE, SAP knows they have you more locked in at renewal time. With perpetual, you can play the field a bit more (for instance, threatening not to migrate or to use a competitor’s solution for certain components).

Finally, align the decision with your business roadmap. If you foresee a lot of growth, mergers, divestitures, or changes, think about which model offers more flexibility.

Traditional licensing lets you scale in a more granular way (you can add capacity by buying hardware or optimizing licenses, often without immediately paying SAP more unless you truly expand usage).

RISE requires you to true-up with SAP for expansions, and major business changes (like splitting off a division) could be complicated under a single subscription contract.

Checklist for CIOs and CFOs:

• Calculate a full 5-year (and 7-year) cost projection for both RISE and traditional. Include everything: software fees, infrastructure, implementation, internal support, potential cost of upgrades, etc. This TCO analysis will highlight the cost crossover point and cash flow differences.
• Quantify the value of existing assets and investments. If you have data centers, hardware, and perpetual licenses already paid for, how much would moving to RISE “strand” those assets? Sometimes continuing to use what you have (sweating the assets) yields huge savings versus scrapping them for a cloud deal.
• Evaluate regulatory, security, or contractual obligations. Do you have any requirements that data must reside in certain locations or under your control? Do you deal with highly sensitive IP or customer data that your risk officers prefer to keep internally managed? These factors can make an on-prem model non-negotiable. Conversely, if SAP’s cloud has certifications that meet your needs, RISE might satisfy compliance.
• Consider your IT strategy and talent. If you plan to reduce your internal IT headcount or don’t have SAP technical skills in-house, RISE can fill that gap with SAP-managed services. If you already have a capable SAP basis and infrastructure team, keeping your own licenses could better utilize those resources.

RISE with SAP Explained: What It Includes, How It Works, and What to Watch Out For

Example Scenario

To bring these points to life, consider a real-world inspired scenario:

A global manufacturing firm had about €10 Million worth of SAP ECC perpetual licenses (accumulated over years).

As they planned a move to S/4HANA, SAP pitched them RISE with SAP (private cloud edition).

• Option A – RISE: SAP’s offer was a 5-year RISE subscription at €3.2 M per year. This included S/4HANA licensing for their users, cloud infrastructure hosting, and SAP’s standard support. It promised a “hands-off” technical operation and a quick migration with SAP’s help.
• Option B – Traditional S/4HANA: The company also considered upgrading to S/4HANA on-premise (in their own data center). They could retain their existing €10M licenses (no need to repurchase core ERP users) and just purchase about €2 M in additional licenses for new S/4HANA functionality and extra users. They would continue paying the 22% annual maintenance on the license value (approximately €2.64 M/year on the €12M total license value). Infrastructure costs for hardware and hosting were estimated at €500k per year, and they would manage the system with their IT team and a third-party support partner.

Result: After analysis, by Year 5, the RISE option would cost roughly €16 M (5 × 3.2M), whereas the traditional option would cost around €10.5 M over the same period (considering the new license spend, five years of maintenance, and infrastructure costs).

Even factoring in the implementation project cost, which was similar in both cases, staying on-premises clearly saved money. Additionally, the company wasn’t comfortable with the lock-in of RISE.

They chose Option B, upgraded to S/4HANA on their own terms, and negotiated with SAP to freeze their maintenance rate for a few years (preventing the usual annual increase).

Lesson: In this scenario, the “convenience” of RISE would have come at about 50% higher TCO over 5 years. By leveraging their existing licenses and infrastructure, the company maintained control and saved a significant amount. The takeaway: always compare the full multi-year costs – the differences can be millions of euros in either direction depending on your situation.

5 Questions to Decide Between RISE and Traditional Licensing

To wrap up, here are five critical questions every CIO and team should answer when choosing between RISE and traditional SAP licensing:

1. Do we already own significant SAP licenses with low ongoing maintenance costs, and are we getting value from them?
   (If yes, leveraging what you have might be more cost-effective than swapping for a subscription.)
2. How critical is having control over infrastructure, customizations, and upgrade timing to our business?
   (If maintaining control is crucial, an on-premise model will align better with your needs.)
3. Are we looking for short-term OpEx relief and simplicity, or focused on long-term cost stability and savings?
   (Short-term budget concerns might favor RISE, while long-term thrift often favors owning licenses.)
4. Can our team (or chosen partners) manage SAP operations in-house, or do we prefer to outsource that responsibility?
   (If you have the capability or desire to manage it, traditional is feasible; if not, RISE offloads a lot of work to SAP.)
5. What’s our exit plan if we choose RISE and later face escalating costs or changing strategy?
   (Make sure you have a strategy for the worst case – if RISE becomes too expensive or limiting, how easily can you pivot? If that question is hard to answer, the flexibility of on-prem might be safer.)

By answering these questions, you’ll clarify which model aligns best with your organization’s goals and risk profile.

The choice between RISE and traditional SAP licensing is a pivotal one – it will shape your SAP landscape and costs for years to come. Carefully weigh value vs. control to make the decision that delivers the best outcome for your business.

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fredrik.filipsson

Fredrik Filipsson is the co-founder of Redress Compliance, a leading independent advisory firm specializing in Oracle, Microsoft, SAP, IBM, and Salesforce licensing. With over 20 years of experience in software licensing and contract negotiations, Fredrik has helped hundreds of organizations—including numerous Fortune 500 companies—optimize costs, avoid compliance risks, and secure favorable terms with major software vendors. Fredrik built his expertise over two decades working directly for IBM, SAP, and Oracle, where he gained in-depth knowledge of their licensing programs and sales practices. For the past 11 years, he has worked as a consultant, advising global enterprises on complex licensing challenges and large-scale contract negotiations.

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